2020 (5) TMI 146 - HC - Income Tax

Penalty u/s 271(1) (c) - Defective notice - non specification of charge - HELD THAT - It is apparent that the show-cause notice issued under Section 274 of the Act does not specifically disclose the charge against the Assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income, which is sine-quo-non for issuance of show-cause notice and for want of such particulars, the Tribunal set-aside the order of the penalty levied on the Assessee. Questions of law being answered in the case of Manjunatha Cotton and Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT we do not find any reason to entertain the present appeal to answer the questions of law raised by the appellant-Revenue.

Summary

Issues involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of the show cause notice issued under Section 274 of the Act.

Detailed Analysis:
Issue 1: Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961
The appeal was filed by the Revenue challenging the dismissal of their appeal by the Tribunal regarding the imposition of a penalty under Section 271(1)(c) of the Income Tax Act for the Assessment Year 2010-11. The case involved the disallowance of certain claims made by the assessee, leading to the initiation of penalty proceedings by the Assessing Authority. The penalty was levied against the assessee, which was later deleted by the CIT(A) and upheld by the ITAT. The ITAT relied on the judgment in the case of CIT(A) Vs. Manjunatha Cotton and Ginning Factory, where it was held that the penalty imposed under Section 271(1)(c) is invalid if the show cause notice does not specify the charge against the assessee for concealment of income particulars or furnishing inaccurate particulars of income. The ITAT's decision was based on the lack of specificity in the show cause notice, leading to the dismissal of the penalty imposed on the assessee.

Issue 2: Validity of the show cause notice issued under Section 274 of the Act
The main contention in this issue revolved around the show cause notice issued under Section 274 of the Income Tax Act, which did not clearly specify the charge against the assessee for concealment of income particulars or furnishing inaccurate particulars of income. The Tribunal set aside the penalty levied on the assessee based on the lack of specific details in the show cause notice. The decision in the case of Manjunatha Cotton and Ginning Factory, which was confirmed by the Supreme Court, emphasized the importance of clearly disclosing the charge in the show cause notice. Since the notice in this case did not meet this requirement, the appeal was dismissed, affirming the decision to delete the penalty imposed on the assessee.

In conclusion, the High Court dismissed the appeal filed by the Revenue, upholding the deletion of the penalty imposed on the assessee due to the lack of specificity in the show cause notice issued under Section 274 of the Income Tax Act. The judgment emphasized the importance of clearly stating the charge in the notice to ensure the validity of any penalties imposed under Section 271(1)(c) of the Act.