2018 (11) TMI 260 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice - non specification of charge - Held that - We find that the notice dt. 15-12-2010 issued u/s 271(1)(c) of the Act, copy of the same is 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. Validity of the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961.
2. Defectiveness of the statutory notice issued under Section 271(1)(c).
3. Jurisdictional High Court precedents and their applicability.
4. Supreme Court's stance on similar cases.

Detailed Analysis:

1. Validity of the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961:
The core issue in this appeal was the confirmation of the penalty imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961. The assessee challenged the penalty, asserting it was based on a defective notice. The AO had imposed the penalty for either concealing particulars of income or furnishing inaccurate particulars of income, but the notice did not specify which.

2. Defectiveness of the statutory notice issued under Section 271(1)(c):
The assessee argued that the notice issued on 15-12-2010 was defective as it did not clearly specify the charge, i.e., whether the penalty was for concealing income or furnishing inaccurate particulars. This argument was supported by the decision of the Hon’ble Karnataka High Court in the case of CIT vs SSA’s Emerald Meadows, which was affirmed by the Hon’ble Supreme Court. The Tribunal agreed with this viewpoint, noting that the notice was ambiguous and thus defective.

3. Jurisdictional High Court precedents and their applicability:
The Revenue relied on several precedents from the Calcutta High Court, Bombay High Court, and Patna High Court, which stated that a mere mistake in the language of the notice or non-striking of the inaccurate portion cannot invalidate the notice. These included:
- Dr. Syamal Baran Mondal Vs. CIT (Calcutta High Court)
- CIT Vs. Kaushalya (Bombay High Court)
- CIT v. Mithila Motor’s (Patna High Court)

However, the Tribunal preferred to follow the Karnataka High Court's decision in the case of Manjunatha Cotton & Ginning Factory, which emphasized the necessity for the notice to clearly specify the charge. The Tribunal reasoned that where two views are available, the one favorable to the assessee should be followed, as established by the Hon’ble Supreme Court in the case of Vegetable Products Ltd.

4. Supreme Court's stance on similar cases:
The Tribunal noted that the Revenue's Special Leave Petition (SLP) against the Karnataka High Court's decision in SSA’s Emerald Meadows was dismissed by the Supreme Court, thereby upholding the principle that a defective notice under Section 271(1)(c) cannot sustain a penalty.

Conclusion:
The Tribunal concluded that the penalty notice issued to the assessee was defective as it did not specify the exact charge. Following the principle laid down by the Karnataka High Court and endorsed by the Supreme Court, the Tribunal held that the imposition of the penalty could not be sustained. Consequently, the penalty of ?6,18,001/- was canceled, and the appeal of the assessee was allowed.

Order Pronounced:
The appeal of the assessee was allowed, and the order was pronounced in the open court on 02.11.2018.