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2017 (6) TMI 298 - AT - Income TaxPenalty u/s.271(1)(c) - denial of natural justice - Held that - Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or had furnished inaccurate particulars of income. This, deprives the assessee of a fair opportunity to explain its stand, thereby, violates the principles of natural justice. Notice issued under section 274 must reveal application of mind by the Assessing Officer and the assessee must be made aware of the exact charge on which he had to file his explanation. The Court observed, vagueness and ambiguity in the notice deprives the assessee of reasonable opportunity as he is unaware of the exact charge he has to face. - Decided in favour of assessee.
Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act. 2. Validity of the notice issued under Section 274 read with Section 271(1)(c) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act: The primary issue in this appeal is the imposition of a penalty of ?1,93,602 under Section 271(1)(c) of the Income Tax Act for the Assessment Year 2006-07. The Assessee initially filed a return declaring a total income of ?1,94,655. However, after the issuance of a notice under Section 148, the Assessee filed a revised return declaring an income of ?7,88,270, including income from other sources amounting to ?5,93,622. The Assessee claimed that this revised return was filed voluntarily to buy peace and avoid litigation. The Assessing Officer (AO) accepted the revised income but also levied a penalty under Section 271(1)(c), which was confirmed by the CIT(A). The Assessee argued that the income was voluntarily offered during the assessment proceedings to avoid litigation and penal action. The Assessee cited the decision of the Punjab and Haryana High Court in the case of Rajiv Garg, where under similar circumstances, the High Court upheld the deletion of the penalty imposed under Section 271(1)(c). The Tribunal found that the Revenue did not provide any material evidence to prove concealment of income or furnishing inaccurate particulars. The additional income was offered in good faith to buy peace, and the Tribunal concluded that the penalty was not justified. 2. Validity of the Notice Issued under Section 274 read with Section 271(1)(c) of the Income Tax Act: The Assessee also raised a legal ground regarding the validity of the notice issued under Section 274 read with Section 271(1)(c). The notice was issued in a standard proforma without specifying whether the penalty was for furnishing inaccurate particulars of income or for concealment of income. The Assessee argued that this vagueness invalidated the entire penalty proceedings. The Tribunal agreed, citing multiple judgments, including those of the Hon’ble Karnataka High Court in the case of CIT v. Manjunatha Cotton and Ginning Factory and the Hon’ble Bombay High Court in the case of Samson Perinchery. These judgments emphasize that the notice must specify the exact charge to provide the Assessee a fair opportunity to respond. The Tribunal found that the notice issued to the Assessee did not specify the charge, indicating non-application of mind by the AO. This lack of specificity rendered the notice invalid, and as a result, the penalty proceedings were vitiated. Conclusion: The Tribunal concluded that the penalty imposed under Section 271(1)(c) was not justified both on factual and legal grounds. The additional income was offered in good faith, and the notice issued under Section 274 read with Section 271(1)(c) was invalid due to its vagueness. Consequently, the Tribunal directed the AO to delete the penalty of ?1,93,602. The appeal of the Assessee was allowed.
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