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2017 (9) TMI 1101 - AT - Income TaxAddition u/s 271(1)(c) - validity of notice - without specifying the specific charge under which the penalty is proposed - Held that - It is mandatory on the part of the AO to point out the specific charge and strike off one of the two charges contained in the notice issued u/s 271(1)(c) r.w.s. 274 falling which the proceedings u/s 271(1)(c) and consequent order were to be quashed. CIT V/s Manjunath Cotton and Ginning Factory reported in 2013 (7) TMI 620 - KARNATAKA HIGH COURT held that the AO has to mention specific charge in the notice whether the penalty is for concealment of income or for furnishing inaccurate particulars of income and has to strike off the charge not applicable. Thus we are of the considered view that the proceedings initiated by the AO without specifying the specific charge under which the penalty is proposed to be initiated is bad in law and so is the consequent order.- Decided in favour of assessee.
Issues:
Appeal against penalty imposed under section 271(1)(c) of the Income Tax Act, 1971 for assessment year 2006-07. Analysis: The case involved an appeal by the assessee against the penalty confirmed by the ld.CIT(A) under section 271(1)(c) of the Act. The initial assessment order passed by the Assessing Officer disallowed certain expenses claimed by the assessee, leading to the initiation of penalty proceedings for furnishing inaccurate particulars of income. The penalty was imposed by the AO based on specific grounds and legal provisions, including reliance on relevant case laws. In the appellate proceedings, the ld. CIT(A) partly allowed the appeal by considering the facts of the case. The CIT(A) observed that the assessee had accepted the wrong claim of depreciation and disallowed certain expenses. The CIT(A) concluded that the penalty imposed by the AO was justified under section 271(1)(c) but directed a recomputation of the penalty amount based on the total addition made in the assessment. The assessee further appealed the decision of the CIT(A) before the ITAT. The legal and technical issue raised by the assessee's representative focused on the specific charge under which the penalty proceedings were initiated. The representative argued that the AO failed to specify the charge clearly in the notices issued, which was a mandatory requirement for imposing penalties under section 271(1)(c) of the Act. After considering the arguments presented by both parties and examining the notices issued by the AO, the ITAT found merit in the assessee's contention. Citing relevant case laws, including decisions by the Hon'ble Karnataka High Court and the jurisdictional High Court, the ITAT held that the proceedings initiated without specifying the specific charge for the penalty were legally flawed. Consequently, the ITAT partly allowed the assessee's appeal on technical and legal grounds, leading to the quashing of the penalty imposed by the AO. In conclusion, the ITAT's decision emphasized the importance of clearly specifying the charges when initiating penalty proceedings under section 271(1)(c) of the Act. By upholding this legal principle, the ITAT ruled in favor of the assessee, highlighting the necessity for procedural compliance in penalty assessments. Order pronounced in the open court on 15th Sept, 2017.
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