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2021 (7) TMI 1187 - AT - Income TaxPenalty u/s 271(1)(c) - Defective notice u/s 274 - non specification of single charge - HELD THAT - It is an admitted fact that before levy of the penalty A.O. has issued show cause notice in which A.O. has mentioned both the limbs of Section 271(1)(c) of the I.T. Act that assessee have concealed the particulars of your income or furnished inaccurate particulars of such income. Thus the A.O. has not mentioned as to for which limb of Section 271(1)(c) of the I.T. Act penalty shall have to be levied against the assessee. A.O. has issued invalid and defective notice under section 271(1)(c) of the I.T. Act read with Section 274 - As relying on ANANTA GOPAL KARAT case 2019 (4) TMI 1992 - ORISSA HIGH COURT the entire penalty proceedings are vitiated and are liable to be quashed. - Decided in favour of assessee.
Issues:
Validity of penalty under section 271(1)(c) of the Income Tax Act based on the show cause notice lacking specificity. Analysis: The appeal was filed by the assessee against the order of the CIT(A) confirming a penalty of ?9,27,000 under section 271(1)(c) of the Act for the assessment year 2012-13. The case involved the assessee, a company engaged in the procurement of paddy and processing of rice, where the AO found discrepancies in the share application money disclosed in the balance sheet. The AO treated ?30,00,000 received from an undisclosed source as income under section 68 of the Act, leading to the initiation of penalty proceedings for concealing income and furnishing inaccurate particulars. The AO issued a show cause notice, and as the assessee did not respond, a penalty of ?9,27,000 was levied, representing 100% of the tax sought to be evaded. The assessee contended that the show cause notice was invalid as it did not specify the exact grounds for penalty under section 271(1)(c) as per the decision in CIT vs. Manjunatha Cotton & Ginning Factory. The AR relied on various judgments, including those of the Hon'ble Karnataka High Court and Jurisdictional Tribunal, to support the argument. On the other hand, the DR argued that the AO had provided proper justification for the penalty. The ITAT considered the submissions and found that the AO's show cause notice lacked specificity regarding the grounds for imposing the penalty, as required by Section 274 of the Act. Citing legal precedents, including the decision of the Hon'ble Karnataka High Court and the Hon'ble Supreme Court, the ITAT concluded that the penalty order was liable for cancellation due to the omission of specifying the grounds for penalty in the notice. Referring to the judgment of the Hon'ble Delhi High Court in a similar case, the ITAT held that the penalty proceedings were vitiated due to the defective notice issued by the AO. Consequently, the ITAT set aside the penalty of ?9,27,000 levied under section 271(1)(c) of the Act, stating that there was no need to decide the penalty on its merits. In conclusion, the ITAT allowed the appeal of the assessee, emphasizing the importance of a valid and specific show cause notice in penalty proceedings under section 271(1)(c) of the Income Tax Act. The judgment highlighted the significance of procedural compliance and the requirement for clarity in communicating the grounds for imposing penalties to ensure fair and lawful proceedings.
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