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2018 (6) TMI 833 - AT - Income TaxLevy of penalty u/s 271(1)(c) - non specification of charge - non striking of inappropriate words - Held that - Penalty is deleted by making reliance in case of JEETMAL CHORARIA VERSUS A.C.I.T., CIRCLE-43, 2017 (12) TMI 883 - ITAT, KOLKATA wherein it is held that show cause notice issued u/s 274 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 does not strike out the inappropriate words - in these circumstances, we are of the view that imposition of penalty cannot be sustained - we, therefore, hold that deletion of penalty by the Ld. CIT(A) against the imposition of penalty by the AO in the present case is to be sustained - the order of Ld. CIT(A) is hereby confirmed - Decided against the revenue.
Issues Involved:
1. Legality of the penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961. 2. Validity of the show cause notice issued under Section 274 of the Act. Issue-wise Detailed Analysis: 1. Legality of the Penalty Imposed under Section 271(1)(c) of the Income-tax Act, 1961: The Revenue challenged the order of the Ld. CIT(A) which deleted the penalty of ?15,45,000/- imposed by the AO under Section 271(1)(c) of the Act. The penalty was imposed following a search and seizure operation in the Agarwal Gourisaria Sub Group of cases, where the assessee disclosed ?50,00,000/- under Section 132(4) of the Act. The AO initiated penalty proceedings on this disclosed amount, alleging concealment of income or furnishing inaccurate particulars. The assessee contended that the disclosure was not backed by evidence of undisclosed income or assets, and thus, there was no concealment or furnishing of inaccurate particulars. The Ld. CIT(A) accepted the assessee's arguments and deleted the penalty, leading the Revenue to appeal. 2. Validity of the Show Cause Notice Issued under Section 274 of the Act: The primary contention was that the show cause notice issued under Section 274 did not specify the exact charge against the assessee—whether it was for concealment of income or furnishing inaccurate particulars. The assessee's counsel argued that the notice was defective as it did not strike out the irrelevant portions, thus failing to specify the charge clearly. This argument was supported by the Hon’ble Karnataka High Court's decision in CIT vs. SSA’s Emerald Meadows and CIT vs. Manjunatha Cotton and Ginning Factory, where it was held that such ambiguity in the notice makes the imposition of penalty invalid. The Hon’ble Supreme Court also dismissed the Revenue's SLP against this view. The Tribunal noted that similar views were upheld by the Hon’ble Bombay High Court in CIT vs. Shri Samson Perinchery and followed by the ITAT in Suvaprasanna Bhattacharya vs. ACIT. The Revenue's representative opposed this view, citing various case laws, including decisions from the Hon’ble Calcutta High Court and the Mumbai ITAT, which suggested that mere defects in the notice do not invalidate penalty proceedings if the assessee was aware of the charges and had an opportunity to be heard. However, the Tribunal found these cases distinguishable as they did not directly address the issue of specificity in the show cause notice under Section 274. The Tribunal concluded that where two views exist, the one favorable to the assessee should be followed. Hence, the Tribunal followed the view of the Hon’ble Karnataka High Court, holding that the defective show cause notice invalidated the penalty proceedings. Consequently, the deletion of the penalty by the Ld. CIT(A) was upheld, and the Revenue's appeal was dismissed. Conclusion: The Tribunal confirmed the order of the Ld. CIT(A), deleting the penalty imposed by the AO under Section 271(1)(c) of the Act, due to the defective show cause notice under Section 274, which did not specify the exact charge against the assessee. The appeal of the Revenue was dismissed, and the decision was pronounced in the open court on 14.06.2018.
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