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2020 (10) TMI 932 - AT - Income TaxPenalty u/s 271(1)(c) - defective notice - AO has not specified under which limb penalty is being initiated - HELD THAT - Failure on the part of the A.O to clearly put the assessee to notice as regards the default for which penalty u/s 271(1)(c) was sought to be imposed on it in the SCN , dated 10.11.2014, had left the assessee guessing of the default for which it was being proceeded against. As the two defaults viz. concealment of income and furnishing of inaccurate particulars of income as contemplated in Sec.271(1)(c) are separate and distinct defaults which operate in their exclusive and independent fields, we, are unable to subscribe to the view taken by the CIT(A) that the A.O had validly imposed penalty for concealment of income/filing inaccurate particulars of income in respect of the aforesaid addition/disallowance made in the hands of the assessee. We not being able to persuade ourselves to subscribe to the imposition of penalty by the A.O, therefore, set aside the order of the CIT(A) who had upheld the same. The penalty imposed by the A.O under Sec.271(1)(c) is quashed in terms of our aforesaid observations. - Decided in favour of assessee.
Issues Involved:
1. Validity of the penalty proceedings under Section 271(1)(c) due to defective notice. 2. Justification for the penalty imposed under Section 271(1)(c) on the merits of the case. Issue-wise Detailed Analysis: 1. Validity of the penalty proceedings under Section 271(1)(c) due to defective notice: The primary issue raised by the assessee was the validity of the penalty proceedings initiated under Section 271(1)(c) of the Income Tax Act, 1961, due to the defective notice issued by the Assessing Officer (A.O). The assessee contended that the A.O failed to specify the exact charge in the 'Show Cause' notice, i.e., whether the penalty was for 'concealment of income' or 'furnishing inaccurate particulars of income'. This ambiguity, according to the assessee, deprived them of a fair opportunity to defend themselves. The Tribunal examined the 'Show Cause' notice and found that the A.O had indeed failed to strike off the irrelevant default, thus not clearly specifying the charge. This non-application of mind by the A.O was considered a serious infirmity, rendering the penalty proceedings invalid. The Tribunal cited several judicial pronouncements, including the judgments of the Hon’ble Supreme Court in the cases of Dilip N. Shroff vs. Jt. CIT and T. Ashok Pai vs. CIT, which emphasized the necessity of specifying the exact charge in penalty notices. The Tribunal concluded that the failure to specify the charge in the notice was not a mere technical default but a fundamental flaw that vitiated the penalty proceedings. Consequently, the penalty imposed under Section 271(1)(c) was quashed. 2. Justification for the penalty imposed under Section 271(1)(c) on the merits of the case: On the merits, the assessee argued that the penalty was unjustified as the claims made in the return of income were based on a bona fide belief and not with the intent to conceal income or furnish inaccurate particulars. The assessee had disclosed all relevant facts in the return, and the mistakes were genuine and not deliberate. The A.O had disallowed the assessee's claim for deduction of interest expenditure and reclassified the income from letting out amenities under a different head, which led to the imposition of the penalty. However, the Tribunal noted that the assessee had admitted the mistakes during the assessment proceedings and had cooperated with the A.O. Given that the penalty proceedings were already found to be invalid due to the defective notice, the Tribunal refrained from delving deeper into the merits of the case. However, it acknowledged that the assessee's mistakes appeared to be bona fide and not indicative of any fraudulent intent. Conclusion: The Tribunal allowed the appeals for both A.Y. 2012-13 and A.Y. 2014-15, quashing the penalties imposed under Section 271(1)(c) due to the defective 'Show Cause' notice. The Tribunal emphasized the importance of specifying the exact charge in penalty notices to ensure that the assessee is given a fair opportunity to defend themselves. The order pronounced under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963, was placed on the notice board.
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