2018 (5) TMI 1605 - AT - Income Tax

Imposition of penalty u/s 271(1)(c) - Held that - the show cause notice u/s 274 does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income - show cause notice u/s 274 does not strike out the inappropriate words - thus imposition of penalty cannot be sustained - appeal of revenue is dismissed - Decided in favor of assessee

Issues Involved:

1. Condonation of delay in filing the appeal.
2. Validity of the penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961.
3. Specificity of the show cause notice issued under Section 274 of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:

The revenue's appeal was time-barred by 8 days. The revenue filed a condonation petition, and after considering the petition, the tribunal found that there was a reasonable cause for the delay. Consequently, the delay was condoned, and the appeal was admitted for hearing.

2. Validity of the Penalty Imposed Under Section 271(1)(c) of the Income-tax Act, 1961:

The penalty under Section 271(1)(c) was imposed on the assessee for the assessment year 2013-14. The facts leading to the penalty were that a search and seizure operation was carried out on the assessee's group, and the assessee disclosed an income of ?1,00,00,000 under Section 132(4). The Assessing Officer (AO) treated this disclosed income as undisclosed income and initiated penalty proceedings under Section 271(1)(c) by issuing a notice under Section 274. The AO was satisfied that the assessee had concealed its income, leading to the imposition of a penalty of ?32,62,152. The assessee appealed against this penalty to the Commissioner of Income Tax (Appeals) [CIT(A)], who deleted the penalty. The revenue then appealed to the tribunal.

3. Specificity of the Show Cause Notice Issued Under Section 274 of the Income-tax Act, 1961:

At the outset, the counsel for the assessee argued that the show cause notice issued under Section 274 did not contain the specific charge against the assessee, i.e., whether the charge was for concealment of particulars of income or for furnishing inaccurate particulars of income. The notice did not strike out the irrelevant portion, making it ambiguous. The counsel cited the decision of the Karnataka High Court in CIT vs. SSA’s Emerald Meadows, which held that a penalty under Section 271(1)(c) is invalid if the show cause notice does not specify the charge. This view was upheld by the Supreme Court when the revenue's Special Leave Petition (SLP) was dismissed.

The tribunal also considered various case laws cited by the Departmental Representative (DR) but found that these did not address the specific issue of the defective show cause notice. The tribunal referenced its earlier decision in Jeetmal Choraria Vs. ACIT, which followed the Karnataka High Court's ruling that a vague notice under Section 274 is invalid.

The tribunal concluded that the penalty imposed could not be sustained due to the defective notice, as it did not specify the charge against the assessee. Consequently, the deletion of the penalty by the CIT(A) was upheld.

Conclusion:

The tribunal dismissed the revenue's appeal, confirming the CIT(A)'s order to delete the penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961. The tribunal emphasized the importance of a specific and clear charge in the show cause notice under Section 274, aligning with the principles of natural justice.

Order Pronouncement:

The order was pronounced in the open court on 25th May, 2018.

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