2018 (12) TMI 1586 - AT - Income Tax

Penalty u/s 271(1)(c) - Non specification of charge - defective notice - Held that - On the facts of the present case that the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Following the decision of the Hon ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. - Decided in favour of assessee.

Summary

Issues:
Challenge to correctness of penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 due to defective show cause notice.

Analysis:
The judgment pertains to an appeal against the imposition of a penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2010-11. The primary issue raised by the appellant was the correctness of the penalty imposed by the lower authorities. The crux of the matter revolved around the defective nature of the penalty notice issued by the Assessing Officer, which failed to specify whether the penalty was for concealing particulars of income or furnishing inaccurate particulars of income. The tribunal referred to a decision by a co-ordinate bench in a similar case, highlighting the importance of clearly stating the grounds for imposing a penalty. The tribunal cited the judgment of the Hon'ble Karnataka High Court, emphasizing that the notice under section 274 of the Act must unambiguously state whether the penalty is for concealment of income or furnishing inaccurate particulars of income.

The tribunal, in line with the legal principles laid down by the Hon'ble Karnataka High Court, concluded that the penalty notice in the present case was defective as it did not specify the grounds for imposing the penalty. Consequently, the tribunal held that all orders imposing penalties in the assessment years were invalid and canceled the penalties imposed on the assessee. The tribunal emphasized that the imposition of a penalty should be based on the specific grounds mentioned in the notice, and failure to do so would violate the principles of natural justice. The tribunal directed the Assessing Officer to delete the penalty, thereby allowing the appeal by the assessee.

In summary, the judgment focused on the procedural aspect of imposing a penalty under section 271(1)(c) of the Income Tax Act, emphasizing the importance of a clear and unambiguous notice specifying the grounds for the penalty. The tribunal's decision was based on the legal principles outlined by the Hon'ble Karnataka High Court, ensuring that the penalty proceedings adhere to the principles of natural justice and procedural fairness.