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2018 (12) TMI 455 - AT - Income TaxPenalty u/s 271(1)(c) - defective notice - non specification of charge - Held that - We find the notice dated 25.03.2014 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. - Imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled. See Jeetmal Choraria Vs. ACIT 2017 (12) TMI 883 - ITAT, KOLKATA - Decided in favour of assessee. - Decided in favour 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, 1961. 2. Whether the specific charge of offense (concealment of income or furnishing inaccurate particulars) must be explicitly mentioned in the penalty notice. 3. The applicability of judicial precedents on the requirement of specifying the charge in the penalty notice. Detailed Analysis: 1. Validity of the Penalty Notice: The appellant contended that the penalty notice dated 25.03.2014 issued under Section 274 read with Section 271(1)(c) of the Income Tax Act was defective because it did not specify the particular charge against the assessee. The appellant relied on the decision of the Hon’ble Supreme Court in the case of SSA’s Emerald Meadows, which held that a penalty notice must clearly state the specific charge. 2. Specific Charge Requirement: The respondent argued that the penalty notice need not specify the exact charge of offense (concealment of income or furnishing inaccurate particulars). The respondent cited various judicial precedents, including the judgments of the Hon’ble Calcutta High Court in Dr. Syamal Baran Mondal vs. CIT and the Hon’ble Bombay High Court in CIT vs. Smt. Kaushalya, which suggested that the absence of specific terms in the penalty notice does not invalidate the notice as long as the assessee is given a reasonable opportunity to be heard. 3. Judicial Precedents and Tribunal’s Decision: The Tribunal considered the arguments and the written submissions, including the precedents cited by both parties. The Tribunal noted that different High Courts had divergent views on the necessity of specifying the charge in the penalty notice. The Hon’ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory had emphasized the need for a clear charge, while other High Courts, including the Bombay High Court, had a more lenient view. The Tribunal preferred to follow the principle that when there are two views on an issue, the view favoring the assessee should be adopted, as enunciated by the Hon’ble Supreme Court in the case of Vegetable Products Ltd. The Tribunal agreed with the reasoning of the Coordinate Bench in the case of Jeetmal Choraria, which followed the Karnataka High Court's view in Manjunatha Cotton and Ginning Factory. The Tribunal found that the penalty notice issued to the appellant did not specify the charge of offense, making it defective. This defect was considered significant enough to invalidate the penalty proceedings. Conclusion: The Tribunal concluded 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 the penalty could not be sustained. The Tribunal set aside the order of the CIT(A) and canceled the penalty of ?2,70,350/- levied by the AO for the assessment year 2011-12. The appeal of the assessee was allowed. Order Pronouncement: The order was pronounced in the Court on 30.11.2018.
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