2018 (11) TMI 512 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice - non specification of charge - Held that - On perusal of the show cause notices issued by the Assessing Officer u/s 274 r.w.s. 271 of the IT Act, 1961, dated 30/11/2010, which is placed on record, it is seen that the Assessing Officer did not mention whether the notice is issued for concealment of income or for furnishing of inaccurate particulars of income. Therefore, as per the ratio laid down by the Hon ble Supreme Court in the case of SSA s Emerald Meadows 2016 (8) TMI 1145 - SUPREME COURT , the notice issued by the Assessing Officer is not valid - Decided in favour of assessee.

Summary

Issues:
- Disallowance of deduction u/s.10B of the Income Tax Act, 1961 for third party exports
- Validity of penalty proceedings u/s 271(1)(c) of the Act

Disallowance of Deduction u/s.10B:
The appeal was filed against the order of CIT(A) for AY 2008-09. The assessee, a granite processing company, claimed deduction u/s.10B of the Act but faced disallowance by the AO. The AO observed discrepancies in the claim related to third party exports and lack of foreign currency remittances. The AO disallowed the exemption u/s.10B for third party exports, reducing the total turnover. Both CIT(A) and ITAT upheld the AO's decision, leading to the disallowance.

Validity of Penalty Proceedings u/s 271(1)(c):
The AO initiated penalty proceedings under section 271(1)(c) alleging deliberate underreporting of income by the assessee. The AO imposed a penalty for claiming deduction on third party exports without corresponding foreign currency remittances. The CIT(A) confirmed the penalty. The assessee appealed, arguing against concealment of income or furnishing inaccurate particulars. The ITAT considered the issue, noting that the AO's notice did not specify the grounds for penalty under section 271(1)(c). Citing legal precedents, the ITAT held the notice invalid and consequently quashed the penalty order, allowing the assessee's appeal.

In conclusion, the ITAT Hyderabad allowed the assessee's appeal, setting aside the penalty order imposed under section 271(1)(c) due to the invalid notice issued by the AO. The judgment emphasized the importance of specifying the grounds for penalty in such notices, in line with legal precedents, ultimately leading to the quashing of the penalty order.