2018 (9) TMI 1 - HC - Income Tax

Imposition of penalty u/s 271(1)(c) - non specification of charge - defective notice - Held that - We find that there was no specific charge against the assessee in the notice. Revenue has missed out their opportunity to subject the assessee to the penalty proceeding by not issuing a proper notice. No specific case has been made out by the Revenue as to why the matter should be remanded except that the assessee had not participated properly in the assessment proceedings but for that reason best judgment assessment has been made and the income, which had escaped assessment has been added to the income of the assessee. It was incumbent upon the Revenue to make out a specific case for imposition of penalty, on which count the Revenue has failed. - decided against revenue

Summary

Issues:
Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961 based on undisclosed income and incorrect deductions for five assessment years.

Analysis:
The High Court of Calcutta heard an appeal challenging the Income Tax Appellate Tribunal's decision invalidating a penalty order under Section 271(1)(c) of the Income Tax Act, 1961. The dispute involved five assessment years (2004-05, 2005-06, 2006-07, 2007-08, and 2009-10) stemming from the non-disclosure of a bank account by the assessee, leading to the addition of deposits to the total income. The penalty was imposed for undisclosed income and incorrect deductions, equivalent to 100% of the tax sought to be evaded. The Tribunal allowed the appeal, citing that the show cause notice did not specify whether the charge was for concealing income particulars or furnishing inaccurate particulars, following precedents from the Karnataka and Bombay High Courts. The Court agreed that the penalty could not be sustained due to the defective notice lacking a specific charge against the assessee.

The Court rejected the Revenue's plea to remand the matter to cure the technical flaw, emphasizing that the absence of a specific charge in the notice deprived the Revenue of the opportunity to properly subject the assessee to penalty proceedings. The Court noted that the Revenue failed to make a specific case for the imposition of penalty, despite the best judgment assessment being made due to the assessee's lack of proper participation in the assessment proceedings. Consequently, the Court upheld the Tribunal's decision, finding no error of law and dismissing the appeal as no substantial question of law was involved. The stay petition was also dismissed, and no costs were awarded in the matter.