2018 (9) TMI 418 - AT - Income Tax

Penalty involving proceedings u/s. 271(1)(c) - defective notice - Held that - CIT(A) has deleted the impugned penalty on account of the fact that Assessing Officer s show cause notice initiating the penal proceedings in motion did not specify as to whether the assessee had concealed or furnished inaccurate particulars of income of its taxable income so far as the quantum issue of share capital / premium issue of 1, 54, 78, 000 is concerned. We find the instant issue to be no more res integra co-ordinate bench s decision in Jeetmal Choraria 2017 (12) TMI 883 - ITAT KOLKATA wherein held the show cause notice issued 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 - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the penalty notice under Section 271(1)(c) of the Income Tax Act, 1961.
2. Whether the Assessing Officer (AO) properly specified the charge against the assessee in the penalty notice.
3. The applicability of judicial precedents regarding the requirement to strike off irrelevant portions in the penalty notice.

Detailed Analysis:

1. Validity of the Penalty Notice under Section 271(1)(c):
The Revenue's appeal challenged the correctness of the Commissioner of Income Tax (Appeals)-5, Kolkata's order, which reversed the AO's action of imposing a penalty of ?50,21,837/- under Section 271(1)(c) of the Income Tax Act, 1961. The CIT(A) found that the penalty notice issued by the AO was faulty as it did not clearly specify whether the penalty was for "concealing the particulars of income" or "furnishing inaccurate particulars of income." The CIT(A) relied on the decision in Manjunatha Cotton and Ginning Factory & Others [2013] 359 ITR 565 (Kar), which held that failure to strike off irrelevant portions in the penalty notice is fatal to the validity of the notice.

2. Specification of the Charge in the Penalty Notice:
The CIT(A) observed that the AO's notice dated 21.03.2015 was issued in a general proforma, listing three different classes of defaults without striking off the irrelevant portions. The AO marked both the second para (for failure to comply with a notice under sections 142(1)/143(2)) and the third para (for concealing the particulars of income or furnishing inaccurate particulars). This lack of specificity was deemed a significant error, as it did not clearly inform the assessee of the exact charge against them.

3. Judicial Precedents on Striking Off Irrelevant Portions:
The CIT(A) and the Tribunal relied on several judicial precedents which held that failure to strike off irrelevant portions in the penalty notice renders it invalid. Key cases cited include:
- CIT vs. Manjunatha Cotton & Ginning Factory (Karnataka High Court)
- SSA’s Emerald Meadows (Supreme Court)
- CIT vs. Shri Samson Perinchery (Bombay High Court)
- Gautam Jhunjhunwala vs. ITO (ITAT Kolkata Bench)

The Tribunal noted that the issue of specificity in penalty notices is no longer res integra, as similar issues were addressed in the case of Jeetmal Choraria, where the Tribunal followed the Karnataka High Court's decision in Manjunatha Cotton & Ginning Factory. The Tribunal emphasized that where two views exist, the one favorable to the assessee should be adopted, as per the Supreme Court's principle in Vegetable Products Ltd.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to cancel the penalty. The Tribunal concluded that the AO's penalty notice was defective for not specifying the exact charge, thus rendering the penalty proceedings invalid. The Tribunal also noted that subsequent judicial precedents supported the CIT(A)'s decision, and the Revenue failed to rebut these points effectively. The order was pronounced in the open court on 05/09/2018.