2018 (9) TMI 66 - AT - Income Tax

Penalty u/s 271(1)(c) - non specification of charge - defective notice - Held that - We find the notice dated 28.03.2013 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. - decided in favour of assessee.

Summary

Issues Involved:
1. Defective Notice under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of Penalty Proceedings based on Defective Notice.
3. Jurisdictional High Court and Supreme Court Decisions on Defective Notices.

Detailed Analysis:

1. Defective Notice under Section 274 read with Section 271(1)(c):
The appellant argued that the notice issued by the Assessing Officer (AO) under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961, was defective as it did not specify the specific charge against the assessee, i.e., whether it 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 to support this contention.

2. Validity of Penalty Proceedings based on Defective Notice:
The respondent (Department) argued that the notice issued under Section 274 was valid and that the penalty proceedings should be upheld. They cited various judgments, including the Hon’ble Calcutta High Court in Dr. Syamal Baran Mondal vs. CIT, which stated that Section 271 does not mandate specific terms for recording satisfaction about concealment of income. The Department also referred to several ITAT Mumbai decisions that upheld penalties despite defects in the notice, arguing that mere non-striking of the inaccurate portion does not invalidate the notice.

3. Jurisdictional High Court and Supreme Court Decisions on Defective Notices:
The Tribunal noted that the same set of written submissions were considered in a previous case (Jeetmal Choraria) where the Coordinate Bench of the Tribunal preferred to follow the Karnataka High Court's decision in Manjunatha Cotton and Ginning Factory. The Tribunal emphasized the principle that when there are two views on an issue, the one favoring the assessee should be adopted, as enunciated by the Hon’ble Supreme Court in Vegetable Products Ltd.

The Tribunal discussed various case laws, including:
- Dr. Syamal Baran Mondal vs. CIT: The decision was on the recording of satisfaction, not on the specific charge in the show cause notice.
- CIT vs. Kaushalya: Held that mere mistake in the language or non-striking of the inaccurate portion cannot invalidate the notice.
- Manjunatha Cotton and Ginning Factory: Held that the notice must specify the charge against the assessee, and failure to do so invalidates the penalty proceedings.

The Tribunal concluded that the notice dated 28.03.2013 issued under Section 274 read with Section 271 of the Act did not specify the charge of offense committed by the assessee, making it defective. The Tribunal also noted that the Hon’ble Supreme Court dismissed the Special Leave Petition (SLP) against the judgment in SSA’s Emerald Meadows, reinforcing the view that a defective notice invalidates penalty proceedings.

Conclusion:
The Tribunal set aside the order of the Commissioner of Income Tax (Appeals) and canceled the penalty of ?75,020 levied by the AO under Section 271(1)(c) of the Act for the assessment year 2010-11. The appeal of the assessee was allowed, and the order was pronounced on 29.08.2018.