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2020 (10) TMI 785 - AT - Income TaxPenalty u/s 271(1)(c) - Defective notice - Addition u/s 68 as unexplained income - HELD THAT - It is evident from the notice u/s 274 r.w.s. 271 of the Act for the impugned year that the Assessing Officer has not specifically mentioned as to under which limb of Section 271(l)(c) of the Act the penalty proceedings had been initiated by him, i.e., whether for concealment of particulars of income or for furnishing of inaccurate particulars of income - See SSA S EMERALD MEADOWS 2015 (11) TMI 1620 - KARNATAKA HIGH COURT AND M/S MANJUNATHA COTTON AND GINNING FACTORY OTHS., M/S. V.S. LAD SONS, 2013 (7) TMI 620 - KARNATAKA HIGH COURT - Decided in favour of assessee.
Issues:
- Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961. - Challenge to the legality of penalty imposition due to technical error in the notice issued under section 274 of the Act. Analysis: 1. Imposition of Penalty under Section 271(1)(c): - The appellant challenged the penalty of ?15,22,754 imposed under section 271(1)(c) of the Income Tax Act for treating sales consideration as unexplained income under section 68. - The Assessing Officer initiated penalty proceedings after making additions to the income declared by the appellant. - The appellant contended that the penalty was not specified under which limb of section 271(1)(c) it was being imposed, whether for concealment of income or furnishing inaccurate particulars of income. - The Tribunal admitted an additional ground of appeal challenging the legality of penalty imposition due to the defective notice issued under section 274 of the Act. - The appellant argued that failure to specify the charge in the notice rendered the penalty order illegal, citing relevant case law. - The Tribunal, following legal precedents, held that the Assessing Officer must specify the limb under which penalty proceedings are initiated, and the failure to do so renders the penalty proceedings bad in law. - Consequently, the Tribunal set aside the penalty and directed the Assessing Officer to delete it, as the penalty proceedings were found to be defective due to the lack of specificity in the notice. 2. Challenge to the Legality of Penalty Imposition: - The appellant raised a crucial legal issue regarding the defective notice under section 274 of the Act, which did not specify the grounds for penalty initiation. - The appellant argued that the penalty order, based on a defective initiation, lacked jurisdiction and was bad in law. - The Department Representative opposed the admission of the additional ground, arguing that a technical error did not invalidate the penalty imposition. - The Tribunal admitted the additional ground, emphasizing the importance of addressing the legal issue raised by the appellant. - Citing relevant case law, the Tribunal held that the failure to specify the grounds for penalty initiation in the notice rendered the penalty proceedings invalid. - The Tribunal dismissed the appeal of the Revenue and directed the Assessing Officer to delete the penalty due to the defective initiation of penalty proceedings. In conclusion, the Tribunal allowed the appeal of the assessee, setting aside the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, due to the defective initiation of penalty proceedings as the notice did not specify the grounds for penalty imposition. The Tribunal emphasized the necessity of the Assessing Officer to clearly state the basis for initiating penalty proceedings to ensure the validity of such actions.
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