2018 (4) TMI 1067 - AT - Income Tax

Penalty u/s 271(1)(c) - non specification of charge - defective notice - Held that - 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. Thus imposition of penalty cannot be sustained. See Jeetmal Choraria Versus A.C.I.T. 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.
2. Defectiveness of the statutory notice issued under Section 274 read with Section 271 of the Act.
3. Relevance of judicial precedents and conflicting judgments from various High Courts and Tribunals.

Issue-Wise Detailed Analysis:

1. Validity of Penalty Imposed Under Section 271(1)(c) of the Income Tax Act:
The appeal by the Assessee challenges the order of the Commissioner of Income Tax (Appeals), which confirmed the penalty of ?4,48,371/- imposed under Section 271(1)(c) of the Act by the Assessing Officer (AO). The primary contention is that the penalty was imposed based on a defective notice, which is not maintainable.

2. Defectiveness of the Statutory Notice Issued Under Section 274 Read with Section 271 of the Act:
The Assessee's representative argued that the notice dated 29-01-2013 issued under Section 274 read with Section 271 of the Act was defective. The notice did not specify whether the penalty was for "concealing the particulars of income" or "furnishing inaccurate particulars of income." This argument was supported by the Hon’ble Karnataka High Court's decision in the case of CIT vs. SSA’s Emerald Meadows, which was upheld by the Hon’ble Supreme Court by dismissing the Special Leave Petition (SLP) filed by the Revenue.

3. Relevance of Judicial Precedents and Conflicting Judgments:
The Revenue's representative relied on several judgments to support the imposition of the penalty despite the alleged defect in the notice. These included:
- Dr. Syamal Baran Mondal vs. CIT: The Calcutta High Court held that Section 271 does not mandate that the recording of satisfaction about concealment of income must be in specific terms.
- Trishul Enterprises vs. DCIT: The ITAT Mumbai dismissed the contention regarding the failure to strike off the relevant part of the notice.
- CIT vs. Smt. Kaushalya: The Bombay High Court held that mere non-striking off of the inaccurate portion in the notice cannot by itself invalidate the notice.
- M/s. Maharaj Garage & Company vs. CIT: The Bombay High Court reiterated that the requirement of Section 274 for granting a reasonable opportunity does not extend to framing a specific charge.

The Tribunal, however, preferred to follow the Karnataka High Court's decision in the case of Manjunatha Cotton and Ginning Factory, which emphasized that a defective notice does not comply with the requirements of the Act and invalidates the penalty proceedings. The Tribunal also noted that when there are conflicting judicial views, 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 issued to the Assessee was defective as it did not specify the charge against the Assessee. This defect rendered the penalty proceedings invalid. The Tribunal canceled the penalty of ?4,48,371/- imposed by the AO and confirmed by the CIT-A, allowing the Assessee's appeal. The decision was based on the principle that in the presence of conflicting judicial views, the view favoring the Assessee should be followed. The Tribunal's order was pronounced in the open court on 20-04-2018.

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