Gajender Singh Jadon vs ACIT – Challenge to Penalty Under Section 271(1)(c) (AY 2006-07)

Gajender Singh Jadon vs ACIT – Challenge to Penalty Under Section 271(1)(c) (AY 2006-07)

Case Number: ITA 6538/DEL/2019

Appellant: Gajender Singh Jadon, New Delhi

Respondent: ACIT, Circle-57(5), New Delhi

Assessment Year: 2006-07

Order Type: Final Tribunal Order

Date of Order: 2023-01-25

Pronounced on: 2023-01-25

Introduction

This case involves an appeal filed by Gajender Singh Jadon against the imposition of a penalty under Section 271(1)(c) of the Income Tax Act, 1961, by the Assessing Officer (AO) for the assessment year 2006-07. The penalty was levied on the grounds of undisclosed income, and the appellant challenged both the jurisdiction of the AO and the validity of the penalty notice.

Background of the Case

Gajender Singh Jadon was assessed under Section 144/147 of the Income Tax Act for the assessment year 2006-07. The AO discovered that the appellant had deposited cash totaling Rs. 14,62,150 in his savings bank account with Delhi Nagrik Sahkari Bank Ltd. The appellant did not respond to the enquiry letter sent by the department. Consequently, the AO brought the cash deposit to tax as undisclosed income and initiated penalty proceedings under Section 271(1)(c) for concealing the particulars of income.

The penalty order, passed on 28.03.2017, imposed a penalty of Rs. 4,36,060 under Section 271(1)(c) of the Act. The appellant appealed against this penalty to the Commissioner of Income Tax (Appeals) [CIT(A)], who upheld the penalty. Aggrieved, the appellant brought the matter before the Income Tax Appellate Tribunal (ITAT).

Appellant’s Grounds of Appeal

The appellant raised several grounds in the appeal, including:

• The order passed by the CIT(A) confirming the penalty was erroneous and bad in law.
• The CIT(A) erred in confirming the penalty without considering the appellant’s claim that he had not received the notice of hearing.
• The assessment order under Section 144/147 was without jurisdiction and void ab initio.
• The addition of Rs. 14,62,150 as undisclosed income under Section 68 of the Act was erroneous.
• The penalty notice was vague, as it did not specify the exact charge, making the penalty arbitrary and illegal.
• The penalty order was also defective due to the absence of a specific charge in the notice and assessment order.
• The penalty was not in accordance with law, as the mandatory requirements of Section 271(1)(c) were not met.
• There was no satisfaction recorded in the assessment order regarding whether the appellant had furnished inaccurate particulars or concealed income, rendering the penalty arbitrary and unjust.

Proceedings Before the Tribunal

The appeal was heard by the Delhi Bench “B” of the ITAT, comprising Shri Shamim Yahya, Accountant Member, and Ms. Astha Chandra, Judicial Member. The Tribunal reviewed the arguments presented by the appellant’s representative, Shri Gagan Kumar, Adv., and the Department’s Senior Departmental Representative (DR), Shri Vipul Kashyap.

The key argument raised by the appellant was that the penalty notice issued under Section 271(1)(c) was defective as it did not specify whether the penalty was being levied for “concealment of income” or “furnishing inaccurate particulars of income.” This omission, according to the appellant, rendered the penalty notice invalid, making the penalty itself void.

Tribunal’s Observations and Findings

The Tribunal noted that it is well settled law that for a penalty under Section 271(1)(c) to be valid, the AO must clearly specify the nature of the default in the penalty notice. This ensures that the assessee is fully aware of the charge against them and can respond appropriately. Failure to specify the charge renders the penalty notice defective, leading to the penalty being void.

The Tribunal referred to the decision of the Hon’ble Supreme Court in the case of CIT vs. SSA’s Emerald Meadows (2016) 242 Taxman 180 (SC), where the Court upheld the principle that a penalty notice must be clear and specific regarding the charge being levied. The Tribunal also cited the Full Bench decision of the Bombay High Court in Mohd. Farhan A. Shaikh vs. ACIT, which reiterated that non-specification of the charge in the penalty notice makes it void.

In this case, the Tribunal found that the AO had issued a penalty notice that did not clearly specify whether the penalty was being imposed for concealment of income or for furnishing inaccurate particulars of income. This made the penalty notice vague and the penalty itself unsustainable in law.

Conclusion and Ruling

The Tribunal concluded that the penalty notice issued to Gajender Singh Jadon was defective as it did not specify the exact charge. Consequently, the penalty imposed under Section 271(1)(c) was rendered void. However, the Tribunal did not decide the matter conclusively at this stage. Instead, it remitted the issue back to the AO to verify from the assessment records whether the penalty notice correctly specified the charge or not.

The AO was directed to examine the records and determine whether the relevant charge was properly ticked in the penalty notice. If the charge was not specified, the penalty would be unsustainable, and the AO was instructed to delete the penalty. The appellant was to be given adequate opportunity to be heard during this process.

Order: The appeal filed by Gajender Singh Jadon was allowed for statistical purposes, with the issue remitted back to the AO for verification.

This ruling reinforces the principle that clarity in penalty notices is essential for the imposition of penalties under Section 271(1)(c). The failure to specify the exact charge in a penalty notice can lead to the penalty being declared void.

Gajender Singh Jadon vs ACIT – Challenge to Penalty Under Section 271(1)(c) (AY 2006-07)