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2017 (9) TMI 645 - AT - Income TaxPenalty u/s 271(1)(c) - validity of notice - issuing notice U/s 274 without mentioning the limb of section 271 under which penalty is proposed to be levied - Non-striking of one of the limbs in the notice - non specific charge mentioned by the Assessing Officer for imposing of penalty - Held that - As perused the penalty notice issued u/s 274 r/w 271(1)(c) and also the Assessment Order passed u/s 143(3) of the Act. It is abundantly clear from these that the Assessing Officer failed to strike of the relevant limb in initiating the penalty proceedings, charge is not made clear. Similar situation was considered by the Coordinate Bench in the case of Meherjee Cassinath Holdings Private Limited v. ACIT (2017 (5) TMI 904 - ITAT MUMBAI ) and the implication of non-striking of the relevant portion of the notice and not specifying the charge while imposing the penalty u/s 271(1)(c). It was held that if there is no specific charge mentioned by the Assessing Officer for imposing of penalty, the penalty cannot be sustained. Non-striking of one of the limbs in the notice suffers from vice of non-application of the mind having regard to the ratio of the decision in the case of the Dilip N. Shroff (2007 (5) TMI 198 - SUPREME Court) and Bombay High Court in the case of Samson Perinchery (2017 (1) TMI 1292 - BOMBAY HIGH COURT ). Thus we delete the penalty levied u/s. 271(1)(c) of the Act on the preliminary point. - Decided in favour of assessee.
Issues Involved:
1. Validity of the penalty notice issued under Section 274 read with Section 271(1)(c) of the Income Tax Act. 2. Non-application of mind by the Assessing Officer in initiating penalty proceedings. 3. Specificity of the charge under Section 271(1)(c) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Validity of the Penalty Notice Issued under Section 274 r/w Section 271(1)(c): The primary issue raised by the assessee was the validity of the penalty notice issued under Section 274 without specifying the exact limb of Section 271(1)(c) under which the penalty was proposed. The Tribunal admitted this additional ground as it questioned the jurisdiction of the Assessing Officer to levy the penalty. The assessee argued that the notice was issued without application of mind, making it void-ab-initio. The Tribunal referenced the case of Meherjee Cassinath Holdings Private Limited v. ACIT, where it was held that non-striking of the relevant clause in the notice indicated a lack of clear and crystallized charge, rendering the penalty unsustainable. 2. Non-application of Mind by the Assessing Officer: The assessee contended that the Assessing Officer failed to apply his mind in initiating the penalty proceedings, as the notice did not clearly specify whether the penalty was for "concealment of income" or "furnishing inaccurate particulars of income." The Tribunal noted that the penalty notice was issued in a standard proforma without striking out the irrelevant clause, which demonstrated non-application of mind. This was supported by the decision in Dilip N. Shroff, where the Supreme Court emphasized the necessity for the Assessing Officer to be clear about the charge being made against the assessee. 3. Specificity of the Charge under Section 271(1)(c): The Tribunal highlighted that Section 271(1)(c) envisages two distinct charges: "concealment of income" and "furnishing inaccurate particulars of income," each with different connotations. It is imperative for the notice to specify the exact charge to enable the assessee to defend accordingly. The Tribunal found that the notice in question failed to do this, thus suffering from the vice of non-application of mind. The Tribunal cited the case of SSA’s Emerald Meadows, where the Karnataka High Court held that a notice not specifying the charge was invalid, and this decision was upheld by the Supreme Court. Conclusion: The Tribunal concluded that the penalty notice issued under Section 274 r/w Section 271(1)(c) was invalid due to non-application of mind and failure to specify the charge. Consequently, the penalty imposed under Section 271(1)(c) was deleted. The Tribunal did not address other arguments on merits raised by the assessee, as the penalty was deleted on the preliminary point of invalid notice. Result: The appeal of the assessee was allowed, and the penalty levied under Section 271(1)(c) was deleted. Order Pronounced: The order was pronounced in the open court on 18th August 2017.
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