2019 (6) TMI 745 - AT - Income Tax

Penalty u/s 271(1)(c) - non specification of charge - defective notice - HELD THAT - Notice issued u/s 271(1)(c) without specifying which of the two contraventions, the assessee is guilty of was defective and the penalty imposed in pursuance of such defective notice was not sustainable. See Amrit Foods vs Commissioner of Central Excise UP 2005 (10) TMI 96 - SUPREME COURT as well as DR. MURARI MOHAN KOLEY 2018 (9) TMI 1 - CALCUTTA HIGH COURT - Decided in favour of assessee.

Summary

Issues:
Penalty imposed under section 271(1)(c) for alleged tax evasion.

Analysis:
The appeal was filed by the assessee against the penalty imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act, 1961. The AO had imposed a penalty of ?2,05,192/- on the assessee for allegedly evading tax on short term capital gains amounting to ?13,25,140/-. The penalty was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee challenged the initiation of penalty proceedings on the grounds that the show cause notice issued by the AO did not specify the exact charge against the assessee. The assessee contended that the notice was defective as it did not clearly state whether the assessee was guilty of concealing particulars of income or furnishing inaccurate particulars of income. The assessee relied on judicial precedents, including a decision by the Hon'ble Kolkata High Court, to support the argument that a notice under section 271(1)(c) must specify the contravention the assessee is alleged to have committed.

During the appeal hearing, no representation was made by the revenue department. The Tribunal examined the issue raised by the assessee and concluded that the notice issued by the AO was indeed defective for not specifying the exact charge against the assessee. Citing relevant legal judgments, including the decision of the Hon'ble Kolkata High Court, the Tribunal held that a notice under section 271(1)(c) must clearly state whether the assessee is guilty of concealing income or furnishing inaccurate particulars. As the notice in this case failed to meet this requirement, the penalty imposed by the AO and confirmed by the CIT(A) was deemed unsustainable. Therefore, the Tribunal decided to cancel the penalty imposed under section 271(1)(c) on the assessee. Consequently, the appeal of the assessee was allowed, and the penalty was set aside.

In conclusion, the Tribunal's decision was based on the defective nature of the show cause notice issued by the AO, which failed to specify the exact charge against the assessee regarding the alleged tax evasion. The Tribunal's ruling aligned with established legal principles requiring clarity in the charges brought against an assessee in penalty proceedings under section 271(1)(c). The cancellation of the penalty was justified by the failure to adhere to procedural requirements in initiating penalty proceedings, as highlighted by the judicial precedents cited during the appeal.