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2018 (11) TMI 1327 - AT - Income TaxPenalty under section 271(1)(c) - defective notice - non specification of charge - Held that - AO has initiated the penalty for concealment of particulars of income or furnishing of inaccurate particulars, which is contrary to the provisions of law. It is also of the view that notice issued by the AO u/s. 271(1) read with Section 274 of the Act is bad in law as it does not specify under which limb of section 271(1) of the Act, the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars. Therefore, the penalty in dispute is not sustainable in the eyes of law. In CIT & Anr. Vs. M/s SSA s Emerald Meadows 2015 (11) TMI 1620 Karnataka High Court has held that Tribunal has correctly allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with Section 271(1)(c) to be bad in law as it did not specify which limb of Section 271(1) - Decided in favour of assessee.
Issues Involved:
1. Legality of penalty levied under section 271(1)(c) of the Income Tax Act. 2. Validity of the notice issued under Section 274 read with Section 271(1)(c) of the Income Tax Act. 3. Specificity of the notice regarding the concealment of particulars of income or furnishing of inaccurate particulars of income. Issue-wise Detailed Analysis: 1. Legality of Penalty Levied Under Section 271(1)(c): The Assessee contested the penalty of ?1,85,400/- imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act, arguing that the penalty order was illegal and void ab initio. The Tribunal examined the facts and found that the penalty was not sustainable because the notice issued by the AO did not specify the exact nature of the default, whether it was for concealment of particulars of income or furnishing of inaccurate particulars. This lack of specificity made the penalty order contrary to the provisions of the law and thus, not legally sustainable. 2. Validity of the Notice Issued Under Section 274 Read with Section 271(1)(c): The Assessee argued that the notice dated 20.3.2015 issued by the AO was defective as it did not specify under which limb of section 271(1)(c) the penalty proceedings were initiated. The Tribunal agreed with the Assessee, noting that the notice was in a standard format and did not clearly indicate whether the penalty was for concealment of income or for furnishing inaccurate particulars. This ambiguity rendered the notice bad in law, as supported by precedents from the Karnataka High Court and the Supreme Court in cases like CIT vs. SSA’s Emerald Meadows and Manjunatha Cotton and Ginning Factory. 3. Specificity of the Notice: The Tribunal emphasized that the AO’s notice must clearly state the specific charge against the Assessee. In this case, the notice mentioned both possible defaults without specifying which one applied, thus failing to meet the legal requirement for clarity. The Tribunal cited multiple judicial decisions, including those from the Karnataka High Court and the Supreme Court, which held that such vague notices are invalid. The Tribunal concluded that the penalty could not be imposed based on a defective notice, thereby deciding in favor of the Assessee. Conclusion: The Tribunal, after reviewing the relevant records and legal precedents, found that the penalty imposed under section 271(1)(c) was not sustainable due to the defective notice issued by the AO. The notice failed to specify whether the penalty was for concealment of income or for furnishing inaccurate particulars, which is a requirement under the law. Consequently, the Tribunal allowed the Assessee's appeal and canceled the penalty, deciding the issue in favor of the Assessee and against the Revenue. Order Pronounced: The appeal filed by the Assessee was allowed, and the penalty in dispute was canceled. The order was pronounced on 22.11.2018.
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