2018 (10) TMI 860 - AT - Income Tax

Levy of penalty u/s 271(l)(c) - non-striking off of the inappropriate words - Sustainable of penalty levied u/s 271(1)(c) when the inappropriate words in the notice issued u/s 274 r.w.s. 271 of the Act have not been struck off - Held that - A perusal of the notice issued u/s 274 r.w.s. 271 dated 28.11.2011 shows that the inappropriate words in the said notice have not been struck off and it is a printed notice. Even the last line of the said notice only speaks of Section 271 and does not even mention of section 271(1)(c) of the I.T. Act. The inappropriate words in the penalty notice has not been struck off and the notice does not specify as to under which limb of the provisions, the penalty u/s 271(1)(c) has been initiated, therefore, we are of the considered opinion that the penalty levied u/s 271(1)(c) is not sustainable and has to be deleted. Although the Ld. DR has relied on various decisions to the proposition that mere non-striking off of the inappropriate words will not invalidate the penalty proceedings, however, all these decisions are of non-jurisdictional High Court decisions. - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(c) for concealment of income and inaccurate particulars.

Analysis:
The appeal was filed against the order upholding the penalty under section 271(1)(c) for concealment of income. The Assessing Officer imposed the penalty after completing the assessment under section 143(3) by adding an amount on account of bad debts. The appellant argued that the notice issued did not specify the charge against them clearly, leading to ambiguity regarding the nature of the penalty. The appellant contended that the bad debt claimed was proper and did not amount to concealment or filing inaccurate particulars. The appellant cited relevant case law to support their argument.

The Departmental Representative supported the CIT(A)'s order, referring to a decision by the Hon'ble Madras High Court regarding the understanding of the notice's nature of default. The Departmental Representative also cited a decision by the Hon'ble Bombay High Court to argue that minor errors in the notice do not invalidate penalty proceedings. The appellant, in response, emphasized that if two views are possible on an issue, the one favorable to the assessee should be followed, citing a decision of the Hon'ble Supreme Court.

The Tribunal analyzed the issue of the sustainability of the penalty under section 271(1)(c) due to the inappropriate words in the notice not being struck off. Referring to a previous decision by a Co-ordinate Bench, the Tribunal found that the penalty notice's ambiguity regarding the specific charge pointed out rendered it invalid. The Tribunal concluded that the penalty was not sustainable and needed to be deleted, despite arguments citing non-jurisdictional High Court decisions. The Tribunal emphasized following the view favorable to the assessee when two views are available, as per the decision of the Hon'ble Supreme Court.

In conclusion, the Tribunal allowed the appeal, setting aside the CIT(A)'s order and directing the Assessing Officer to cancel the penalty levied under section 271(1)(c) due to the invalidity of the notice specifying the charge clearly.