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2018 (12) TMI 1386 - AT - Income TaxPenalty u/s 271(1)(c) - defective notice - non striking of the irrelevant clauses in notice - non deleting of inappropriate words - Held that - the standard proforma of notice under section 274 of the Act without striking of the irrelevant clauses would lead to an inference of non-application of mind by the Assessing Officer. The Hon ble Supreme Court in the case of Dilip N. Shroff vs. JCIT 2007 (5) TMI 198 - SUPREME COURT has also noticed that where the Assessing Officer issues notice under section 274 of the Act in the standard proforma and the inappropriate words are not deleted, the same would postulate that the Assessing Officer was not sure as to whether he was to proceed on the basis that the assessee had concealed the particulars of his income or furnished inaccurate particulars of income. Accordingly levy of penalty suffers from non-application of mind. In the background of the aforesaid legal position and, having regard to the manner in which the Assessing Officer has issued notice under section 274 r.w.s. 271(1)(c) of the Act dated 15.1.2014 without striking off the irrelevant words, the penalty proceedings show a non-application of mind by the Assessing Officer and is, thus, unsustainable. Also see COMMISSIONER OF INCOME TAX & ANR. VERSUS M/S SSA S EMERALD MEADOWS 2016 (8) TMI 1145 - SUPREME COURT - decided in favour of assessee.
Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act. Analysis: Issue 1: Validity of Penalty Notice The appeal was against the Commissioner of Income Tax (Appeals)'s order confirming the penalty under section 271(1)(c) of the Act. The main contention was whether the penalty notice adequately specified the grounds for initiating penalty proceedings. The Assessing Officer's notice did not explicitly mention whether the penalty was for concealing income particulars or furnishing inaccurate income particulars. The appellant argued that this lack of clarity made the penalty order liable for cancellation, citing a Supreme Court judgment. The Departmental Representative, however, relied on various precedents to support the justification for penalty proceedings in cases of ex-facie bogus claims in the income tax return. Issue 2: Judicial Interpretation The Tribunal examined the facts, noting that the Assessing Officer had levied a penalty of Rs. 8,36,592 without specifying the nature of the offense in the penalty notice. Reference was made to a judgment by the Hon'ble Apex Court in a similar case, where the Tribunal's decision in favor of the assessee was upheld. The Tribunal emphasized the importance of clearly specifying the grounds for penalty under section 271(1)(c) to afford the assessee a fair opportunity to respond. The Tribunal dismissed the appeal, considering the matter covered by a Division Bench judgment. Issue 3: Application of Legal Principles The Tribunal reiterated the legal position that penalty under section 271(1)(c) is attracted when there is concealment of income particulars or furnishing inaccurate income particulars. It highlighted the significance of clearly indicating the specific charge to enable the assessee to respond appropriately. Citing the Karnataka High Court's observation and the Supreme Court's stance on non-application of mind in issuing penalty notices, the Tribunal concluded that the penalty proceedings lacked proper application of mind by the Assessing Officer. The Tribunal, following the precedent set by the Supreme Court in a similar case, canceled the penalty levied by the Assessing Officer. In conclusion, the Tribunal allowed the appeal, canceling the penalty imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act. The decision was based on the failure to specify the grounds for penalty adequately in the notice, in line with legal principles and judicial interpretations.
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