2018 (2) TMI 294 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice - non-striking of the relevant Clause - Held that - It is clear from the notices initiating penalty in the present case that the AO did not specifically mention the charge on which the proceedings u/s 271(1)(c) of the Act were initiated against the assessee. The Hon ble High Court of Karnataka in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (2013 (7) TMI 620 - KARNATAKA HIGH COURT) held that non-striking of the relevant Clause under which the penalty is sought to be imposed will lead to an inference of non-application of mind. - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction of CIT (Appeals) in levying penalty under section 271(1)(c) of the Income-tax Act, 1961.
2. Limitation prescribed under section 275 of the Act for penalty proceedings.
3. Requirement of discernible satisfaction for initiating penalty.
4. Validity of notice issuance and service for penalty imposition.
5. Adequate opportunity of being heard in penalty proceedings.
6. Imposition of penalty for disallowance of additional depreciation under section 32(1)(ii)(a) of the Act.
7. Concealment or furnishing of inaccurate particulars of income for penalty imposition.
8. Compliance with legal requirements in penalty initiation notice.
9. Precedents supporting the need for clear grounds in penalty proceedings.

Detailed Analysis:
1. The appeal challenged the CIT (Appeals) order levying a penalty under section 271(1)(c) of the Income-tax Act, 1961, for the assessment year 2009-10.
2. The first issue raised was the jurisdiction of the CIT (Appeals) in imposing the penalty, questioning the validity of the penalty order and its compliance with the law.
3. The appellant argued that the penalty order was barred by limitation as prescribed under section 275 of the Act, emphasizing the need for adherence to statutory timelines.
4. Another contention was the lack of discernible satisfaction for initiating the penalty, asserting that such satisfaction is essential for the validity of penalty imposition.
5. The appellant further challenged the legality of the notice issuance and service for the penalty, highlighting the importance of proper procedural compliance.
6. Regarding the imposition of penalty for disallowance of additional depreciation, the appellant argued against the penalty under section 271(1)(c) for the claimed amount.
7. The issue of concealment or furnishing inaccurate particulars of income was crucial for penalty imposition, with the appellant emphasizing the absence of such actions.
8. The judgment cited legal precedents supporting the requirement of clear grounds in penalty proceedings, emphasizing the need for specific allegations in the notice initiating penalty.
9. Ultimately, the Tribunal ruled in favor of the appellant, directing the Assessing Officer to delete the penalty imposed, citing irregularities in the penalty initiation process.

This comprehensive analysis covers the various legal issues raised in the judgment, detailing the arguments presented by the parties and the Tribunal's decision based on legal principles and precedents.