The Jammu & Kashmir And Ladakh High Court has held that notice under section 271(1)(c) of Income Tax Act must specify whether penalty is against concealment of income or furnishing inaccurate particulars of income.
The bench of Justice Sanjeev Kumar and Justice Rajesh Sekhri has observed that the Assessing Authority was itself not clear, whether it was a case of concealment of particulars of income by the Assessee or his failure to furnish correct particulars of such income. The Assessee too was deprived of a clear opportunity to give the explanation in view of the confusion created by the Assessing Authority itself.
Background – Concealment of Income
In terms of Section 271(1) (c) of the Income Tax Act, 1961, penalty proceedings can be initiated provided the Assessing Officer or the Joint Commissioner (Appeals) or Commissioner (Appeals) etc., as the case may be, is satisfied that any person has inter alia concealed the particulars of the income or furnished the incorrect particulars of such income.
Before taking the penalty proceedings to logical end, the Assessee is also required to be put on notice for offering his explanation to such concealment or furnishing incorrect particulars of such income etc.
The Tribunal found that the notice which was served upon the Assessee for seeking his explanation was not clear and unambiguous. The Assessing Authority concerned had not recorded its satisfaction with regard to one of the two limbs or on both the limbs indicated in clause (c) of sub-section 1 of Section 271.
The notice issued to the Assessee was a composite notice intimating the Assessee that he was liable to be proceeded for imposition of penalty for having concealed the particulars of his income/ for having furnished incorrect particulars for income.
The Assessing Authority was itself not clear, whether it was a case of concealment of particulars of income by the Assessee or his failure to furnish correct particulars of such income. The Assessee too was deprived of a clear opportunity to give the explanation in view of the confusion created by the Assessing Authority itself.
The Tribunal, after relying upon the several precedents, came to the conclusion that it was a case where the Assessee had not given the proper opportunity to offer his explanation and, therefore, the impugned order of imposition of penalty was vitiated being in violation of the principles of natural justice.
The Tribunal also found fault with the requisite satisfaction which the Assessing Authority was required to arrive at before initiating the penalty proceedings.
Conclusion – Concealment of Income
The court, while dismissing the appeal of the department, held that the order does not suffer from any illegality and, therefore, there is no case made out for interference with the judgement of the Tribunal.
Case Details
Case Title: Pr. Commissioner of Income Tax Versus J & K Power Development Corporation Limited
Case No.: ITA 7/2019
Date: 15.10.2024
Counsel For Petitioner: Umar Rashid Wani
Counsel For Respondent: Ab. Rashid Malik
