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2019 (10) TMI 355 - AT - Income TaxLevy of penalty u/s. 271(1)(c) - validity of notice issued u/s. 274 r.w.s. 271 (1) (c) - non specification of notice - HELD THAT - Levy of penalty by the AO u/s. 271 (1) (c) of the IT Act which has been upheld by the CIT(A) is bad in law since the notice does not specify under which limb of section 271 (1) (c) of the IT Act the penalty proceedings have been initiated. Therefore, the penalty levied by the Assessing Officer and sustained by CIT(A) is cancelled. - Decided in favour of assessee.
Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act. 2. Validity of the notice issued under Section 274 read with Section 271(1)(c) of the Income Tax Act. 3. Whether the assessee concealed income or furnished inaccurate particulars of income. Detailed Analysis: 1. Levy of Penalty under Section 271(1)(c): The primary issue in this case is the levy of a penalty amounting to ?3,59,591/- under Section 271(1)(c) of the Income Tax Act by the Assessing Officer (AO). The penalty was imposed on the grounds that the assessee, an HUF, had declared a total income of ?12,47,740/- but was assessed at ?18,57,743/- due to an addition made under Section 68 read with Section 115BBE. This addition was based on the sale of shares of M/s. CCL International Limited, which were purchased for ?6,10,000/- and sold for ?18,57,743/- within eight months, claiming a concessional tax rate. The AO initiated penalty proceedings under Section 271(1)(c) for this transaction, which was upheld by the CIT(A). 2. Validity of the Notice Issued under Section 274 read with Section 271(1)(c): The assessee contested the validity of the penalty notice, arguing that the notice did not specify the exact charge, i.e., whether the penalty was for "concealment of income" or "furnishing inaccurate particulars of income." The assessee relied on various judicial decisions, including the Hon'ble Karnataka High Court's rulings in CIT Vs. M/s. Manjunath Cotton & Ginning (359 ITR 565) and CIT Vs. M/s. SSA’s Emerald (73 taxman.com 241), where penalties were deemed invalid if the notice did not specify the exact charge. The Tribunal agreed with the assessee, noting that the penalty notice issued was in a standard format without striking off irrelevant portions, indicating non-application of mind by the AO. This was further supported by the Hon'ble Supreme Court's dismissal of the SLP filed by the revenue against the Karnataka High Court's decision. 3. Whether the Assessee Concealed Income or Furnished Inaccurate Particulars of Income: The Tribunal examined whether the assessee had concealed income or furnished inaccurate particulars. The assessee argued that the transaction of sale and purchase of shares was disclosed in an open and bona fide manner and that the tax was paid by surrendering the amount. The assessee also cited the Hon'ble Supreme Court's decision in CIT Vs. Reliance Petroproducts (322 ITR 158), asserting that the penalty should be deleted. The Tribunal found that the AO's penalty notice did not specify the exact charge, making it unsustainable. The Tribunal noted that the AO's failure to strike off irrelevant portions of the notice led to ambiguity about the charge, thus invalidating the penalty proceedings. Conclusion: The Tribunal concluded that the penalty levied under Section 271(1)(c) was invalid due to the non-specific nature of the penalty notice. The Tribunal relied on precedents set by higher courts, emphasizing the need for clarity in penalty notices. Consequently, the penalty of ?3,59,591/- imposed by the AO and upheld by the CIT(A) was cancelled, and the appeal filed by the assessee was allowed. The order was pronounced in the open court on 07.10.2019.
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