2018 (5) TMI 742 - AT - Income Tax

Penalty u/s. 271(1)(c) - Non specification of charge - Held that - 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 - Decided in favour of assessee

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961 due to defective show cause notice.

Issue-wise Detailed Analysis:

1. Condonation of Delay:
The appeal filed by the assessee was delayed by 54 days. The assessee submitted a condonation petition, and the Departmental Representative (DR) did not object to this petition. After considering the condonation petition and the lack of objection from the DR, the Tribunal decided to condone the delay and proceeded to hear the appeal.

2. Validity of Penalty under Section 271(1)(c):
The main issue in this appeal was whether the penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961, was valid. The penalty was initially imposed by the Assessing Officer (AO) after an assessment under Sections 143(3)/147, which determined a total income significantly higher than what the assessee had returned. The AO initiated penalty proceedings for alleged bogus expenses, under-valuation of stock, and bogus purchases.

The assessee challenged the penalty on the grounds that the show cause notice issued under Section 274 read with Section 271 did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars of income. The notice used a standard format and did not strike out the irrelevant portions, making it unclear what the specific charge was.

The assessee's counsel cited several judicial precedents, including:
- The Hon’ble Karnataka High Court's decision in CIT vs. SSA’s Emerald Meadows, which held that a penalty notice must specify the charge against the assessee.
- The Hon’ble Bombay High Court's decision in CIT vs. Shri Samson Perinchery, which followed the Karnataka High Court's view.
- The ITAT Kolkata's decision in Suvaprasanna Bhattacharya vs. ACIT, which supported the necessity of a clear charge in the penalty notice.

The DR opposed these submissions, citing various case laws, including decisions from the Hon’ble Calcutta High Court and ITAT Mumbai, which suggested that a mere mistake in the language of the notice or non-striking of the inaccurate portion does not invalidate the notice.

However, the Tribunal found that the decisions cited by the DR were either not applicable or not persuasive enough. The Tribunal noted:
- The decision in Dr. Syamal Baran Mondal vs. CIT dealt with the recording of satisfaction, not the specificity of the charge in the show cause notice.
- The Mumbai ITAT decisions and the Hon’ble Bombay High Court's decision in CIT vs. Kaushalya suggested that the issuance of notice is an administrative device and a mistake in the notice does not invalidate the penalty proceedings. However, these views were not binding on the Tribunal.

The Tribunal preferred to follow the view of the Hon’ble Karnataka High Court, which mandates that the specific charge must be mentioned in the show cause notice. It held that the penalty notice in the present case was defective as it did not specify whether the penalty was for concealment of income or for furnishing inaccurate particulars of income.

Conclusion:
The Tribunal concluded that the imposition of penalty under Section 271(1)(c) and its confirmation by the CIT(A) could not be sustained due to the defective show cause notice. Consequently, the appeal of the assessee was allowed, and the penalty was directed to be cancelled.

Result:
The appeal of the assessee was allowed, and the imposition of penalty was cancelled.

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