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2019 (5) TMI 284 - AT - Income TaxPenalty u/s 271(1)(c) - deemed dividend addition u/s 2(22)(e) - Non specification of charge - additions made for treating the transactions of current in nature as loan to the assessee by M/s SSP Enterprises P Ltd - HELD THAT - From perusal of the show cause notices 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 needs to be examined. As relying on SHRI VARAD MEHTA VERSUS DCIT 1 (1) , BHOPAL 2018 (12) TMI 1091 - ITAT INDORE notice issued u/s 271(1)(c) dated 29.04.2015 is invalid, untenable and suffers from the infirmity of non application of mind by the AO. We accordingly direct to delete the penalty for Assessment Years 2012-13 imposed u/s 271(1)(c) on this ground itself. We accordingly allow the additional legal ground raised by the assessee on the legality of the penalty proceedings initiated u/s 271(1)(c) of the Act. Since the issue of penalty u/s 271(1)(c) has been dealt by us 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 for the Assessment Year 2012-13 is allowed. - 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. Specificity of the charge for penalty, i.e., whether for "concealment of particulars of income" or "furnishing inaccurate particulars of income." Detailed Analysis: Issue 1: Legality of the Penalty Proceedings The appellant challenged the legality of the penalty proceedings initiated under Section 271(1)(c) of the Income Tax Act, 1961, for the Assessment Year 2012-13. The penalty of ?12,50,000 was imposed by the Assessing Officer (A.O.) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The appellant contended that the A.O. failed to specify whether the penalty was for "concealing the particulars of income" or "furnishing inaccurate particulars of income," which is a crucial requirement under Section 271(1)(c). Issue 2: Specificity of the Charge The appellant argued that the A.O. did not clearly specify the charge in the penalty notice issued under Section 274 read with Section 271(1)(c). The notice merely mentioned the section without specifying whether the penalty was for "concealment of particulars of income" or "furnishing inaccurate particulars of income." This lack of specificity was claimed to be a violation of the principles of natural justice, as it did not provide the appellant with a clear understanding of the charge to defend against. Tribunal's Findings: The Tribunal examined the penalty notice issued on 01.04.2015 and found that it did not specify the exact charge. The notice was generic, mentioning only the section without clarifying whether the penalty was for "concealment of particulars of income" or "furnishing inaccurate particulars of income." The Tribunal referred to similar cases, including the decision in Varad Mehta (ITA No.693/Ind/16 dated 06.12.2018) and the judgment of the Hon'ble Jurisdictional High Court in PCIT Vs Kulwant Singh Bhatia (ITA No.9 of 2018 dated 9.5.2018). In these cases, it was held that a penalty notice must clearly specify the charge to comply with the principles of natural justice. A generic notice that does not specify the charge is invalid and untenable in law. The Tribunal also cited the judgment in CIT V/s Manjunatha Cotton Ginning Factory, where the Hon'ble High Court of Karnataka held that a notice under Section 274 read with Section 271(1)(c) must specifically mention whether the penalty is for "concealment of income" or "furnishing inaccurate particulars of income." A generic notice fails to meet the legal requirements and denies the taxpayer the opportunity to defend against the specific charge. Conclusion: The Tribunal concluded that the penalty notice issued under Section 274 read with Section 271(1)(c) was invalid due to the lack of specificity regarding the charge. The notice suffered from the infirmity of non-application of mind by the Assessing Officer. Consequently, the Tribunal directed the deletion of the penalty of ?12,50,000 imposed for the Assessment Year 2012-13. The Tribunal allowed the appeal of the assessee, rendering other arguments on the merits of the penalty academic in nature. Result: The appeal of the assessee was allowed, and the penalty of ?12,50,000 was deleted. Order pronounced in the open Court on 30.04.2019.
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