2017 (12) TMI 1715 - AT - Income Tax

Penalty u/s. 271(1)(c) - defective notice issued u/s. 274 - HELD THAT - We find that the notice dt. 05-12-2007 issued u/s. 274 r.w.s 271 does not specify the charge of offence committed by the assessee viz whether had concealed the particulars of income or had furnished inaccurate particulars of income. Hence the said notice is to be held as defective. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the penalty imposed under Section 271(1)(c) of the Income Tax Act.
2. Defectiveness of the statutory notice issued under Section 274 read with Section 271(1)(c).
3. Applicability of the decision in the case of SSA's Emerald Meadows.
4. Arguments presented by the Department regarding the validity of the notice and penalty proceedings.

Detailed Analysis:

1. Validity of the penalty imposed under Section 271(1)(c) of the Income Tax Act:
The appeal was directed against the order of the Commissioner of Income Tax (Appeals), which confirmed the penalty of Rs. 18,90,250/- imposed under Section 271(1)(c) of the Act by the Assessing Officer (AO). The core issue was whether the penalty imposed was valid, given the alleged defectiveness of the statutory notice.

2. Defectiveness of the statutory notice issued under Section 274 read with Section 271(1)(c):
The Assessee's representative (AR) argued that the statutory notice dated 05-12-2007 issued by the AO under Section 274 read with Section 271 of the Act was defective. The AR contended that the notice did not specify the charge of offense committed by the assessee, i.e., whether it was for concealing particulars of income or furnishing inaccurate particulars of income. This argument was supported by the decision of the Hon'ble Supreme Court in the case of SSA's Emerald Meadows, which held that such a defective notice is not maintainable.

3. Applicability of the decision in the case of SSA's Emerald Meadows:
The AR relied heavily on the decision in the case of SSA's Emerald Meadows, where the Hon'ble Supreme Court dismissed the Special Leave Petition (SLP) filed by the Revenue, thereby upholding the decision of the Karnataka High Court, which invalidated the penalty proceedings initiated on the basis of a defective notice. The Tribunal found this precedent applicable and relevant to the present case, reinforcing the argument that the penalty could not be sustained due to the defective notice.

4. Arguments presented by the Department regarding the validity of the notice and penalty proceedings:
The Department's representative (DR) argued in favor of the validity of the penalty and the notice, citing several case laws. The DR referenced judgments from the Hon'ble Calcutta High Court, ITAT Mumbai, and the Hon'ble Bombay High Court, which suggested that mere defects in the notice do not invalidate the penalty proceedings if the assessee was given a reasonable opportunity to be heard. However, the Tribunal preferred the view favoring the assessee, as established by the Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning, which emphasized the necessity of specifying the charge in the notice.

Tribunal's Conclusion:
The Tribunal, after considering the rival submissions and the written submissions, concluded that the notice issued under Section 274 read with Section 271 of the Act was indeed defective as it did not specify the charge against the assessee. The Tribunal followed the principle that when there are two views on an issue, the view favoring the assessee should be adopted. Consequently, the Tribunal canceled the penalty of Rs. 18,90,250/- imposed by the AO and confirmed by the CIT-A, allowing the appeal of the assessee.

Order:
The appeal of the assessee was allowed, and the penalty levied under Section 271(1)(c) was canceled. The order was pronounced in the open court on 13-12-2017.