PCIT Vs Ennoble Construction (Karnataka High Court)
Karnataka High Court held that initiation of penalty proceedings under section 271(1)(c) of the Income Tax Act without specifying the limb under which penalty proceedings has been initiated is bad-in-law. Accordingly, question is answered in favour of respondent/assessee.
Facts- The appeal is preferred by the assessee / respondent against the separate orders dated 24.09.2013 of the CIT (Appeals)-VI, Bengaluru for the Assessment Year 2006-07 confirming the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961. It is relevant to refer to the impugned order dated 29.07.2016, which is challenged under this appeal. Undisputedly the Assessing Officer has not identified in the notice as to whether penalty proceedings are being initiated for concealment of income or furnishing inaccurate particulars of income.
Conclusion- The ITAT has carefully examined the notice issued under Section 274 read with Section 271(c) of the I.T. Act and found that the notices were issued on printed proforma, which the AO did not identify whether the assessee/respondent in this appeal has concealed the particulars of income or furnished inaccurate particulars of such income. Now the question arises whether it is necessary to identify in the notice. The penalty provision has two distinct limbs. The first limb deals with condition precedent for initiating penalty action and assumption of jurisdiction of the authority concerned; this limb is separately enacted with each of clause (a) since omitted insofar as Section 271(1)(c). The second limb of the penalty provision is the substantial part which deals with the actual imposition for the liability of penalty and quantification thereof. The penalty provisions are not onerous so far as substantial and procedural provisions relating to penalty containing the Income Tax Act, 1961 have held to be not onerous.
