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2015 (7) TMI 601 - AT - Income TaxPenalty u/s. 271(1)(c) - interest so earned by the assessee had not been offered to tax by the assessee in the returns of income filed for A.Ys. 2004-05 to 2008-09. Similarly, the assessee also did not declare interest received on SB account for A.Ys. 2004-05 to 2008-09 - Held that - The show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. In our view, the aforesaid defect cannot be said to be curable u/s. 292BB of the Act, as the defect cannot be said to be a notice which is in substance and effect in conformity with or according to the intent and purpose of the Act. Following the decision of the Hon ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT , we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. - Decided in favour of assessee.
Issues Involved:
1. Validity of the penalty order under Section 271(1)(c) of the Income Tax Act, 1961. 2. Defectiveness of the show cause notice issued under Section 274 of the Act. Issue-wise Detailed Analysis: 1. Validity of the Penalty Order under Section 271(1)(c) of the Income Tax Act, 1961: The primary issue in these appeals was the challenge against the order of the CIT(Appeals) confirming the penalties imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961. The penalties were imposed due to the assessee's failure to disclose interest income earned from deposits and savings bank accounts in the returns filed for the assessment years 2004-05 to 2008-09. The assessee later filed revised returns to include this omitted income. The Tribunal noted that the assessee had raised a technical objection regarding the validity of the penalty orders, arguing that the notices issued under Section 274 read with Section 271(1)(c) were defective. 2. Defectiveness of the Show Cause Notice Issued under Section 274 of the Act: The Tribunal admitted the additional ground raised by the assessee, which questioned the validity of the penalty orders on the basis that the show cause notices issued under Section 274 were defective. The assessee contended that the notices did not specify whether the penalty was being initiated for "concealing particulars of income" or "furnishing inaccurate particulars of income," as the relevant columns were not struck off. The Tribunal referred to the Karnataka High Court's decision in CIT vs. Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565 (Karn), which held that a notice under Section 274 must specifically state the grounds for imposing the penalty and that a vague notice would violate the principles of natural justice. The Tribunal emphasized that the Karnataka High Court had laid down clear principles regarding the issuance of notices under Section 274. It stated that the notice should specifically mention the grounds for imposing the penalty, and a printed form with all grounds mentioned would not suffice. The Tribunal found that the show cause notices issued to the assessee were indeed defective as they did not specify the grounds for the penalty. Consequently, the Tribunal held that the penalty orders were invalid and quashed them. Conclusion: The Tribunal concluded that the penalty orders for the assessment years 2004-05 to 2008-09 were invalid due to the defective show cause notices issued under Section 274 of the Act. The appeals were allowed on this technical ground, and the penalties imposed were canceled. The Tribunal did not address the merits of the case as the appeals were decided on the technical ground. The judgment was pronounced in the open court on July 3, 2015.
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