2019 (3) TMI 1352 - AT - Income Tax

Validity of notice issued u/s 274 r.w.s. 271(1)(c) - defective notice - non specification of charge - HELD THAT - 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. Alleged notice issued u/s 274 r.w.s. 271(1)(c) dated 30.10.12 is invalid, untenable and suffers from the infirmity of non application of mind by the AO. We accordingly direct to delete the penalty for AY 2006-07 and 2008-09 respectively imposed u/s 271(1)(c) on this ground itself. We accordingly allow the additional ground raised by the assessee on the legality of the penalty proceedings initiated u/s 271(1)(c). Since the issue of penalty u/s 271(1)(c) also has been dealt on the preliminary points other arguments of the assessee dealing with the merits of the levy of penalty are not been dealt with, as the same are rendered academic in nature and thus the appeal of the assessee are allowed.

Issues Involved:

1. Legality of the penalty proceedings under Section 271(1)(c) of the Income Tax Act.
2. Specificity of the charge in the penalty notice.
3. Validity of the penalty imposed for Assessment Years 2006-07 and 2008-09.

Issue-wise Detailed Analysis:

1. Legality of the Penalty Proceedings under Section 271(1)(c) of the Income Tax Act:

The assessee challenged the legality of the penalty proceedings initiated under Section 271(1)(c) of the Income Tax Act, claiming that the Assessing Officer (AO) failed to specify the exact charge in the penalty notice. The Tribunal admitted the additional legal grounds raised by the assessee, citing precedents from the Supreme Court cases, including National Thermal Power Company Limited and Jute Corporation of India, which allow for the admission of legal grounds that do not require further investigation of facts. The Tribunal emphasized that the issues raised go to the root of the AO's jurisdiction to levy the penalty, making them relevant for adjudication.

2. Specificity of the Charge in the Penalty Notice:

The Tribunal noted that the penalty notice issued by the AO did not specify whether the penalty was for "concealment of particulars of income" or "furnishing inaccurate particulars of income." The Tribunal examined the notice and found that it merely mentioned the section without specifying the charge. The Tribunal referred to similar cases, including Varad Mehta and the jurisdictional High Court case of Shri Kulwant Singh Bhatia, where it was held that a penalty notice must specify the exact charge to comply with the principles of natural justice. The Tribunal concluded that the notice issued to the assessee was invalid and untenable due to this lack of specificity.

3. Validity of the Penalty Imposed for Assessment Years 2006-07 and 2008-09:

The Tribunal found that the AO had not made a proper specific charge in the penalty notice for both assessment years. The Tribunal cited the Karnataka High Court case of CIT vs. Manjunatha Ginning Factory, which held that a notice under Section 274 read with Section 271(1)(c) must specifically mention the ground for penalty, whether it is for concealment of income or furnishing inaccurate particulars. The Tribunal concluded that the AO's failure to specify the charge in the notice rendered the penalty proceedings invalid. Consequently, the Tribunal directed the deletion of the penalties of ?16,50,000 for Assessment Year 2006-07 and ?36,70,000 for Assessment Year 2008-09.

Conclusion:

The Tribunal allowed the appeals of the assessee, holding that the penalty notices issued under Section 271(1)(c) were invalid due to the lack of specificity regarding the charge. The penalties imposed for both assessment years were deleted, and the appeals were allowed on this ground alone, rendering other arguments academic in nature. The order was pronounced in the open court on 25.03.2019.

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