2019 (3) TMI 1351 - AT - Income Tax

Penalty u/s 271(1)(c) - non specification of charge - defective notice - issuing notice in general proforma - HELD THAT - From perusal of the above show cause notice we find that the A.O has merely mentioned the section but the specific charge i.e. whether the penalty have been initiated for concealment of particulars of income or for furnishing inaccurate particulars of income has not been mentioned. Now whether such type of notice which does not speak about the specific charge leveled against the assessee is valid and tenable in the eyes of law. Notice issued by the AO under Section 274 r.w.s. 271(l)(c) to be bad in law as it did not specify which limb of Section 271(l)(c) of the Act, 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.

Summary

Issues:
Appeals against orders of Ld. Commissioner of Income Tax (Appeals) pertaining to Assessment Years 1987-88 to 1992-93 challenging penalty under section 271(1)(c) of the Income Tax Act 1961.

Analysis:

1. Background and Common Issues:
The appeals were filed by the assessee against the orders of the Ld. Commissioner of Income Tax (Appeals) for the years 1987-88 to 1992-93, contesting penalties imposed under section 271(1)(c) of the Income Tax Act 1961. The appeals were heard together due to common issues.

2. Factual Overview:
The assessee, a company engaged in manufacturing, faced a search under section 132 of the IT Act in 1992. Subsequently, penalties were levied for each assessment year as detailed in the table, and appeals to the Ld. CIT(A) were unsuccessful.

3. Legal Challenge on Penalty Notice:
The primary legal contention raised by the assessee was the validity of the penalty proceedings initiated through notices under sections 274 and 271(1)(c) of the Act. The argument focused on the lack of specific charges in the notices, citing precedents where such notices were deemed invalid.

4. Judicial Precedents and Legal Analysis:
The Tribunal examined relevant judgments, including the case of Principal Commissioner of Income Tax v/s Kulwant Singh Bhatia, emphasizing the necessity for the penalty notice to specify the grounds clearly. The Tribunal referred to precedents where inadequate notices were held to violate principles of natural justice.

5. Decision and Ruling:
After careful consideration, the Tribunal found the notices issued by the Assessing Officer to be invalid and lacking specificity regarding the charges against the assessee. Citing legal principles and precedents, the Tribunal set aside the penalties imposed for all assessment years under appeal.

6. Outcome and Conclusion:
Consequently, the Tribunal allowed the appeals of the assessee for the years 1987-88 to 1992-93, directing the deletion of penalties imposed under section 271(1)(c) based on the legal ground of invalid notices. The Tribunal's decision was based on the procedural flaw in the penalty proceedings, rendering other arguments on the merits of the penalties academic.

This comprehensive analysis highlights the legal intricacies, precedents, and procedural flaws addressed in the judgment, leading to the favorable outcome for the assessee in challenging the penalties imposed under section 271(1)(c) of the Income Tax Act 1961.