2018 (3) TMI 144 - AT - Income Tax

Penalty proceedings u/s 271(1)(c) - non specification of charge for the propose of the levy of penalty in the notice - defective notice - Held that - The show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. See Jeetmal Choraria Versus A.C.I.T., Circle-43 2017 (12) TMI 883 - ITAT, KOLKATA - Decided in favour of assessee.

Summary

Issues:
1. Validity of penalty proceedings under section 271(1)(c) of the Income Tax Act based on a notice lacking specific charges against the assessee.

Analysis:
The judgment involved two appeals by the assessee challenging the confirmation of penalty proceedings under section 271(1)(c) of the Income Tax Act. The main issue revolved around the notice issued to the assessee, which did not specify whether the charge was for concealing particulars of income or furnishing inaccurate particulars of income. The assessee argued that the notice was defective and did not comply with the legal requirement. The ITAT Kolkata Bench's decision in a similar case highlighted the importance of a specific charge in the show cause notice to the assessee before imposing a penalty.

The assessee's counsel referred to various judicial decisions, including those by the Hon'ble Karnataka High Court and the Hon'ble Bombay High Court, emphasizing the necessity of a clear charge in the notice for penalty proceedings. The counsel argued that a defective show cause notice without specifying the charge against the assessee cannot be sustained, citing relevant case laws and precedents.

On the other hand, the revenue relied on decisions by the Mumbai ITAT and the Hon'ble Bombay High Court to support their argument that the notice's language or minor errors should not invalidate penalty proceedings. However, the ITAT Mumbai's decision was found not applicable to the current case due to specific circumstances and legal interpretations.

The judgment extensively discussed the conflicting views of different High Courts and Tribunals regarding the necessity of a specific charge in the show cause notice for penalty proceedings. Ultimately, the ITAT preferred to follow the view expressed by the Hon'ble Karnataka High Court, emphasizing the importance of a clear charge in the notice. Consequently, the ITAT ruled in favor of the assessee, holding that the imposition of penalty based on a defective notice lacking specific charges was not sustainable, and directed the cancellation of the penalty.

In conclusion, both appeals by the assessee were allowed, and the penalty imposition was canceled based on the absence of a specific charge in the notice, as required by law. The judgment highlighted the significance of a clear and specific charge in the show cause notice for penalty proceedings under section 271(1)(c) of the Income Tax Act, emphasizing the principles of natural justice and legal precedents in such cases.