2018 (4) TMI 397 - AT - Income Tax

Penalty u/s 271(1)(c) - non specification of charge - defective of 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. The plea for the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. We therefore hold that imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled. - Decided in favour of assessee.

Summary

Issues:
Challenge to order of CIT(A) confirming penalty u/s 271(1)(c) of the Income Tax Act, 1961.

Analysis:

1. Violation of Natural Justice:
The appellant contended that the CIT(A) erred by passing an ex parte appellate order without providing adequate opportunity for a hearing, violating the principles of natural justice. The appellant argued that this action should render the order quashed.

2. Distinct Proceedings of Assessment and Penalty:
The appellant argued that the CIT(A) failed to recognize the independence of assessment and penalty proceedings. The appellant claimed that the addition made in the assessment, upheld in the appellate proceeding, should not automatically trigger penal provisions under section 271(1)(c) of the Act.

3. Concealment of Income:
The AO added a significant amount as unexplained cash credit, leading to penalty proceedings under section 271(1)(c) of the Act. The appellant challenged this penalty imposition, arguing against the concealment of income and the furnishing of inaccurate particulars.

4. Defective Show Cause Notice:
The appellant raised the issue of a defective show cause notice issued under section 274 of the Act, lacking specificity regarding the charge of concealing income or furnishing inaccurate particulars. Citing legal precedents, the appellant argued that such a notice rendered the penalty imposition invalid.

5. Legal Precedents and Arguments:
The appellant relied on judgments from various High Courts and Tribunal decisions to support the argument that a defective show cause notice is grounds for canceling the penalty imposition. The appellant's counsel presented legal arguments based on these precedents to challenge the validity of the penalty.

6. Judicial Decision and Order:
After thorough consideration, the Tribunal found merit in the appellant's arguments regarding the defective show cause notice. The Tribunal held that the penalty imposition could not be sustained due to the lack of specificity in the notice. Consequently, the Tribunal allowed the appeal, canceling the penalty imposed under section 271(1)(c) of the Act.

In conclusion, the Tribunal's decision favored the appellant, emphasizing the importance of adhering to procedural requirements, such as providing a specific charge in the show cause notice before imposing penalties under the Income Tax Act. The judgment highlighted the significance of upholding principles of natural justice and ensuring procedural fairness in tax proceedings.