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2019 (1) TMI 351 - AT - Income TaxPenalty u/s 271(1)(c) - defective notice - Held that - As perused the copy of the notice issued u/s 274 r.w.s 271 of the Act; dated 30/03/2015 and find that it reveals that the AO has not deleted the inappropriate words and parts in the relevant paragraph of the notice, whereby it is not clear as to which default has been committed by the assessee; i.e., whether it is for furnishing of inaccurate particulars of income or concealing particulars of income that penalty u/s 271(1)(c) of the Act is sought to be levied. As in the case of M/s Manjunatha Cotton & Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT has held that a notice issued u/s 274 r.ws 271 of the Act without specifying the nature of default; i.e. whether the notice is issued for concealment of particulars of income or furnishing of inaccurate particulars of income; is invalid and the consequential penalty proceedings/order are also not valid. - Decided in favour of assessee.
Issues Involved:
1. Legality of the penalty proceedings initiated under Section 271(1)(c) of the Income Tax Act, 1961. 2. Validity of the notice issued under Section 274 read with Section 271 of the Income Tax Act, 1961. 3. Opportunity for the assessee to be heard before dismissing the appeal on limitation. Detailed Analysis: 1. Legality of the Penalty Proceedings Initiated Under Section 271(1)(c) of the Income Tax Act, 1961: The primary issue raised by the assessee was the legality of the penalty proceedings initiated by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961. The assessee contended that the AO did not clearly specify the reason for initiating the penalty proceedings, whether it was for concealment of particulars of income or for furnishing inaccurate particulars of income. The assessee argued that there was no concealment of income, and the additional income declared was to cooperate with the department and to buy peace. 2. Validity of the Notice Issued Under Section 274 Read with Section 271 of the Income Tax Act, 1961: A significant issue was the validity of the notice issued under Section 274 read with Section 271 of the Act. The assessee argued that the notice was defective as the AO did not strike off the irrelevant portion, making it unclear whether the penalty was for concealment of particulars of income or for furnishing inaccurate particulars of income. The assessee relied on the decision of the Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory (359 ITR 565) and the rejection of the Revenue’s SLP by the Apex Court in the case of SSAS Emerald Meadows. The Tribunal found that the notice indeed did not specify the charge against the assessee, thereby making it invalid. The Tribunal cited the Karnataka High Court's judgment which held that a penalty notice must specify the exact charge to give the assessee a fair opportunity to contest it. 3. Opportunity for the Assessee to Be Heard Before Dismissing the Appeal on Limitation: The assessee also raised an additional ground regarding the dismissal of the appeal by the Commissioner of Income Tax (Appeals) [CIT(A)] on the grounds of limitation without granting an opportunity for the assessee to be heard. The assessee submitted that the delay in filing the appeal was due to shifting residence and the belief that the delay would be explained at the time of hearing. The Tribunal admitted this additional ground for adjudication, following the decision of the Apex Court in the case of NTPC Ltd. vs. CIT (229 ITR 383), which allows raising legal grounds that go to the root of the matter. Judgment: The Tribunal held that the notice issued under Section 274 read with Section 271 of the Act was invalid as it did not specify the nature of the default, whether it was for concealment of particulars of income or for furnishing inaccurate particulars of income. Consequently, the penalty proceedings conducted in pursuance of this defective notice were also deemed invalid. The Tribunal deleted the penalty levied under Section 271(1)(c) of the Act for the assessment year 2012-13. Since the basis for the levy of penalty was held invalid, the other grounds of appeal on the merits of the penalty did not require adjudication. The assessee's appeal was allowed, and the order was pronounced on January 4, 2019.
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