J&K HC: Tax Penalty Notices Under IT Section 271(1)(c) Must Specify Reasons

The Jammu and Kashmir and Ladakh High Court in a case has cited that the notice to a taxpayer offering the levying of the penalty u/s 271(1)(c) of the Income Tax Act, 1961 should cite the reason for levying the penalty. It was carried that it is required to be quoted whether the taxpayer is accused of concealing his income or providing the wrong income particulars.

Concerning the case, the notice issued to the respondent taxpayer, J & K Power Development Corporation Limited was a composite notice intimating that he was obligated to proceed with levying the penalty for having concealed the particulars of his income for having provided the wrong particulars for the same income.

The income tax appellate tribunal on the plea of the taxpayer ruled that it was a matter in which the taxpayer was not furnished a proper chance to explain and principles of natural justice were breached, therefore violating the penalty order.

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It was carried by the division bench of Justices Sanjeev Kumar and Rajesh Sekhri that the same notice could not be a composite one. The notice is required to mention one of the two bases to allow the taxpayer to file a proper explanation.

As per the High Court, the related Assessing Authority does not record its satisfaction for one of two limbs or on both the limbs shown in clause (c) of sub-section 1 of Section 271. Also, the assessing authority was not clear whether it was a matter of concealment of the particulars of the income via the taxpayer or his failure to provide the true particulars of the same income. The Assessee was also denied a proper chance to explain due to the confusion caused by the Assessing Authority.

Section 271(1)(c) cited that the penalty proceedings could not be initiated given that the assessing officer is pleased that any individual has concealed the income particulars or provided the true particulars for this income.

The appeal of the revenue has been dismissed by the court given the freedom to move against the respondent afresh, under the statute. For the Revenue Advocate, Umar Rashid Wani appeared and Rashid Malik with Advocate Mohd Younis Hafiz appeared for the Respondent.