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2018 (4) TMI 739 - AT - Income TaxPenalty u/s 271(1)(c) - non specification of charge - defective notice - Held that - After perusing the aforesaid contents of the Notice dated 01.12.2010, we are of the view that the AO has initiated the penalty for concealment of particulars of income or furnishing of inaccurate particulars, which is contrary to the provisions of law. We are of the view that notice issued by the AO u/s. 271(1)(c) read with Section 274 of the Act is bad in law as it does not specify which limb of section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars. Therefore, the penalty in dispute is not sustainable in the eyes of law. - Decided in favour of assessee
Issues Involved:
1. Validity of the penalty imposed under Section 271(1)(c) of the Income Tax Act. 2. Defective notice under Section 274 read with Section 271 of the Income Tax Act. 3. Jurisprudence and precedents regarding the necessity of specifying the charge in penalty notices. Issue-Wise Detailed Analysis: 1. Validity of the Penalty Imposed Under Section 271(1)(c) of the Income Tax Act: The primary issue in this appeal was the confirmation of a penalty amounting to ?1,22,789/- imposed under Section 271(1)(c) of the Income Tax Act for the assessment year 2011-12. The appellant argued that the penalty was based on a defective notice, which did not specify whether the penalty was for "concealment of income" or "furnishing inaccurate particulars of income." The appellant's counsel cited the Hon'ble Supreme Court's decision in SSA’s Emerald Meadows to support the claim that such a defective notice invalidates the penalty. 2. Defective Notice Under Section 274 Read with Section 271 of the Income Tax Act: The appellant contended that the statutory notice dated 26-03-2014 issued by the Assessing Officer (AO) under Section 274 read with Section 271 of the Act was defective. The notice failed to specify the exact charge against the assessee, i.e., whether the penalty was for concealing particulars of income or for furnishing inaccurate particulars of income. The appellant relied on the decision of the Hon'ble Karnataka High Court in CIT vs. SSA’s Emerald Meadows, which was upheld by the Hon'ble Supreme Court, to argue that such a defective notice is not maintainable and invalidates the penalty proceedings. 3. Jurisprudence and Precedents Regarding the Necessity of Specifying the Charge in Penalty Notices: The respondent's counsel (ld.DR) argued that the penalty should be upheld, relying on various judgments that supported the validity of penalty notices even if they did not specify the exact charge. The ld.DR cited the Hon'ble Calcutta High Court's decision in Dr. Syamal Baran Mondal vs. CIT, which held that Section 271 does not mandate specific terms for recording satisfaction about concealment of income. The ld.DR also referred to several decisions from the ITAT Mumbai and the Hon'ble Bombay High Court, which supported the view that a mere mistake in the language of the notice or non-striking of the inaccurate portion does not invalidate the notice. However, the Tribunal preferred to follow the ratio laid down by the Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory, which emphasized the necessity of specifying the charge in the penalty notice. The Tribunal noted that when there are two views on an issue, the view favorable to the assessee should be adopted, as established by the Hon'ble Supreme Court in the case of Vegetable Products Ltd. Conclusion: The Tribunal found that the notice dated 26-03-2014 issued under Section 274 read with Section 271 of the Act did not specify the charge of offense committed by the assessee, making it defective. The Tribunal also noted that the Revenue's Special Leave Petition (SLP) against the decision in SSA’s Emerald Meadows was dismissed by the Hon'ble Supreme Court. Consequently, the Tribunal canceled the penalty of ?1,22,789/- levied by the AO under Section 271(1)(c) of the Act and confirmed by the CIT-A. The appeal of the assessee was allowed, and the order was pronounced in the open court on 13-04-2018.
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