2021 (7) TMI 154 - AT - Income Tax

Penalty u/s. 271(1)(c) - defective notice u/s 274 - HELD THAT - In the case under consideration, on perusal of the show cause notices issued by the Assessing Officer u/s. 274r.w.s. 271(1)(c) it is seen that the Assessing Officer did not mention whether the notice is issued for concealment of income or for furnishing of inaccurate particulars of income. Therefore, as per the ratio laid down by the Hon'ble Supreme Court in the case of SSA's Emerald Meadows 2016 (8) TMI 1145 - SC ORDER the notice issued by the Assessing Officer is not valid and consequently, the order passed u/s. 271(1)(c) is also not valid. Hence, we set aside the order of the CIT(A) and quash the order passed by the Assessing Officer u/s. 271(1)(c) of the Act. Accordingly, the appeal of the assessee is allowed.

Summary

Issues:
Appeal against CIT(A) order for AY 2013-14 under section 271(1)(c) on disallowance of forex loss and under section 14A.

Analysis:
1. The assessee filed an appeal against the CIT(A) order dated 14/09/2017 for AY 2013-14 concerning penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961. The grounds of appeal included challenging the sustainment of penalty on the disallowance of forex loss and disallowance under section 14A.

2. The Assessing Officer observed a forex loss of &8377; 42,60,676 on the purchase of machinery from a specific entity. The appellant recorded this as a capital entry but claimed it as a deduction in the Profit and Loss account. The Assessing Officer issued a notice under section 274 rws 271(1)(c) for furnishing inaccurate particulars of income. The penalty proceedings were initiated, resulting in a penalty of &8377; 13,82,382.

3. The CIT(A) confirmed the penalty levied by the Assessing Officer, leading the assessee to appeal before the ITAT. The assessee argued that the notice issued by the Assessing Officer did not specify whether it was for concealment of income or furnishing inaccurate particulars, rendering the notice invalid and consequently the penalty order invalid.

4. The ITAT considered the submissions and relevant case laws, including the decision of the Hon'ble Supreme Court in the case of CIT Vs. SSA's Emerald Meadows. The ITAT found that the notice issued by the Assessing Officer did not specify the grounds under which penalty proceedings were initiated, as required by law. Citing precedents, the ITAT held the notice invalid and consequently set aside the penalty order passed by the Assessing Officer under section 271(1)(c).

5. Therefore, the ITAT allowed the appeal of the assessee, quashing the penalty order passed by the Assessing Officer under section 271(1)(c) of the Act. The judgment was pronounced in the open court on 29th June, 2021.