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2018 (7) TMI 62 - AT - Income TaxPenalty u/s 271(1)(c) - not struck of irrelevant portion in the show cause notice - Held that - Hon ble Bombay High Court following the decision of the Hon ble Karnataka High Court in the case of CIT vs Manjunatha Cotton and Ginning factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT came to the conclusion that imposition of penalty on defective show cause notice without specifying the charge against the assessee cannot be sustained. 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.
Issues Involved:
1. Validity of penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961. 2. Specificity of the charge in the show cause notice issued under Section 274 read with Section 271(1)(c). Issue-wise Detailed Analysis: 1. Validity of Penalty Imposed under Section 271(1)(c): The appellant challenged the penalty of ?6,05,524/- upheld by the CIT(A) under Section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2014-15. The penalty was imposed by the Assessing Officer (AO) for the concealment of income, as the assessee did not disclose salary income amounting to ?22,74,500/-. The AO initiated penalty proceedings under Section 271(1)(c) by issuing a notice under Section 274, which led to the imposition of the penalty. The CIT(A) confirmed the AO's action, leading the assessee to appeal before the Tribunal. 2. Specificity of the Charge in the Show Cause Notice: The core argument presented by the assessee's counsel was that the show cause notice issued under Section 274 read with Section 271(1)(c) did not specify the exact charge against the assessee, i.e., whether it was for "concealment of particulars of income" or "furnishing inaccurate particulars of income." The notice failed to strike out the irrelevant portion, rendering it ambiguous. The counsel cited the Karnataka High Court's decision in CIT vs. SSA’s Emerald Meadows and Manjunatha Cotton and Ginning Factory, where it was held that such ambiguity in the notice invalidates the penalty proceedings. The Supreme Court upheld this view by dismissing the Revenue's appeal. Tribunal's Consideration: The Tribunal examined various case laws, including those cited by the Departmental Representative (DR), such as the Calcutta High Court decision in Dr. Syamal Baran Mondal vs. CIT and the Bombay High Court's decision in CIT vs. Kaushalya. The Tribunal noted that these decisions did not specifically address the issue of ambiguity in the show cause notice under Section 274. The Tribunal referred to its previous decision in Jeetmal Choraria vs. ACIT, where it was held that the failure to specify the charge in the show cause notice under Section 274 invalidates the penalty proceedings. The Tribunal distinguished between the requirement of recording satisfaction about concealment of income and the necessity of specifying the charge in the show cause notice. Conclusion: The Tribunal concluded that the show cause notice issued to the assessee was invalid due to its failure to specify the charge, following the precedent set by the Karnataka High Court and other supportive judgments. Consequently, the imposition of penalty under Section 271(1)(c) could not be sustained. The Tribunal allowed the appeal, canceling the penalty imposed on the assessee. Final Judgment: The appeal of the assessee was allowed, and the order was pronounced in the open court on 29.06.2018.
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