2015 (10) TMI 2006 - AT - Income Tax

Penalty under Section 271(1)(c) - irregular notice - Held that - The Assessing Officer has not specified the relevant portion of the clause (c) of the notice under Section 274 rws 271 of the Act for initiating penalty proceedings under Section 271(1)(c) of the Act for Assessment Years 2006-07 to 2008-09. Therefore, respectfully following the decision of CIT Vs. Manjunatha Cotton & Ginning Factory (2013 (7) TMI 620 - KARNATAKA HIGH COURT ) we hold that the notices issued under Section 274 rws 271 of the Act in the case on hand for Assessment Years 2006-07 to 2008-09 are invalid. We, therefore, cancel the impugned orders of the authorities below levying penalty under Section 271(1)(c) of the Act for all the three assessment years involved. - Decided in favour of assessee.

Issues Involved:
1. Validity of proceedings under Section 271(1)(c) of the Income Tax Act.
2. Levy of penalty on claiming deduction under Section 36(1)(viia) for provision for standard assets.
3. Levy of penalty for claiming capital expenditure as revenue expenditure.
4. Delay in remittance and non-deduction of TDS.
5. Provision for LFC/HTC, Silver Jubilee Awards, and Resettlement Expenses.
6. Additional ground: Penalty proceedings null and void-ab-initio.

Detailed Analysis:

1. Validity of Proceedings under Section 271(1)(c):
The Tribunal examined whether the mandatory conditions for initiating penalty proceedings were complied with, specifically focusing on the validity of notices issued under Section 274 rws 271 of the Act. The Tribunal found that the Assessing Officer did not specify whether the penalty was for "concealment of income" or "furnishing inaccurate particulars of income," leading to an inference of non-application of mind. Citing the Karnataka High Court's decision in CIT v. Manjunatha Cotton & Ginning Factory, the Tribunal held that the notices were invalid due to their vagueness and lack of specificity. Consequently, the penalty orders for Assessment Years 2006-07 to 2008-09 were quashed.

2. Levy of Penalty on Claiming Deduction under Section 36(1)(viia) for Provision for Standard Assets:
The assessee had claimed deductions under Section 36(1)(viia) for provisions made for standard assets, which were disallowed by the Assessing Officer, leading to the levy of penalties. The Tribunal did not provide a detailed analysis on this specific issue due to the overarching decision on the invalidity of the penalty notices.

3. Levy of Penalty for Claiming Capital Expenditure as Revenue Expenditure:
Similarly, the issue of penalties levied for claiming capital expenditure as revenue expenditure was not separately adjudicated due to the primary finding on the invalidity of the penalty notices.

4. Delay in Remittance and Non-Deduction of TDS:
The Revenue appealed against the cancellation of penalties related to the delay in remittance and non-deduction of TDS for Assessment Year 2006-07. The Tribunal's decision to quash the penalty notices rendered this issue moot without separate analysis.

5. Provision for LFC/HTC, Silver Jubilee Awards, and Resettlement Expenses:
For Assessment Year 2008-09, the Revenue's appeal concerning penalties for provisions for LFC/HTC, Silver Jubilee Awards, and Resettlement Expenses was similarly impacted by the Tribunal's decision on the invalidity of the penalty notices.

6. Additional Ground: Penalty Proceedings Null and Void-ab-initio:
The assessee raised an additional ground, arguing that the penalty proceedings were null and void-ab-initio due to defective notices. The Tribunal admitted this legal ground, referencing the Supreme Court's decision in NTPC Ltd. and the Karnataka High Court's ruling in Sankeshwar Printers Pvt. Ltd. The Tribunal concluded that the defective notices invalidated the penalty proceedings, leading to the cancellation of the penalties for all three assessment years.

Conclusion:
The Tribunal allowed the assessee's appeals for Assessment Years 2006-07 to 2008-09 and dismissed the Revenue's appeals for Assessment Years 2006-07 and 2008-09, primarily on the ground that the penalty notices issued were invalid due to a lack of specificity and non-application of mind by the Assessing Officer. This decision rendered the detailed analysis of individual penalty issues unnecessary.

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