A notice issued under Section 271(1)(c) of the Income Tax Act, 1961, is invalid if it fails to specify the exact limb of the provision, i.e., whether it pertains to concealment of income or furnishing inaccurate particulars, as such omnibus notices demonstrate non-application of mind and violate natural justice.

आदेश /O R D E R

PER C.N. PRASAD, J.M.

This appeal is filed by the assessee against the order u/s 250 of the Act, 1961, Karnal dated 06.05.2019 for the AY 2012-13 in sustaining the penalty of Rs.7,78,604/- levied u/s 271(1)(c) of the Act.

Ld. Counsel for the assessee, at the outset, submits that penalty order is invalid and bad in law for the reason that the penalty proceedings were initiated and penalty was levied without assigning specific charge, the exact limb of section 271(1)(c) of the Act. In other words, it is submitted that the Ld. Counsel submits that the AO did not specify under which limb of section 271(1)(c) penalty proceedings had been initiated i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. Therefore, it is submitted that in the absence of specific charge in the notice issued u/s 271(1)(c) of the Act the said notice is bad in law and consequently the penalty order is bad in law. Reliance was placed on the following decisions: -

1. PCIT Vs. Gopal Kumar Goyal 153 taxmann.com 534 (Del);

2. PCIT Vs. Sahara India Life Insurance Company Limited 432 ITR 84 (Del);

3. Mohd. Farhan A Shaikh Vs. DCIT 434 ITR 1 (Bom.).

On the other hand, the Ld. DR supported the orders of the authorities below.

Heard rival submissions. On perusal of the penalty notice issued u/s 274 r.w.s. 271(1)(c) of the Act which is placed at page 46 of the Paper Book, we observe that the notice was issued mechanically stating that assessee has concealed the particulars of income or furnished inaccurate particulars of such income. The AO failed to specify the exact limb for which the notice was issued. In other words, the AO did not specify the specific charge for which the penalty proceedings were initiated i.e. either for concealment of particulars of income or for furnishing of inaccurate particulars of income.

We observe that an identical issue came up before the Hon’ble Bombay High Court (full bench at Goa) in the case of Mr. Mohd. Farhan A. Shaikh vs. ACIT [434 ITR (1)] and the Hon’ble High Court held as under:

"Question No.1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(l)(c), does a mere defect in the notice— not striking off the irrelevant matter—vitiate the penalty proceedings?

181. It does. The primary burden ties on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(l)(c), read with section 274 of IT Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness.

182. More particularly, a penal provision, even with civil consequences, must be construed strictly. And ambiguity, if any, must be resolved in the affected assessee's favour.

183. Therefore, we answer the first question to the effect that Goa Dourado Promotions and other cases have adopted an approach more in consonance with the statutory scheme. That means we must hold that Kaushaiya does not lay down the correct proposition of law.

Question No.2: Has Kaushaiya failed to discuss the aspect of 'prejudice?

184. Indeed, Kaushaiya did discuss the aspect of prejudice. As we have already noted, Kaushaiya noted that the assessment orders already contained the reasons why penalty should be initiated. So, the assessee, stresses Kaushaiya, "fully knew in detail the