In ITA/CO No. 152/RPR/2014 -ITAT- ITAT (Raipur) quashes penalty of Rs. 8587.95 lakh imposed on South Eastern Coalfields; Assessing Officer's failure to specify specific charge in SCN rendered the penalty invalid
Members Arun Khodpia (Accountant) & Ravish Sood (Judicial) [09-06-2023]

Read Order: The Deputy Commissioner of Income Tax and others v. South Eastern Coalfields Ltd and others

Chahat Varma

New Delhi, June 14, 2023: The Raipur bench of the Income Tax Appellate Tribunal has held that the indispensable requirement on the part of the Assessing Officer (AO) to put the assessee to notice as regards the specific charge contemplated under Section 271(1)(c) of the Income Tax Act, viz. ‘concealment of income’ or ‘furnishing of inaccurate particulars of income’ or both of the said defaults was not merely an idle formality, but was a statutory obligation, which had not been discharged in the present case as per the mandate of law.

The present cross-appeals were filed by the assessee and the revenue, against the orders passed by the CIT(Appeals), which in turn arose from the orders passed by the AO under Section 271(1)(c) of the Income Tax, Act, for the respective assessment years.

The assessee, a subsidiary of Coal India Limited, was engaged in the activities related to development of mines and extraction of coal from various mines under its control and earned income from coal sales. The AO saddled the assessee with a penalty for concealment of income and furnishing of inaccurate particulars of income, that were upheld by the CIT(Appeals).

The assessee argued that the AO had not specified the specific default for which the penalty was imposed in the show cause notices issued under Section 274 read with Section 271 of the Income Tax Act. The assessee contended that due to the AO's failure to indicate the specific default, the penalty imposed under Section 271(1)(c) of the Act could not be sustained and should be vacated.

The bench of Arun Khodpia (Accountant) and Ravish Sood (Judicial) remarked that the AO's use of ‘OR’ as a conjunction between the two defaults (concealment of income and furnishing of inaccurate particulars) failed to clearly communicate to the assessee the specific defaults for which the penalty was being imposed. This ambiguity left the assessee guessing about the exact default(s) for which the penalty was being sought.

The bench relied on the Supreme Court's judgment in the case of Dilip N. Shroff v. Joint Commnr. Of Income Tax, Mumbai & Anr [LQ/SC/2007/766], where it was observed that the expressions ‘concealment of particulars of income’ and ‘furnishing of inaccurate particulars of income’ had different connotations.

Thus, the bench held, “the penalty under Sec. 271(1)(c) of Rs. 8587.95 lac imposed by him being in clear violation of the mandate of Sec. 274(1) of the Act cannot be sustained.”