2022 (10) TMI 1163 - HC - Income Tax

Penalty u/s 271(1)(c) - defective notice u/s 274 - whether show-cause notice does not specifically spell out the grounds for imposition of the proposed penalty ? - HELD THAT - On perusal of the order passed by the learned Tribunal we find that he Tribunal had examined the factual position and found that the show cause notice issued under Section 274 of the Act was defective. Tribunal had also noted various decisions of this Court wherein it has been held that when the notice issued u/s 274 of the Act was defective the defect is incurable as it goes to the root of the matter. Therefore we find that the Tribunal rightly granted relief to the assessee. Revenue appeal fails and is dismissed.

Summary

Issues:
Validity of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961 due to lack of specific grounds in the show-cause notice.

Analysis:
The High Court of Calcutta heard an appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the assessment year 2007-08. The substantial question of law raised was whether penalty proceedings under Section 271(1)(c) of the Act are invalid if the show-cause notice does not clearly state the grounds for imposing the penalty. The appellant was represented by Mr. Tilak Mitra, while Ms. Swapna Das appeared for the respondent.

Upon reviewing the Tribunal's order, the Court observed that the Tribunal had found the show-cause notice issued under Section 274 of the Act to be defective. The Court noted that previous decisions of the Court established that when such a notice is defective, the defect is considered incurable as it strikes at the core of the matter. Consequently, the Tribunal's decision to grant relief to the assessee was deemed appropriate by the High Court.

As a result, the High Court dismissed the appeal, affirming the Tribunal's decision to provide relief to the assessee. The Court ruled that the substantial question of law was answered against the revenue, emphasizing the importance of a valid and specific show-cause notice in penalty proceedings under the Income Tax Act, 1961.