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2017 (2) TMI 514 - AT - Income TaxPenalty u/s. 271(1)(c) - income offered after the search but in the return filed u/s 153A - Defective notice - Held that - We find from the perusal of the show cause notice issued u/s 274 read with section 271(1)(c) of the Act, the ld AO had merely made a tick mark without mentioning the specific charge of offence and without strucking off the relevant portion in the show cause notice as to whether the assessee had concealed his income or furnished inaccurate particulars of income. Thus the show cause notice u/s.274 of the Act is defective. The the penalty levied u/s 271(1)(c ) of the Act deserves to be cancelled on all counts. - Decided in favour of assessee
Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961. 2. Validity of show cause notice under Section 274 read with Section 271(1)(c). Issue-Wise Detailed Analysis: 1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961: The core issue in these appeals is whether the penalty under Section 271(1)(c) could be levied on income disclosed in the return filed under Section 153A after a search operation. The brief facts reveal that a search and seizure operation was conducted on the assessee's premises, leading to the discovery of undisclosed income. The jurisdiction was transferred, and proceedings under Section 153A were initiated. The assessee filed returns and subsequently revised the computation of income based on the inspection of seized records. The Assessing Officer (AO) levied penalties at 300% of the tax sought to be evaded for various assessment years, arguing that the assessee would not have disclosed the income but for the search. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the penalty but reduced it to 100%. Both the assessee and the revenue appealed against this decision. 2. Validity of Show Cause Notice under Section 274 read with Section 271(1)(c): The assessee argued that the show cause notices issued under Section 274 were defective as they did not specify the exact charge—whether it was for "concealing particulars of income" or "furnishing inaccurate particulars of income." The assessee relied on the Karnataka High Court's decision in CIT vs Manjunatha Cotton and Ginning Factory, which held that such notices must clearly state the specific charge. The Supreme Court upheld this decision in CIT & Anr vs M/s SSA’s Emerald Meadows. The Tribunal found that the AO had merely made a tick mark on the notice without specifying the charge, making the notice defective. The Tribunal cited the coordinate bench's decision in Harish Kumar Sarawgi vs DCIT, which had similarly held that penalty under Section 271(1)(c) could not be levied based on a defective notice. Judgment: The Tribunal concluded that the penalty levied under Section 271(1)(c) could not be sustained due to the defective show cause notices. The notices did not specify whether the penalty was for "concealing particulars of income" or "furnishing inaccurate particulars of income," violating principles of natural justice. Consequently, the Tribunal canceled the penalties and allowed the assessee's appeals while dismissing the revenue's appeals. Conclusion: The appeals of the assessee were allowed, and the appeals of the revenue were dismissed. The order was pronounced in the open court on 03.02.2017.
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