2018 (4) TMI 624 - AT - Income Tax

Penalty u/s. 271(1)(c) - defective notice - non specification of charge - 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. In these circumstances, we are of the view that imposition of penalty cannot be sustained. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of penalty imposed under section 271(1)(c) of the Income Tax Act.
2. Defective notice issued under section 274 read with section 271(1)(c) of the Income Tax Act.
3. Judicial precedents and their applicability to the present case.

Detailed Analysis:

1. Validity of Penalty Imposed Under Section 271(1)(c) of the Income Tax Act:
The primary issue in this appeal is the validity of the penalty amounting to ?3,09,000/- imposed under section 271(1)(c) of the Income Tax Act by the Assessing Officer (AO). The Commissioner of Income Tax (Appeals) had confirmed this penalty. The Assessee contended that the penalty was imposed based on a defective notice and cited the Supreme Court's decision in SSA’s Emerald Meadows, which invalidated penalties imposed on defective notices.

2. Defective Notice Issued Under Section 274 Read With Section 271(1)(c) of the Income Tax Act:
The Assessee argued that the statutory notice dated 01-03-2013 issued by the AO under section 274 read with section 271 of the Act was defective. The Assessee relied on the decision of the Karnataka High Court in CIT vs SSA’s Emerald Meadows, which was upheld by the Supreme Court. The main contention was that the notice did not specify whether the penalty was for "concealment of particulars of income" or "furnishing inaccurate particulars of income," making it vague and invalid.

3. Judicial Precedents and Their Applicability to the Present Case:
The Department's Representative (DR) argued that the penalty should be upheld, citing various judicial precedents. These included decisions from the Calcutta High Court, Bombay High Court, and ITAT Mumbai, which held that minor defects in the notice do not invalidate penalty proceedings if the Assessee had an opportunity to be heard.

The Tribunal considered the written submissions and case laws cited by both parties. It noted that the Coordinate Bench in the case of Jeetmal Choraria had elaborately discussed similar issues and preferred to follow the Karnataka High Court's decision in Manjunatha Cotton and Ginning Factory. This decision emphasized that when there are two views on an issue, the one favoring the Assessee should be adopted, as enunciated by the Supreme Court in Vegetable Products Ltd.

The Tribunal found that the notice dated 01-03-2013 did not specify the charge against the Assessee, making it defective. The Supreme Court had dismissed the Revenue's Special Leave Petition against the Karnataka High Court's decision, reinforcing this view.

Conclusion:
The Tribunal concluded that the penalty imposed under section 271(1)(c) could not be sustained due to the defective notice. It followed the principle that when two views are available, the one favoring the Assessee should be adopted. Consequently, the penalty of ?3,09,000/- was canceled, and the appeal of the Assessee was allowed. The order was pronounced in the open court on 28-03-2018.