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2018 (3) TMI 945 - AT - Income TaxPenalty u/s 271(1)(c) - absence of any specific show cause notice having been issued - non specification - Held that - AO has initiated the penalty for concealment of particulars of income or furnishing of inaccurate particulars, which is contrary to the provisions of law. Notice issued by the AO u/s. 271(1)(c) r.w.s. 274 is bad in law as it does not specify which limb of section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars. The penalty in dispute is not sustainable in the eyes of law. - Decided in favour of assessee.
Issues Involved:
1. Legality of penalty upheld by the Commissioner of Income Tax (Appeals) under Section 271(1)(c) of the Income Tax Act. 2. Validity of the show cause notice issued for the penalty. 3. Jurisdictional correctness of the penalty due to lack of recorded satisfaction in the assessment order. 4. Determination of whether incorrect claims amount to furnishing inaccurate particulars. 5. Adherence to principles of natural justice in imposing the penalty. 6. Evaluation of the factual matrix and evidence by the Commissioner of Income Tax (Appeals). Issue-wise Detailed Analysis: 1. Legality of Penalty Upheld by the Commissioner of Income Tax (Appeals): The main contention was that the Commissioner of Income Tax (Appeals) erred in upholding a penalty of ?2,11,086/- under Section 271(1)(c) of the Income Tax Act. The Assessee argued that the penalty was imposed without a specific allegation of either concealment of income or furnishing inaccurate particulars. The Tribunal found that the Assessing Officer (AO) had used a standard format notice without specifying the exact nature of the default, thus rendering the penalty unsustainable in law. This view was supported by various judicial precedents, including decisions by the Karnataka High Court and the Supreme Court in the cases of CIT vs. M/s SSA’s Emerald Meadows and Manjunatha Cotton and Ginning Factory. 2. Validity of the Show Cause Notice Issued for the Penalty: The Assessee argued that the show cause notice issued under Section 271(1)(c) did not specify whether the penalty was for concealment of particulars of income or for furnishing inaccurate particulars. The Tribunal noted that the notice dated 30.03.2016 merely ticked options without specifying the exact charge. Citing judicial precedents, the Tribunal held that such a notice is bad in law and cannot sustain a penalty. The Tribunal emphasized that the AO must clearly state the specific charge in the notice to fulfill the legal requirements. 3. Jurisdictional Correctness of the Penalty Due to Lack of Recorded Satisfaction in the Assessment Order: The Assessee contended that no satisfaction was recorded in the assessment order regarding the alleged default, thus questioning the jurisdictional correctness of the penalty. The Tribunal observed that the AO had not clearly recorded whether the penalty was for concealment of income or for furnishing inaccurate particulars. This lack of clarity in the assessment order further supported the Tribunal's decision to cancel the penalty, as it violated the legal requirement of a clear and specific charge. 4. Determination of Whether Incorrect Claims Amount to Furnishing Inaccurate Particulars: The Assessee argued that incorrect claims do not necessarily amount to furnishing inaccurate particulars if the details provided are not found to be incorrect, erroneous, or false. The Tribunal agreed with this argument, noting that the AO had not demonstrated that the Assessee's claims were false or inaccurate. Therefore, the penalty for furnishing inaccurate particulars was not justified. 5. Adherence to Principles of Natural Justice in Imposing the Penalty: The Assessee claimed that the penalty was imposed without giving a proper opportunity to be heard, violating the principles of natural justice. The Tribunal found merit in this argument, noting that the Assessee was not given a valid and proper opportunity to present their case. This procedural lapse further invalidated the penalty imposed by the AO. 6. Evaluation of the Factual Matrix and Evidence by the Commissioner of Income Tax (Appeals): The Assessee argued that the Commissioner of Income Tax (Appeals) failed to appreciate the factual matrix and evidence on record, leading to an unjustified conclusion. The Tribunal reviewed the case records and found that the Commissioner had mechanically sustained the penalty without a thorough evaluation of the facts and evidence. This lack of proper consideration further supported the Tribunal's decision to cancel the penalty. Conclusion: The Tribunal concluded that the penalty imposed under Section 271(1)(c) was not sustainable due to the lack of a specific charge in the notice, the absence of recorded satisfaction in the assessment order, and procedural lapses violating natural justice principles. Consequently, the Tribunal canceled the penalty and allowed the appeal filed by the Assessee. The decision was pronounced on 16/03/2018.
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