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2019 (2) TMI 288 - AT - Income TaxPenalty u/s 271(1)(c) - non specification of charge - defective notice - Held that - Notice issued by the Assessing Officer under Section 274 read with Section 271(l)(c) to be bad in law as it did not specify which limb of Section 271(l)(c) the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal while allowing the appeal of the assessee has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013 (7) TMI 620 - KARNATAKA HIGH COURT) - Decided in favour of assessee.
Issues Involved:
1. Whether the penalty of ?2,10,000/- under Section 271(1)(c) of the Income Tax Act, 1961, was correctly upheld by the CIT(A). 2. Whether the absence of a specific show cause notice invalidates the penalty. 3. Whether the lack of recorded satisfaction in the assessment order affects the jurisdiction to levy the penalty. 4. Whether the incorrect claim made by the assessee amounts to furnishing inaccurate particulars. 5. Whether the principles of natural justice were violated due to lack of proper opportunity for the assessee to be heard. 6. Whether the factual matrix and evidence were properly considered by the CIT(A). Detailed Analysis: 1. Penalty of ?2,10,000/- under Section 271(1)(c): The primary issue revolves around the penalty imposed under Section 271(1)(c) for allegedly furnishing inaccurate particulars of income. The assessee argued that the penalty was levied without proper jurisdiction and specific grounds, while the CIT(A) upheld the penalty. The tribunal found that the Assessing Officer (AO) was not clear whether the penalty was for concealment of income or furnishing inaccurate particulars. This ambiguity was deemed contrary to the provisions of law, making the penalty unsustainable. 2. Absence of Specific Show Cause Notice: The tribunal noted that the show cause notices issued on 14.07.2016, 25.07.2016, and 14.02.2017 did not specify the exact charge under which the penalty was proposed. This lack of specificity rendered the notices defective. The tribunal relied on precedents, including the Karnataka High Court's decision in CIT vs. Manjunatha Cotton and Ginning Factory and the Supreme Court's decision in CIT vs. SSA’s Emerald Meadows, which held that such notices must clearly specify the charge to be valid. 3. Lack of Recorded Satisfaction: The tribunal observed that the AO's penalty order contained contradictory statements regarding the grounds for penalty. Initially, the AO mentioned "furnishing inaccurate particulars of income," but later stated "deliberately concealed particulars of income." This inconsistency indicated no clear satisfaction was recorded, thus affecting the jurisdiction to levy the penalty. The tribunal cited multiple cases supporting this view, emphasizing that clear satisfaction must be recorded for a valid penalty. 4. Incorrect Claim and Furnishing Inaccurate Particulars: The tribunal highlighted that incorrect claims in the return do not necessarily amount to furnishing inaccurate particulars unless the details supplied are found to be incorrect, erroneous, or false. The tribunal found that the CIT(A) failed to appreciate this distinction, leading to an unjustified penalty. 5. Violation of Principles of Natural Justice: The assessee argued that the penalty was imposed without proper opportunity to be heard, violating principles of natural justice. The tribunal agreed, noting that the CIT(A) did not consider the assessee's submissions adequately. This lack of opportunity and consideration rendered the penalty order contrary to natural justice principles. 6. Consideration of Factual Matrix and Evidence: The tribunal concluded that the CIT(A) did not properly appreciate the factual matrix and evidence on record. The conclusions drawn were deemed mechanical and unjustified. The tribunal emphasized the need for a thorough and fair consideration of all relevant facts and evidence before imposing a penalty. Conclusion: The tribunal, after considering all the issues and precedents, found the penalty of ?2,10,000/- under Section 271(1)(c) to be unsustainable in law. The appeal filed by the assessee was allowed, and the penalty was canceled. The order was pronounced on 04-02-2019.
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