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2015 (5) TMI 893 - AT - Income TaxPenalty under Section 271(1)(c) - validity of the notice issued under Section 274 rws 271 of the Act dt.20.10.2010 for initiating penalty proceedings under Section 271(1)(c) - Held that - A perusal of the notice issued under Section 274 r.w.s. 271 of the Act dt.20.10.2010, reveals that the Assessing Officer has not deleted the inappropriate words and parts of the notice, whereby it is not clear as to the default committed by the assessee; i.e. whether it is the concealment of particulars of income or furnishing of inaccurate particulars of income that the penalty under Section 271(1)(c) of the Act is sought to be levied. We find that the Hon ble High Court of Karnataka in its order in the case of M/s. Manjunatha Cotton & Ginning Factory in 2013 (7) TMI 620 - KARNATAKA HIGH COURT has held that such a notice, as has also been issued in the case on hand, is invalid and the consequential penalty proceedings are also not valid. - Decided in favour of assesse.
Issues Involved:
1. Validity of the notice initiating penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961. 2. Levy of penalty for alleged concealment of income or furnishing inaccurate particulars of income. Issue-wise Detailed Analysis: 1. Validity of the Notice Initiating Penalty Proceedings: The primary contention raised by the assessee was the validity of the notice issued under Section 274 read with Section 271 of the Income Tax Act, 1961. The assessee argued that the notice was vague and did not specify whether the penalty was being levied for concealment of income or for furnishing inaccurate particulars of income. This lack of clarity, according to the assessee, rendered the notice invalid. The Tribunal examined the notice and found that the Assessing Officer had not deleted the inappropriate parts of the notice, making it unclear whether the penalty was for concealment of income or for furnishing inaccurate particulars. The Tribunal referred to the judgment of the Hon'ble High Court of Karnataka in the case of Manjunatha Cotton & Ginning Factory, which held that such a vague notice is invalid and the consequential penalty proceedings are also invalid. The relevant portions of the judgment emphasized that the notice must clearly specify the grounds on which the penalty is being levied to ensure the principles of natural justice are upheld. Respecting the jurisdictional High Court's ruling, the Tribunal concluded that the notice issued to the assessee was invalid, and consequently, the penalty proceedings based on such a notice were also invalid. Hence, the penalty of Rs. 2,10,687 levied under Section 271(1)(c) for the Assessment Year 2008-09 was canceled. 2. Levy of Penalty for Alleged Concealment of Income or Furnishing Inaccurate Particulars: Given that the Tribunal found the notice initiating the penalty proceedings to be invalid, it held that there was no need to adjudicate on the merits of the penalty itself. The grounds challenging the merits of the penalty, including whether the assessee had concealed income or furnished inaccurate particulars, were rendered moot by the decision on the validity of the notice. The Tribunal's decision to cancel the penalty was based solely on the procedural lapse in the issuance of the notice. As such, the other grounds of appeal raised by the assessee regarding the substantive aspects of the penalty did not require further consideration. Conclusion: In conclusion, the Tribunal allowed the assessee's appeal, canceling the penalty of Rs. 2,10,687 levied under Section 271(1)(c) for the Assessment Year 2008-09 due to the invalidity of the notice initiating the penalty proceedings. The decision was pronounced in the open court on 10th April 2015.
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