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2018 (4) TMI 264 - AT - Income TaxPenalty u/s. 271(1)(c) - non specification of charge - defective notice - Held that - We find that the notice dt. 23-02-2015 issued u/s. 274 r.w.s 271 of the Act does not specify the charge of offence committed by the assessee viz whether had concealed the particulars of income or had furnished inaccurate particulars of income. Hence the said notice is to be held as defective. - Decided in favour of assessee.
Issues Involved:
1. Validity of penalty imposed under Section 271(1)(c) of the Income Tax Act. 2. Defective notice under Section 274 read with Section 271 of the Income Tax Act. 3. Judicial precedents and their applicability. Detailed Analysis: 1. Validity of Penalty Imposed Under Section 271(1)(c) of the Income Tax Act: The primary issue in this appeal was the validity of the penalty of ?22,97,509 imposed under Section 271(1)(c) of the Income Tax Act for the Assessment Year (AY) 2012-13. The Commissioner of Income Tax (Appeals), Siliguri had confirmed this penalty, which was originally imposed by the Assessing Officer (AO). 2. Defective Notice Under Section 274 read with Section 271 of the Income Tax Act: The appellant's representative (ld.AR) argued that the penalty was imposed based on a defective notice dated 23-02-2015 issued under Section 274 read with Section 271 of the Act. The notice did not specify whether the penalty was for "concealing the particulars of income" or "furnishing inaccurate particulars of income," making it defective. This argument was supported by the decision of the Hon’ble Karnataka High Court in the case of CIT vs. SSA’s Emerald Meadows, which was upheld by the Hon’ble Supreme Court by dismissing the Special Leave Petition (SLP) filed by the Revenue. 3. Judicial Precedents and Their Applicability: The respondent's representative (ld.DR) relied on various judicial precedents to support the validity of the penalty, even if the notice was defective. The key judgments cited included: - Dr. Syamal Baran Mondal vs. CIT (2011) 244 CTR 631: This case stated that Section 271 does not mandate specific terms for recording satisfaction about concealment of income. - Trishul Enterprises vs. DCIT (ITA Nos. 384 & 385/Mum/2014): The ITAT Mumbai dismissed the contention regarding the failure of the AO to strike off the relevant part of the notice. - CIT vs. Smt. Kaushalya (1992): The Bombay High Court held that mere non-striking off specific limbs cannot invalidate the notice under Section 274. - M/s Maharaj Garage & Company vs. CIT: The Bombay High Court reiterated that the requirement for a reasonable opportunity under Section 274 does not necessitate a specific charge or explanation in the notice. The Tribunal noted that similar arguments were presented in the case of Jeetmal Choraria, where the Coordinate Bench preferred the Karnataka High Court's view in the case of Manjunatha Cotton and Ginning Factory. The principle established by the Hon’ble Supreme Court in Vegetable Products Ltd. was that when two views are available, the one favoring the assessee should be adopted. Tribunal's Decision: The Tribunal found that the notice dated 23-02-2015 was indeed defective as it did not specify the charge against the assessee. The Tribunal also noted that the Hon’ble Supreme Court had dismissed the Revenue's SLP against the Karnataka High Court's decision in SSA’s Emerald Meadows, thereby upholding the view that a defective notice invalidates the penalty proceedings. Consequently, the Tribunal canceled the penalty of ?22,97,509 levied by the AO and confirmed by the CIT-A. The grounds raised by the assessee in the appeal were allowed, and the appeal was decided in favor of the assessee. Conclusion: The appeal was allowed, and the penalty imposed under Section 271(1)(c) was canceled due to the defective notice issued under Section 274 read with Section 271 of the Income Tax Act. The Tribunal followed the judicial precedent set by the Karnataka High Court and upheld by the Supreme Court, emphasizing the requirement for a clear and specific charge in the penalty notice.
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