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2018 (2) TMI 1361 - AT - Income TaxPenalty u/s 271(1)(c) - undisclosed income not declared in the original return - specification of charge against assessee - 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 of the Act does not strike out the inappropriate words. We are of the view that imposition of penalty cannot be sustained. See Jeetmal Choraria Versus A.C.I.T., Circle-43, 2017 (12) TMI 883 - ITAT, KOLKATA - Decided in favour of assessee.
Issues Involved:
1. Validity of penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961. 2. Specificity of the charge in the show cause notice issued under Section 274 of the Act. Issue-Wise Detailed Analysis: 1. Validity of Penalty Imposed under Section 271(1)(c) of the Income-tax Act, 1961: The appeal concerns the upholding of a penalty of ?36,517/- imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income-tax Act, 1961. The penalty was imposed following a search and seizure operation conducted under Section 132(1) of the Act, during which it was discovered that the assessee had shown a loan from an individual which was later admitted by the assessee to be income from undisclosed sources. Consequently, the AO treated this amount as concealed income and imposed the penalty, which was subsequently confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. 2. Specificity of the Charge in the Show Cause Notice Issued under Section 274 of the Act: The primary contention raised by the assessee was that the show cause notice issued under Section 274 read with Section 271 of the Act did not specify the exact charge, i.e., whether the penalty was for concealment of particulars of income or for furnishing inaccurate particulars of income. The notice used a standard format without striking out the irrelevant portion, thus not clearly informing the assessee of the specific charge. The assessee’s counsel referenced several judicial precedents, including: - CIT vs. SSA’s Emerald Meadows: The Karnataka High Court held that a penalty order is invalid if the show cause notice does not specify the charge. - CIT vs. Manjunatha Cotton and Ginning Factory: The Karnataka High Court emphasized the necessity of specifying the charge in the show cause notice. - CIT vs. Shri Samson Perinchery: The Bombay High Court followed the Karnataka High Court’s decision, invalidating penalties based on defective notices. - Suvaprasanna Bhattacharya vs. ACIT: The ITAT Kolkata followed the same principle. The Department's Representative (DR) opposed this view, citing various case laws, including: - Dr. Syamal Baran Mondal vs. CIT: The Calcutta High Court held that Section 271 does not mandate specific terms for recording satisfaction about concealment. - CIT vs. Kaushalya: The Bombay High Court ruled that the issuance of notice is an administrative device and a mistake in the notice’s language does not invalidate penalty proceedings. - Earthmoving Equipment Service Corporation vs. DCIT: The ITAT Mumbai did not follow the Karnataka High Court’s decision, emphasizing that the penalty was not solely based on the defective notice. However, the ITAT Kolkata, in the case of Jeetmal Choraria vs. ACIT, reiterated that the specificity of the charge in the notice is crucial. The Tribunal noted that where two views exist, the one favorable to the assessee should be followed. It concluded that the defective show cause notice in the present case rendered the penalty proceedings unsustainable. Conclusion: The ITAT Kolkata held that the penalty imposed and confirmed by the CIT(A) could not be sustained due to the defective show cause notice, which did not specify the charge against the assessee. The penalty was thus deleted, and the appeal of the assessee was allowed. The judgment emphasized adherence to the principle that where judicial precedents offer differing views, the view favorable to the assessee should prevail.
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