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2018 (8) TMI 676 - AT - Income TaxLevy of penalty u/s 271(1)(c) - defective notice issued u/s. 274 - Held that - when there are two views on the issue, one in the favouring of assessee should be adopted - the notice issued u/s. 274 r.w.s 271 of the Act, placed on record 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. No penalty - Decided in favor of assessee.
Issues Involved:
1. Validity of the notice issued under Section 274 read with Section 271(1)(c) of the Income Tax Act. 2. Whether the penalty imposed under Section 271(1)(c) of the Income Tax Act was maintainable. Issue-wise Detailed Analysis: 1. Validity of the Notice Issued Under Section 274 Read with Section 271(1)(c) of the Income Tax Act: The appellant argued that the notice dated 14-03-2013 issued by the AO under Section 274 read with Section 271(1)(c) of the Act was defective as it did not specify the specific charge against the assessee, i.e., whether the penalty was for concealment of income or furnishing inaccurate particulars of income. The appellant relied on the decision of the Hon’ble Supreme Court in the case of SSA’s Emerald Meadows, which held that such a defect renders the notice invalid. The respondent, represented by the ld.DR, contended that the notice was valid and relied on various judicial precedents, including the judgment of the Hon’ble Calcutta High Court in the case of Dr. Syamal Baran Mondal Vs. CIT, which stated that Section 271 does not mandate the recording of satisfaction about concealment of income in specific terms and words. The satisfaction of the AO must reflect from the order either through expressed words or by overt acts. The Tribunal considered the submissions and noted that the same set of written submissions were filed in a similar case (Jeetmal Choraria) where the Coordinate Bench preferred to follow the ratio laid down by the Hon’ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory. The principle established is that when there are two views on an issue, the view favoring the assessee should be adopted, as enunciated by the Hon’ble Supreme Court in the case of Vegetable Products Ltd. The Tribunal observed that the notice issued did not specify the charge against the assessee, making it defective. The Tribunal also noted that the Revenue’s Special Leave Petition (SLP) against the judgment in SSA’s Emerald Meadows was dismissed by the Hon’ble Supreme Court, reinforcing the invalidity of such defective notices. 2. Whether the Penalty Imposed Under Section 271(1)(c) of the Income Tax Act Was Maintainable: Given the defective notice, the Tribunal held that the imposition of penalty under Section 271(1)(c) could not be sustained. The Tribunal emphasized that the show cause notice must clearly specify the charge against the assessee, and failure to do so renders the penalty proceedings invalid. The Tribunal referred to various judicial precedents, including the decisions of the Hon’ble Bombay High Court and the Hon’ble Patna High Court, which supported the view that a mere mistake in the language used or non-striking of the inaccurate portion in the notice does not invalidate the notice. However, the Tribunal preferred to follow the decision of the Hon’ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory, which held that a vague notice is not in compliance with the requirements of the law. The Tribunal concluded that the penalty imposed on the basis of a defective notice could not be sustained and directed the cancellation of the penalty of ?1,15,671/- levied by the AO under Section 271(1)(c) for the A.Y 2010-11. Conclusion: The Tribunal set aside the order of the CIT-A and allowed the appeal filed by the assessee, canceling the penalty imposed under Section 271(1)(c) of the Act for A.Y 2010-11. The judgment emphasized the importance of specifying the charge in the show cause notice and upheld the principle that when there are two views on an issue, the view favoring the assessee should be adopted.
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