2019 (11) TMI 975 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice - non specification of charge - HELD THAT - From a perusal of this notice, it is crystal clear that the charge for which penalty is proposed to be levied u/s 271(1)(c) whether for concealment of income, or for furnishing of inaccurate particulars of income, is not specific. The law mandates that the authority, who is proposing to impose penalty, shall be certain as to the basis on which the penalty is being levied and the notice must reflect that specific reason, so that the assessee, to whom such notice is given, can prepare himself regarding the defence, which he would like to take to support his case. In SSA s Emerald Meadows 2016 (8) TMI 1145 - SC ORDER looked into the facts before them that Tribunal relying on the decision of Division Bench of Hon'ble Karnataka High Court in the case of CIT and Another vs. Manjunath Cotton Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT allowed the appeal of the assessee holding that notice issued by the Assessing Officer under section 274 read with section 271(1)(c) of the Act was bad in law, as it did not specify under which limb of section 271(1)(c) of the Act, penalty proceedings has been initiated, i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. Appeal of the assessee is allowed.

Summary

Issues:
1. Imposition of penalty under section 271(1)(c) of the Income Tax Act without specifying the charge.
2. Whether the penalty imposed on the addition of excess stock of marble is barred by limitation.
3. Upholding the penalty on the estimated addition of gross profit.
4. Imposition of penalty solely on estimated values without specific material.
5. Excessive penalty imposition without providing sufficient time and opportunity for defense.

Issue 1: The primary issue in this case was the imposition of a penalty under section 271(1)(c) of the Income Tax Act without specifying the charge clearly. The appellant argued that the notice for penalty did not specify whether it was for concealment of income or furnishing inaccurate particulars of income. The appellant contended that such a vague notice is not valid in law, as the specific charge must be known to enable the assessee to prepare a defense adequately. The Tribunal referred to various legal precedents, including 'CIT vs. SSA's Emerald Meadows' and 'CIT and Another vs. Manjunath Cotton & Ginning Factory', emphasizing that penalty proceedings must comply with the principles of natural justice and specify the grounds for penalty clearly. The Tribunal concluded that the penalty imposed without a specific charge was illegal and ordered its deletion.

Issue 2: Another issue raised was whether the penalty imposed on the addition of excess stock of marble was barred by limitation. The appellant argued that this issue had been conclusively settled by the order of the CIT(A), Lucknow, with no second appeal available. However, the Tribunal did not delve deeply into this issue in its judgment.

Issue 3: The appellant also challenged the penalty imposed on the estimated addition of gross profit. The Tribunal noted the appellant's contention that the penalty was based on estimated values without specific material to support it. However, the Tribunal did not find it necessary to address this issue separately in its judgment.

Issue 4: The imposition of a penalty solely on estimated values without specific material was also highlighted as an issue by the appellant. The Tribunal acknowledged this argument but did not provide a detailed analysis or ruling on this specific issue in its judgment.

Issue 5: Lastly, the appellant raised concerns about the excessive penalty imposition without adequate time and opportunity to present a defense. The Tribunal did not delve into this issue separately in its judgment, as the primary focus was on the lack of specificity in the penalty notice.

In conclusion, the Appellate Tribunal, in this case, primarily focused on the issue of imposing a penalty without specifying the charge clearly, deeming such a penalty illegal and ordering its deletion. Other issues raised by the appellant were not extensively addressed in the judgment.