2019 (2) TMI 1797 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice - no specific charge against the assessee spelt out in the said notice - HELD THAT - 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 that in such circumstances penalty u/s.271(1)(c) of the Act cannot be imposed, has to be accepted, as such a plea is based on the decisions referred to by the learned counsel for the Assessee. We, therefore, hold that imposition of penalty in the present case cannot be sustained and the same was rightly cancelled by the CIT(A). - Decided in favour of assessee.

Summary

Issues:
- Appeal against the order of the CIT(Appeals) cancelling penalty under section 271(1)(c) of the Income Tax Act, 1961.
- Delay in filing the appeal by the revenue.
- Validity of the revised return filed by the Assessee.
- Defective show cause notice u/s 274 of the Act before imposing penalty.

Analysis:
1. Cancellation of Penalty by CIT(Appeals:
The revenue appealed against the CIT(Appeals) order cancelling the penalty imposed on the Assessee under section 271(1)(c) of the Income Tax Act. The penalty was levied due to an addition of ?75 lacs to the Assessee's total income. The Assessee, an individual, explained that the seized money belonged to parties for purchasing seeds. The CIT(A) cancelled the penalty, stating that the revised return filed by the Assessee was invalid as the original return was not in accordance with the law. The CIT(A) held that no penalty could be imposed in this scenario, leading to the cancellation of the penalty.

2. Delay in Filing the Appeal:
There was a delay of 29 days in filing the appeal by the revenue, attributed to administrative difficulties. The delay was condoned as it was not inordinate, and the reasons provided in the affidavit were accepted by the Tribunal.

3. Validity of Revised Return:
The Assessee filed a revised return offering the ?75 lacs as income after the seizure. However, the CIT(A) found the revised return invalid due to the original return being flawed. The CIT(A) based this decision on Section 139(5) of the Income Tax Act, stating that the right to file a revised return is denied to those who file under Section 139(4), as held by the Supreme Court in a relevant case.

4. Defective Show Cause Notice:
The Tribunal upheld the cancellation of the penalty by the CIT(A) due to a defective show cause notice under section 274 of the Act. The notice did not specify whether the charge against the Assessee was for concealing particulars of income or furnishing inaccurate particulars of income. Citing relevant case law, the Tribunal concluded that the penalty imposition was not sustainable in the absence of a specific charge in the notice, leading to the dismissal of the revenue's appeal.

In conclusion, the Tribunal dismissed the revenue's appeal against the cancellation of the penalty, emphasizing the importance of a valid show cause notice and the implications of an invalid return on penalty imposition. The decision was based on legal provisions and precedents, highlighting the necessity for procedural compliance in tax penalty cases.