2018 (7) TMI 570 - AT - Income Tax

Penalty u/s. 271(1)(c) - non specification of charge - Held that - We find that the notice dt. 30-03-2015 issued u/s. 274 r.w.s 271 of the Act does not specify the charge of offence committed by the assessee viz whether had concealed the particulars of income or had furnished inaccurate particulars of income. Hence the said notice is to be held as defective. Penalty deleted - decided in favour of assessee.

Summary

Issues Involved:
1. Justification of penalty under Section 271(1)(c) of the Income Tax Act.
2. Validity of the notice issued under Section 274 of the Income Tax Act.
3. Application of legal precedents and judicial interpretations.

Detailed Analysis:

1. Justification of Penalty under Section 271(1)(c):
The primary issue in this case was whether the Commissioner of Income Tax (Appeals) [CIT-A] was justified in confirming the penalty of ?6,24,671/- imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act for the Assessment Year (A.Y) 2008-09. The penalty was imposed for either concealing particulars of income or furnishing inaccurate particulars of income. The Appellate Tribunal scrutinized the arguments and legal precedents cited by the Departmental Representative (DR), who relied on various judgments to support the imposition of the penalty.

2. Validity of the Notice Issued under Section 274:
A significant point of contention was whether the notice issued under Section 274, which did not specify the exact charge (i.e., whether the penalty was for concealment of income or furnishing inaccurate particulars), was valid. The DR cited multiple cases, including the judgments of the Calcutta High Court, Bombay High Court, and Mumbai ITAT, which held that the absence of specific terms in the notice does not invalidate the penalty proceedings as long as the assessee had an opportunity to be heard.

3. Application of Legal Precedents and Judicial Interpretations:
The Tribunal considered various judicial interpretations, including:
- The Calcutta High Court's decision in Dr. Syamal Baran Mondal vs. CIT, which stated that specific terms in the notice are not mandatory.
- The Bombay High Court's decision in CIT vs. Smt. Kaushalya, which emphasized that a mistake in the notice language does not invalidate the proceedings.
- The Karnataka High Court's decision in CIT vs. Manjunatha Cotton and Ginning Factory, which held that a vague notice not specifying the charge is invalid.

The Tribunal preferred the Karnataka High Court's view, which is more favorable to the assessee, in line with the Supreme Court's principle that when two views are available, the one favorable to the assessee should be adopted.

Conclusion:
The Tribunal found that the notice issued under Section 274 was defective as it did not specify the charge against the assessee. This defect rendered the penalty proceedings invalid. The Tribunal also noted that the Supreme Court had dismissed a Special Leave Petition (SLP) against a similar judgment, reinforcing the view that the penalty could not be sustained. Consequently, the penalty of ?6,24,671/- was canceled, and the appeal of the assessee was allowed.

Result:
The appeal of the assessee was allowed, and the penalty imposed under Section 271(1)(c) was canceled.

Order Pronounced:
The order was pronounced in the open court on 04-07-2018.