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2018 (4) TMI 1068 - AT - Income TaxPenalty 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 the penalty notice issued under section 271(1)(c) of the Income Tax Act, 1961. 2. Whether the penalty imposed under section 271(1)(c) can be sustained based on the facts and circumstances. Issue-wise Detailed Analysis: 1. Validity of the Penalty Notice Issued under Section 271(1)(c): The primary contention raised by the assessee was that the penalty notice issued by the Assessing Officer (AO) was defective. The notice did not clearly specify whether the penalty was being imposed for "furnishing inaccurate particulars of income" or "concealment of particulars of income." This defect was highlighted with reference to the judgment of the Coordinate Bench Kolkata in the case of Jeetmal Choraria vs. ACIT, Circle-43, Kolkata, wherein it was held that a penalty notice must specify the exact charge against the assessee. The notice should not have ambiguous language like "Have concealed the particulars of your income or furnished inaccurate particulars of such income." The assessee's counsel drew attention to the decision of the Hon’ble Karnataka High Court in the case of CIT vs. SSA’s Emerald Meadows, which held that a penalty notice under section 274 of the Act must specify the charge against the assessee. The Hon’ble Supreme Court dismissed the Special Leave Petition (SLP) against this decision, thereby upholding it. The counsel also cited the Hon’ble Bombay High Court's decision in the case of CIT vs. Shri Samson Perinchery, which echoed the same principle. The Revenue's representative relied on the Hon’ble Calcutta High Court's decision in Dr. Syamal Baran Mondal Vs. CIT, which suggested that specific wording in the satisfaction of concealment was not mandatory. However, this was distinguished as it pertained to the recording of satisfaction and not the specific charge in the penalty notice. The Tribunal noted that the Mumbai ITAT had taken a different view in cases like Dhanraj Mills Pvt. Ltd. vs. ACIT, where it was held that the mere mistake in the language of the notice does not invalidate it. However, the Tribunal preferred to follow the Karnataka High Court's decision, which is more favorable to the assessee, as per the legal principle that where two views are available, the one favorable to the assessee should be followed. 2. Sustainability of Penalty under Section 271(1)(c): The Tribunal observed that the penalty notice in the present case did not specify the charge against the assessee, similar to the facts in the Jeetmal Choraria case. Given the defective notice, the imposition of penalty could not be sustained. The Tribunal emphasized that the show cause notice under section 274 of the Act must strike out the inappropriate words to specify the exact charge. Since the penalty was quashed due to the defective notice, the cross-objection filed by the assessee, which challenged the partial penalty sustained by the CIT(A), became infructuous. Conclusion: The Tribunal concluded that the imposition of penalty under section 271(1)(c) could not be sustained due to the defective penalty notice. Consequently, the appeal filed by the Revenue was dismissed, and the cross-objection filed by the assessee was also dismissed as infructuous. The order was pronounced in the Court on 20.04.2018.
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