2019 (2) TMI 1073 - AT - Income Tax

Penalty u/s 271(1)(c) - non specification of charge - defective notice - non strike of the inappropriate words - HELD THAT - Notice issued by the Assessing Officer under Section 274 read with Section 271(l)(c) to be bad in law as it did not specify which limb of Section 271(l)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013 (7) TMI 620 - KARNATAKA HIGH COURT) - Decided in favour of assessee.

Summary

Issues:
Challenge to penalty imposed under section 271(1)(c) based on defective notice.

Analysis:
The appeal was against the confirmation of a penalty of ?3,24,159 imposed under section 271(1)(c) of the Income Tax Act, 1961. The assessee, engaged in trading hosiery goods, had filed a return declaring a total income of ?3,03,080. The AO determined the total income at ?14,14,441, including an addition of ?9,80,000 for undisclosed investment in mutual funds. Penalty proceedings were initiated, and the AO imposed the penalty since the explanation provided by the assessee was deemed unacceptable. The CIT(A) upheld the penalty, leading to the appeal before the Tribunal.

During the hearing, the assessee's counsel challenged the penalty on the grounds of a defective notice issued by the AO. The counsel argued that the notice did not clearly specify whether the penalty was for concealing income particulars or furnishing inaccurate particulars. Citing a decision by a coordinate bench in a similar case, the counsel contended that the notice's defective nature rendered the penalty unsustainable. The Tribunal referred to the decision mentioned, which highlighted the importance of clarity in the notice for penalty proceedings. It was noted that the notice in the present case did not specify the charge clearly, leading to the conclusion that the penalty imposition could not be sustained.

The Tribunal found the decision from the coordinate bench applicable to the current case, with no opposition from the Revenue's representative. Consequently, the penalty imposed by the AO and confirmed by the CIT(A) was canceled, and the appeal of the assessee was allowed. The Tribunal pronounced the order in the open court on 15th February 2019.