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2019 (7) TMI 1366 - AT - Income TaxPenalty u/s 274 r.w.s 271(1) (c) - defective notice for not mentioning the specific charge - HELD THAT - We find the notice dated 11/09/2015 issued u/s. 274 r.w.s 271 of the Act, placed on record, does not specify the charge of offence committed by the assessee viz. whether had concealed the particulars of income or had furnished inaccurate particulars of income. Hence the said notice is to be held as defective. See M/S MANJUNATHA COTTON AND GINNING FACTORY OTHS., M/S. V.S. LAD SONS, 2013 (7) TMI 620 - KARNATAKA HIGH COURT - Decided in favour of assessee.
Issues Involved:
1. Validity of the penalty notice under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961. 2. Whether the penalty imposed by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeal) [CIT(A)] was maintainable. Detailed Analysis: Issue 1: Validity of the Penalty Notice The primary contention raised by the Assessee was that the notice issued by the AO under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961, was defective. The notice did not specify the exact charge against the Assessee, i.e., whether it was for "concealment of income" or "furnishing inaccurate particulars of income." The Assessee relied on the decision of the Hon'ble Supreme Court in the case of SSA’s Emerald Meadows, which emphasized the necessity of specifying the charge in the penalty notice. On the contrary, the Department argued that the defect in the notice does not invalidate the penalty proceedings. The Department cited multiple case laws, including the judgments of the Hon'ble Calcutta High Court in Dr. Syamal Baran Mondal Vs. CIT and the Mumbai ITAT in Trishul Enterprises Vs. DCIT, which held that non-striking off of the relevant part of the notice does not invalidate the notice as long as the Assessee is given an opportunity to show cause. Issue 2: Maintainability of the Penalty The Department further argued that the penalty imposed by the AO and confirmed by the CIT(A) was maintainable. They relied on various judicial precedents, including the Hon'ble Bombay High Court in CIT Vs. Smt. Kaushalya and the Hon'ble Madras High Court in Sundaram Finance Ltd. Vs. ACIT, which supported the view that the issuance of a defective notice does not necessarily invalidate the penalty proceedings if the Assessee was given a reasonable opportunity to be heard. The Tribunal, however, preferred to follow the principle laid down by the Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory, which mandates that the specific charge must be mentioned in the penalty notice. The Tribunal emphasized that when there are two views on an issue, the view favorable to the Assessee should be adopted, as enunciated by the Hon'ble Supreme Court in the case of Vegetable Products Ltd. Conclusion: The Tribunal found that the notice dated 11/09/2015 issued under Section 274 read with Section 271(1)(c) of the Act did not specify the charge of offense committed by the Assessee, making it defective. The Tribunal noted that the Hon'ble Supreme Court had dismissed the SLP of the Revenue in a similar case, thereby supporting the Assessee's contention. Consequently, the Tribunal set aside the order of the CIT(A) and canceled the penalty of ?95,900/- levied by the AO under Section 271(1)(c) of the Act for the assessment year 2013-14. Order: The appeal of the Assessee was allowed, and the penalty imposed was canceled. The order was pronounced in the Court on 24.07.2019.
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