2017 (12) TMI 1577 - AT - Income Tax

Penalty imposed u/s. 271(1)(c) - non specification of charge - defective notice - Held that - The show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. The plea of the ld. Counsel for the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. We therefore hold that imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled. - decided in favour of assessee

Summary

Issues Involved:
1. Validity of penalty imposed under Section 271(1)(c) of the Income Tax Act.
2. Defective notice issued under Section 274 read with Section 271(1)(c) of the Income Tax Act.
3. Interpretation and application of judicial precedents regarding penalty proceedings.

Detailed Analysis:

1. Validity of Penalty Imposed under Section 271(1)(c) of the Income Tax Act:

The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) [CIT-A] which deleted the penalty of ?11,68,082/- imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act for the Assessment Year (A.Y) 2011-12. The Revenue's representative (ld.DR) relied on the AO's order and argued that the CIT-A was not justified in deleting the penalty. The ld.DR submitted detailed arguments and case laws to support the contention that the penalty was validly imposed.

2. Defective Notice Issued under Section 274 r.w.s 271(1)(c) of the Income Tax Act:

The respondent's representative (ld.AR) argued that the penalty was imposed based on a defective notice issued under Section 274 read with Section 271(1)(c) of the Act. The ld.AR cited the decision of the Hon’ble Supreme Court in the case of SSA’s Emerald Meadows, which held that a defective notice invalidates the imposition of penalty. The statutory notice dated 27-03-2014 issued by the AO was claimed to be defective as it did not specify the charge against the assessee, i.e., whether it was for concealing particulars of income or furnishing inaccurate particulars of income.

3. Interpretation and Application of Judicial Precedents Regarding Penalty Proceedings:

The Tribunal considered various judicial precedents cited by both parties. The ld.DR referred to multiple cases, including decisions by the Hon'ble Calcutta High Court, Hon'ble Bombay High Court, and ITAT Mumbai, which supported the view that a mere defect in the notice does not invalidate the penalty proceedings. However, the Tribunal preferred to follow the decision of the Hon’ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory, which held that a notice must specifically mention the charge against the assessee, and a vague notice is invalid.

The Tribunal noted that the same set of written submissions were filed in the case of Jeetmal Choraria, where the Coordinate Bench followed the Karnataka High Court's decision. The Tribunal reiterated that where two views are available, the view favorable to the assessee should be followed, as per the established legal principle.

The Tribunal found that the notice issued in the present case was indeed defective as it did not specify the charge against the assessee. Consequently, the imposition of penalty could not be sustained. The Tribunal also noted that the Hon’ble Supreme Court had dismissed the Revenue's Special Leave Petition (SLP) against the Karnataka High Court's decision, reinforcing the precedent.

Conclusion:

The Tribunal concluded that the penalty imposed by the AO under Section 271(1)(c) of the Act could not be sustained due to the defective notice issued under Section 274. The appeal by the Revenue was dismissed, and the penalty of ?11,68,082/- was canceled. The decision was pronounced in the open court on 13-12-2017.