Supreme Court Refuses SLP Against Bombay HC Order on Defective Section 271(1)(c) Penalty Notice
Background of the Dispute
The controversy originates from penalty proceedings initiated under Section 271(1)(c) of the Income Tax Act 1961 against Golden Peace Hotels And Resorts Pvt. Ltd. The Assessing Officer had imposed penalty alleging concealment of income and/or furnishing of inaccurate particulars.
The assessee challenged the penalty before the Commissioner (Appeals), and subsequently before the Income Tax Appellate Tribunal (ITAT). Both appellate authorities ruled in favour of the assessee and directed deletion of the penalty.
The Revenue then approached the Bombay High Court, seeking admission of an appeal on the core question of whether the ITAT was justified in deleting the penalty levied under Section 271(1)(c).
When the Bombay High Court declined to admit the Revenue’s appeal and upheld the deletion of penalty, the Revenue carried the matter to the Supreme Court by filing a Special Leave Petition (SLP) in PCIT Vs Golden Peace Hotels And Resorts Pvt. Ltd. (Supreme Court of India).
The supplied material records that the Supreme Court refused to interfere and dismissed the SLP, thereby letting the Bombay High Court’s decision stand.
Revenue’s Stand Before the Bombay High Court
Before the Bombay High Court, the Revenue advanced the following key arguments:
- The assessee had filed revised returns wherein the disclosure of income was allegedly made in a fragmented or piecemeal manner.
- Relying on
Mak Data (P.) Ltd. v. Commissioner of Income Tax, (2013) 38 Taxman.com 448 (SC), the Revenue contended that making disclosure after detection does not absolve the assessee from liability to penalty underSection 271(1)(c). - The Revenue pointed to references in the assessment order suggesting concealment of income and/or furnishing of inaccurate particulars, and urged that these references were sufficient to sustain the penalty.
On this basis, the Revenue pressed for admission of its appeal, asserting that the Tribunal had erred in deleting the penalty.
Assessee’s Contentions Before the Bombay High Court
The assessee countered the Revenue’s stance by focusing on the legal requirements for imposing penalty under Section 271(1)(c) and the flaws in the penalty proceedings:
- It was submitted that there was no clear finding by the Assessing Officer that the assessee had either concealed income or provided inaccurate particulars of income.
- The assessee drew attention to the penalty notice dated 30/09/2016, which had been issued in a standard printed format. In that notice, the irrelevant portions (whether the charge was concealment of particulars of income or furnishing inaccurate particulars of income) were not struck off.
- This omission, according to the assessee, rendered the notice vague and unclear as to the precise limb of
Section 271(1)(c)under which penalty was contemplated. - In support, the assessee relied on:
Commissioner of Income Tax-11 v. Shri Samson Perinchery, (2017) 392 ITR 4Principal Commissioner of Income Tax v. New Era Sova Mine, 2019 SCC OnLine Bom 1032
Both these decisions stress that a penalty notice must specifically identify whether the charge is:
- concealment of particulars of income, or
- furnishing of inaccurate particulars of income, or
- both;
and that, in printed notices, inapplicable portions must be removed to avoid ambiguity.
Findings of the Commissioner (Appeals) and ITAT
Both the Commissioner (Appeals) and the ITAT had examined the record and reached consistent conclusions: