2018 (10) TMI 983 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice - Held that - Penalty cancelled for not striking the relevant portion in the notice issued under section 274 of the Act to initiate penalty proceedings under section 271(1)(c). See COMMISSIONER OF INCOME TAX, BANGALORE AND THE INCOME TAX OFFICER, WARD-6 (3) , BANGALORE VERSUS M/S SSA S EMERALD MEADOWS 2015 (11) TMI 1620 - KARNATAKA HIGH COURT - decided against revenue.

Summary

Issues:
Appeal against deletion of penalty under section 271(1)(c) by the Commissioner of Income-tax (Appeals) for the assessment year 2011-12. Validity of notice issued by Assessing Officer under section 274 read with section 271 of the Act. Cancelation of penalty based on defective notice.

Analysis:
The appeal was filed by the Revenue against the order of the Commissioner of Income-tax (Appeals) deleting the penalty imposed under section 271(1)(c) for the assessment year 2011-12. The Commissioner held that disallowance of expenses in the assessment did not imply concealment or furnishing inaccurate particulars of income. The Tribunal referred to previous decisions and emphasized that non-filing of appeal in the quantum matter does not indicate concealment. The Tribunal found that the major ingredient of disallowance in the assessment proceedings was 'amortisation of Government securities,' which was later decided in favor of the appellant in a subsequent assessment year. The Tribunal upheld the Commissioner's decision to delete the penalty.

The issue of the validity of the notice issued by the Assessing Officer under section 274 read with section 271 of the Act was raised. The Tribunal cited a previous order where it was held that the notice was invalid as it did not specify whether the assessee had concealed income or furnished inaccurate particulars. The Tribunal referred to a case where the notice without specifying the fault under section 271(1)(c) was deemed bad in law. The Tribunal concluded that since the notice was defective, the penalty proceeding was vitiated, and thus, the penalty was canceled for all the assessment years under challenge.

The Tribunal considered the arguments from both sides regarding the validity of the notice and the subsequent penalty proceeding. It noted that the notice did not specify the fault regarding concealment or furnishing inaccurate particulars, which rendered the notice bad in law. Citing a decision of the Karnataka High Court upheld by the Supreme Court, the Tribunal concluded that the penalty was invalid due to the defective notice. The Tribunal dismissed the appeal of the Revenue and upheld the cancelation of the penalty imposed by the Assessing Officer under section 271(1)(c) for all the assessment years under consideration.

In conclusion, the Tribunal found no infirmity in the order of the Commissioner of Income-tax (Appeals) and dismissed the appeal of the Revenue. The penalty imposed by the Assessing Officer under section 271(1)(c) was canceled based on the defective notice issued by the Assessing Officer, which did not specify the fault regarding concealment or furnishing inaccurate particulars of income.