2020 (4) TMI 681 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - defective/illegal notice - whether for concealment of particulars of income or furnishing of inaccurate particulars of income is illegal? - HELD THAT - Penalty so imposed and sustained on the basis of such defective notice issued u/s 271(l)(c) which did not specify the particular limb of sec. 271(l)(c) i.e. whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income, is illegal and that in view of ratio laid down in the case of Manjunath Cotton and Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT and followed in the cases of Shri Sachin Arora Others 2018 (3) TMI 1026 - ITAT AGRA . - Decided in favour of assessee.

Summary

Issues:
Validity of penalty order based on defective show cause notice without specific charge under section 271(1)(c) of the Income Tax Act.

Analysis:
The appeal was filed challenging the validity of a penalty order issued by the Assessing Officer (AO) without a specific charge for levy of penalty under section 271(1)(c) of the Income Tax Act. The issue revolved around the defective show cause notice that did not specify whether the penalty was for concealment of particulars of income or furnishing inaccurate particulars of income. The appellant argued that such a notice was illegal, citing the decision of the Karnataka High Court in a specific case. The counsel for the assessee contended that the penalty imposed based on this defective notice was illegal and referred to relevant case laws to support their argument.

The Tribunal extensively examined the issue of the defective/illegal notice in light of the decision of the Karnataka High Court in a specific case. The Tribunal distinguished case laws cited by the Departmental Representative (DR) in other appeals and analyzed the principles laid down by the Karnataka High Court regarding the levy of penalty under section 271(1)(c). The Tribunal considered various judgments and ultimately decided in favor of the assessee. It highlighted the importance of the assessing officer applying his mind independently while determining the penalty, without merely relying on previous findings. The Tribunal also noted that a Special Leave Petition (SLP) was pending before the Supreme Court on a similar issue, indicating the need for a final decision from the apex court.

Based on its analysis and previous decisions, the Tribunal allowed the appeal of the assessee, acknowledging the genuine grievance raised regarding the defective notice and the need for clarity on the relevant clause for imposing the penalty. The Tribunal also granted permission for the revenue to seek restoration of the appeal if the Supreme Court ruled in their favor on the issue of specifying the relevant clause for penalty under section 271(1)(c). The order was pronounced in open court with the observations made by the Tribunal regarding the pending issue before the Supreme Court.