2023 (1) TMI 1080 - AT - Income Tax

Penalty levied u/s 271(1)(c) - Defective notice u/s 274 - non specification of clear charge - HELD THAT - As relying on BIJOY KUMAR AGARWAL 2019 (6) TMI 721 - CALCUTTA HIGH COURT and MANJUNATHA COTTON AND GINNING FACTORY 2013 (7) TMI 620 - KARNATAKA HIGH COURT and AMRIT FOODS 2005 (10) TMI 96 - SUPREME COURT notice issued under section 271(1)(c) without specifying which of the two contraventions, the assessee is guilty of was defective and the penalty imposed in pursuance of such defective notice was not sustainable. we cancel the penalty imposed upon the assessee under section 271(1)(c) by the ld. AO and sustained the order passed by the ld. CIT(A). - Decided in favour of assessee.

Issues Involved:
1. Validity of the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.
2. Specificity required in the notice issued under section 274 read with section 271(1)(c).
3. Legal precedents and their applicability to the case.

Issue-wise Detailed Analysis:

1. Validity of the Penalty Imposed Under Section 271(1)(c):
The appeals were filed by the revenue challenging the orders of the CIT(A) who deleted the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The penalty was initially imposed by the Assessing Officer (AO) for the alleged concealment of income or furnishing of inaccurate particulars of income. The CIT(A) observed that the penalty order was defective as the notice did not specify the exact charge against the assessee, thus making the penalty proceedings void. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO's failure to specify the charge rendered the penalty notice and subsequent order invalid.

2. Specificity Required in the Notice Issued Under Section 274 Read with Section 271(1)(c):
The Tribunal highlighted that the notice under section 274 read with section 271(1)(c) must clearly specify whether the penalty is for "concealment of particulars of income" or "furnishing inaccurate particulars of income." The AO's notice in this case was found to be vague and did not strike out the inapplicable portion, thus failing to meet the legal requirement of specificity. The Tribunal cited several judicial precedents, including the Hon'ble Karnataka High Court's decision in the case of Manjunatha Cotton and Ginning Factory, which mandates that the grounds for penalty must be clearly stated to comply with the principles of natural justice.

3. Legal Precedents and Their Applicability:
The Tribunal relied on multiple judicial precedents to support its decision. Key cases cited include:
- Manjunatha Cotton and Ginning Factory (Karnataka High Court): This case established that penalty notices must specify the exact charge to allow the assessee to prepare an adequate defense.
- SSA Emerald Meadows (Supreme Court): The Supreme Court dismissed the revenue's appeal, affirming the need for specificity in penalty notices.
- Suvaprasanna Bhattacharya (ITAT Kolkata): This case reiterated that penalty orders must be based on clear and specific charges as stated in the notice.
- Principal CIT vs. Bijoy Kr. Agarwal (Calcutta High Court): The court held that a penalty notice without specifying the contravention is defective, and any penalty imposed based on such a notice is unsustainable.

The Tribunal concluded that the AO's failure to specify the particular limb under which the penalty was proposed made the notice and subsequent penalty order invalid. Consequently, the appeals filed by the revenue were dismissed, and the penalties imposed were canceled.

Conclusion:
The Tribunal's judgment emphasizes the importance of specificity in penalty notices under section 274 read with section 271(1)(c) of the Income Tax Act. The lack of clear charges in the notice violates the principles of natural justice, rendering the penalty proceedings invalid. The Tribunal's decision is consistent with established legal precedents, ensuring that assessees are adequately informed of the charges against them to prepare their defense.

← Previous Next →