By TIOL News Service

JAIPUR, APR 04, 2019: THE ISSUE IS - Whether penalty order is invalid merely because there was a defect in the Notice but the same was rectified at the time of passing the order. NO IS THE ANSWER.

Facts of the case

THE assessee had filed return for relevant AY. During the course of assessment proceedings, the AO made an addition on account of interest on income tax refund amounting to Rs. 1485/- and addition on account of difference in commission income. The AO also initiated the penalty proceedings and issued notice for concealing the particulars of income or furnishing inaccurate particulars of such income. The AO had levy the penalty for concealing the income and levying the penalty of Rs. 36,003/-. It was accordingly submitted that in the absence of any specific charge against the assessee in the assessment order and even in the penalty notice and thereafter, in the penalty proceedings, levying the penalty for concealing the particulars of income, the penalty order passed by the AO was illegal and bad in law.

On appeal, Tribunal held that,

++ the AO has recorded the satisfaction in the assessment order for initiating the penalty proceedings u/s 271(1)(c) of the Act. Thereafter, the notice initiating the penalty proceedings is uncertain where the AO uses the expression "concealment of particulars of income or furnished inaccurate particulars of such income". However, during the penalty proceedings, he has given a decisive and clear finding as reflected in the penalty order that the assessee is guilty of concealment of particulars of income where the AO says that "after considering all the facts that the amount of subject income under consideration were concealed by the assessee either by not disclosing or with the intention to evade the tax. Therefore, I am satisfied that the assessee has intentionally concealed the total income of Rs 1,20,009, hence, a notional penalty u/s 271(1)(c) to the tune of Rs 36,003 is hereby imposed." Therefore, penalty order cannot be held bad in law merely on account of uncertain charge at the stage of penalty notice. Given that the AO has found the assessee guilty of specific charge of concealment of particulars of income at the time of passing the penalty order which is found to be factually correct, the penalty levied u/s 271(1)(c) is hereby confirmed and the ground of appeal is dismissed. In the result, the appeal of the assessee is dismissed.

(See 2019-TIOL-723-ITAT-JAIPUR)