2018 (9) TMI 1309 - AT - Income Tax

Penalty u/s. 271(1)(c) - invalid of notice - Held that - 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. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. Imposition of penalty cannot be sustained. The assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. We therefore hold that imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled. - Decided in favour of assessee.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Validity of the penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961 due to defective notice.

Detailed Analysis:

1. Delay in Filing the Appeal:
The primary issue addressed was the substantial delay of 1178 days in filing the appeal by the assessee. The assessee argued that the delay was due to incorrect advice from the former Authorized Representative (AR), who mistakenly filed a fresh appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] instead of the Tribunal. The AR believed that an error in the original appeal could only be rectified by filing a new appeal. This fresh appeal was treated as a rectification application by the CIT(A) and was dismissed. The assessee was then advised by the same AR not to pursue the appeal further. It was only after consulting a new advocate in January 2018 that the assessee was advised to file the appeal promptly. The Tribunal, considering the judicial precedents emphasizing substantial justice over technicalities, condoned the delay, noting that the assessee should not be penalized for the AR's incorrect advice.

2. Validity of the Penalty Imposed Under Section 271(1)(c):
The second issue was the validity of the penalty imposed under Section 271(1)(c) due to the defective notice issued by the Assessing Officer (AO). The Tribunal noted that the notice issued under Section 274 read with Section 271 did not specify the exact charge against the assessee—whether it was for concealing particulars of income or furnishing inaccurate particulars of income. The Tribunal referenced several judicial decisions, including those from the Karnataka High Court and the Supreme Court, which held that such vague notices are invalid. Specifically, in CIT vs. SSA’s Emerald Meadows and CIT vs. Manjunatha Cotton and Ginning Factory, the courts ruled that penalty notices must clearly specify the charge against the assessee to be valid. The Tribunal also cited similar decisions from the Bombay High Court and the Calcutta High Court, reinforcing that penalties based on defective notices cannot be sustained.

The Tribunal rejected the Department's arguments and case laws opposing the assessee's stance, noting that the cited cases did not directly address the issue of defective notices or were not applicable to the facts of the present case. The Tribunal emphasized that where two views exist, the one favoring the assessee should be adopted. Consequently, the Tribunal held that the penalty imposed under Section 271(1)(c) was invalid due to the defective notice and directed its cancellation.

Conclusion:
The appeal was allowed, and the penalty imposed under Section 271(1)(c) was deleted. The Tribunal's decision was pronounced in the open court on 19/09/2018.