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2018 (8) TMI 845 - AT - Income TaxLevy of penalty u/s 271(1)(c) - defective notice u/s 274 - Held that - the notice issued u/s. 274 r.w.s 271 of the Act, placed on record, 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 set aside - Decided in favor of assessee.
Issues Involved:
1. Validity of the penalty notice issued under Section 274 read with Section 271(1)(c) of the Income Tax Act. 2. Whether the penalty imposed under Section 271(1)(c) is sustainable given the alleged defects in the notice. Issue-Wise Detailed Analysis: 1. Validity of the Penalty Notice: The Assessee argued that the notice issued by the Assessing Officer (AO) under Section 274 read with Section 271(1)(c) of the Income Tax Act was defective because it did not specify the exact charge against the Assessee, i.e., whether the penalty was for "concealment of income" or "furnishing inaccurate particulars of income." This argument was supported by the decision of the Hon'ble Supreme Court in the case of SSA’s Emerald Meadows, which held that such a notice is invalid if it does not specify the charge clearly. The Revenue, on the other hand, relied on various judicial precedents to argue that the defect in the notice does not invalidate the penalty proceedings. They cited judgments from the Hon'ble Calcutta High Court, Hon'ble Bombay High Court, and other Tribunal decisions to support their stance that the issuance of notice is an administrative device and minor defects in the notice should not invalidate the penalty proceedings. 2. Sustainment of Penalty Imposed: The Tribunal examined the rival submissions and case laws cited by both parties. It noted that the Coordinate Bench of the Tribunal had dealt with a similar issue in the case of Jeetmal Choraria, where it preferred to follow the ratio laid down by the Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory. The principle established is that when there are two views on an issue, the one favoring the Assessee should be adopted, as enunciated by the Hon'ble Supreme Court in the case of Vegetable Products Ltd. The Tribunal found that the notice issued to the Assessee did not specify the charge of the offense, i.e., whether it was for "concealing particulars of income" or "furnishing inaccurate particulars of income." This defect rendered the notice invalid. The Tribunal also noted that the Special Leave Petition (SLP) filed by the Revenue against this judgment was dismissed by the Hon'ble Supreme Court, thereby reinforcing the validity of the Assessee's argument. Conclusion: The Tribunal held that the penalty notice issued under Section 274 read with Section 271(1)(c) of the Income Tax Act was defective due to the lack of specification of the charge. Consequently, the imposition of penalty could not be sustained. The Tribunal set aside the order of the Commissioner of Income Tax (Appeals) and canceled the penalty of ?41,09,182/- levied by the AO for the Assessment Year 2012-13. The appeal filed by the Assessee was allowed. Order Pronounced: The order was pronounced in the open court on 10-08-2018, allowing the Assessee's appeal and canceling the penalty imposed.
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