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2018 (10) TMI 864 - AT - Income TaxPenalty levied u/s. 271(1)(c) - order imposing penalty does not contain the specific charge against the assessee - defective notice - Held that - As decided in case of DR. MURARI MOHAN KOLEY 2018 (9) TMI 1 - CALCUTTA HIGH COURT 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. - decided against revenue
Issues Involved:
1. Validity of the show cause notice issued under Section 274 read with Section 271(1)(c) of the Income-tax Act, 1961. 2. Specificity of the charge in the show cause notice - whether it is for concealment of income or furnishing inaccurate particulars of income. 3. Legal precedents and their applicability to the case. Detailed Analysis: 1. Validity of the Show Cause Notice: The primary issue in this appeal was the validity of the show cause notice issued under Section 274 read with Section 271(1)(c) of the Income-tax Act, 1961. The assessee contended that the notice did not specify the exact charge against them, i.e., whether it was for concealment of particulars of income or for furnishing inaccurate particulars of income. The notice was a standard form where the inappropriate words were not struck out, leading to ambiguity. 2. Specificity of the Charge: The assessee's counsel argued that the show cause notice's failure to specify the charge made it invalid. This argument was supported by several judicial precedents: - The Hon'ble Karnataka High Court in the case of CIT vs. SSA’s Emerald Meadows and CIT vs. Manjunatha Cotton and Ginning Factory held that a penalty imposed under Section 271(1)(c) is invalid if the show cause notice does not specify the charge. - The Hon'ble Bombay High Court in CIT vs. Shri Samson Perinchery also upheld this view, stating that a defective show cause notice without specifying the charge cannot sustain the penalty. - The ITAT in Suvaprasanna Bhattacharya vs. ACIT and the Hon'ble Calcutta High Court in Pr. CIT-19 vs. Dr. Murari Mohan Koley reiterated the necessity for the show cause notice to clearly state whether the penalty is for concealment of income or furnishing inaccurate particulars. 3. Legal Precedents and Applicability: The Department's representative cited various case laws to counter the assessee's argument, including: - The Hon'ble Calcutta High Court in Dr. Syamal Baran Mondal vs. CIT, which held that specific terms and words are not mandated for recording satisfaction about concealment of income. - The ITAT Mumbai in cases like Dhanraj Mills Pvt. Ltd. vs. ACIT and Earthmoving Equipment Service Corporation vs. DCIT, where it was held that mere mistakes in the language or non-striking of inaccurate portions do not invalidate the notice. However, the Tribunal found these cases distinguishable. For instance: - In CIT vs. Kaushalya, the Bombay High Court held that the issuance of notice is an administrative device and a mistake in the notice language does not invalidate it. However, the Tribunal noted that this view was not in the context of the specific charge required under Section 274. - The Tribunal preferred to follow the Karnataka High Court's decision in Manjunatha Cotton & Ginning Factory, which emphasized the necessity of a clear and specific charge in the notice. Conclusion: The Tribunal concluded that the show cause notice issued in this case did not specify the charge against the assessee, leading to a lack of clarity on whether the penalty was for concealment of income or furnishing inaccurate particulars. This ambiguity rendered the penalty proceedings unsustainable. Consequently, the penalty imposed by the Assessing Officer and confirmed by the CIT(A) was deleted, and the appeal of the assessee was allowed. Result: The appeal of the assessee was allowed, and the penalty imposed under Section 271(1)(c) was deleted.
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