2018 (1) TMI 894 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice - Held that - The 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 does not strike out the inappropriate words. We are of the view that imposition of penalty cannot be sustained. The plea of the the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. We therefore hold that imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled. - Decided in favour of assessee.

Summary

Issues:
Challenge to penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 based on show cause notice lacking specific charge of concealment or furnishing inaccurate particulars of income.

Detailed Analysis:

1. Issue of Specific Charge in Show Cause Notice:
The appeal challenged the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, due to the show cause notice not specifying whether the charge was for concealing particulars of income or furnishing inaccurate particulars. The counsel for the assessee argued that the notice did not strike out irrelevant portions, rendering it vague. The counsel cited various judicial decisions, including the Hon'ble Karnataka High Court and Bombay High Court rulings, to support the argument that a defective show cause notice without a specific charge cannot sustain the imposition of penalty.

2. Legal Precedents and Arguments:
The counsel referenced the Hon'ble Karnataka High Court's decision in CIT vs. Manjunatha Cotton and Ginning Factory, supported by subsequent rulings, to emphasize the importance of a clear charge in the notice. Conversely, the learned DR relied on Mumbai ITAT and Bombay High Court decisions, arguing that the notice's language or minor errors do not invalidate penalty proceedings. The Mumbai ITAT also highlighted the principle of natural justice and the need for the assessee to be informed and given an opportunity to respond to the proposed penalty.

3. Judicial Interpretations and Tribunal Decisions:
The ITAT Kolkata analyzed various judicial interpretations, including the Hon'ble Bombay High Court and Patna High Court's views on the purpose of a show cause notice. The tribunal noted conflicting decisions between different jurisdictions but ultimately followed the view favoring the assessee, as per the Hon'ble Karnataka High Court's ruling. The tribunal emphasized the necessity of a clear charge in the notice to sustain the imposition of penalty, as highlighted in the case at hand.

4. Final Decision and Outcome:
After a thorough analysis of legal precedents and arguments presented, the ITAT Kolkata concluded that the show cause notice in the present case lacked a specific charge against the assessee, leading to the cancellation of the imposed penalty. The tribunal upheld the plea of the assessee based on the cited decisions and directed the cancellation of the penalty. The appeal of the assessee was allowed, emphasizing the importance of a clear and specific charge in the show cause notice for penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961.

This detailed analysis highlights the significance of a specific charge in a show cause notice for penalty proceedings and the legal implications of such notices in income tax assessments.