2019 (2) TMI 1325 - AT - Income Tax

Penalty u/s 271(1)(c) - non specification of charge - defective notice - HELD THAT - The 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. In these circumstances, we are of the view that imposition of penalty cannot be sustained. The plea of the Id. Counsel for 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 . See COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013 (7) TMI 620 - KARNATAKA HIGH COURT) - Decided in favour of assessee.

Summary

Issues Involved:
1. Delay in filing appeals.
2. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
3. Validity of show cause notice under Section 274 of the Income Tax Act, 1961.

Detailed Analysis:

1. Delay in Filing Appeals:
The assessee's appeals for the assessment year 2014-15 were delayed by 107 days. The delay was attributed to ill health, supported by a medical certificate. The Revenue did not dispute this claim. Consequently, the Tribunal condoned the delay, stating, "We therefore condone the impugned identical delay of 107 days’ in filing of both these appeals."

2. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The lower authorities imposed penalties of ?1 lac and ?6,63,297 under Section 271(1)(c) of the Act. The penalties were based on the assessee's failure to correctly report income and expenses. The Tribunal considered a similar case (Jeetmal Choraria vs. ACIT) where the penalty was deleted due to the notice not specifying whether it was for "concealment of income" or "furnishing inaccurate particulars of income." The Tribunal noted, "The initiation of penalty proceedings was not made with reference to any specific item of addition."

3. Validity of Show Cause Notice under Section 274 of the Income Tax Act, 1961:
The Tribunal scrutinized the show cause notice issued under Section 274, which did not specify the exact charge against the assessee. The notice failed to strike out the irrelevant portion, making it unclear whether the penalty was for "concealment of particulars of income" or "furnishing inaccurate particulars of income." The Tribunal referenced multiple judicial precedents, including the Karnataka High Court's decision in CIT vs. SSA's Emerald Meadows, which held that such ambiguity invalidates the penalty.

The Tribunal observed, "The 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." This ambiguity led to the conclusion that the penalty could not be sustained, and it was directed to be canceled.

Conclusion:
The Tribunal allowed the assessee's appeals, quashing the penalties imposed. The decision was pronounced in open court on 20/02/2019. The Tribunal's order emphasized the requirement for clarity in penalty notices under Section 274, aligning with judicial precedents favoring the assessee when such clarity is absent.