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2019 (10) TMI 1160 - AT - Income TaxPenalty u/s 271(1)(c) - non specification of charge - defective notice - HELD THAT - We find the notice dated 16/03/2016 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.
Issues Involved:
1. Defectiveness of the notice issued under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961. 2. Validity of penalty imposed under Section 271(1)(c) based on the defective notice. 3. Jurisdictional High Court and Supreme Court rulings on similar issues. Detailed Analysis: 1. Defectiveness of the Notice Issued under Section 274 read with Section 271(1)(c): The primary contention raised by the Assessee was that the notice dated 13.03.2013 issued by the Assessing Officer (AO) under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 was defective as it did not specify the exact charge against the Assessee. The Assessee relied on the decision of the Hon’ble Supreme Court in SSA’s Emerald Meadows, which held that a notice must clearly state whether the penalty is being levied for concealment of income or for furnishing inaccurate particulars of income. 2. Validity of Penalty Imposed Based on Defective Notice: The Assessee argued that the penalty imposed by the AO based on a defective notice is not maintainable. The Revenue, on the other hand, relied on various judgments to argue that the defect in the notice does not invalidate the penalty proceedings. The Revenue cited the judgment of the Hon’ble Calcutta High Court in Dr. Syamal Baran Mondal Vs. CIT, which states that Section 271 does not mandate that the recording of satisfaction must be in specific terms and words, and the satisfaction of the AO must reflect from the order either through expressed words or by overt acts. Additionally, the Revenue referenced decisions from the Hon’ble Bombay High Court and the Hon’ble Patna High Court, which supported the view that a mere mistake in the language or non-striking of inaccurate portions in the notice does not invalidate the penalty proceedings. 3. Jurisdictional High Court and Supreme Court Rulings: The Tribunal considered the conflicting views from various High Courts and the Supreme Court. It noted that the Hon’ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory held that a penalty notice must clearly specify the charge against the Assessee. The Tribunal also referred to the Hon’ble Supreme Court’s dismissal of the Revenue’s Special Leave Petition (SLP) against the Karnataka High Court’s decision, thereby upholding the requirement for a specific charge in the penalty notice. The Tribunal observed that when there are conflicting judgments, the view favorable to the Assessee should be adopted, as established by the Hon’ble Supreme Court in the case of Vegetable Products Ltd. It was noted that the Hon’ble Jurisdictional High Court in the case of PCIT vs. Dr. Murari Mohan Koley endorsed the view that a defective notice under Section 274 is not valid for imposing penalty under Section 271(1)(c). Conclusion: The Tribunal found that the notice issued to the Assessee was indeed defective as it did not specify whether the penalty was for concealment of income or for furnishing inaccurate particulars of income. Consequently, the penalty imposed based on such a defective notice could not be sustained. The Tribunal set aside the order of the Commissioner of Income Tax (Appeal) and canceled the penalty of Rs. 4,56,166/- levied by the AO under Section 271(1)(c) for the assessment year 2010-11. The Assessee’s appeal was allowed. Order Pronounced: The appeal of the Assessee was allowed, and the order was pronounced in the Court on 10.05.2019.
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