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2019 (3) TMI 260 - AT - Income TaxPenalty u/s.271(1)(c) - non deceleration of LTCG on sale of property - Whether Assessee is guilty of having furnished inaccurate particulars of income or of having concealed particulars of such income ? - defective notice - non specification of charge - HELD THAT - Imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. SEE COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013 (7) TMI 620 - KARNATAKA HIGH COURT) 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. - Decided in favour of assessee.
Issues Involved:
1. Validity of the notice issued under Section 274 of the Income Tax Act, 1961. 2. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961 for either "concealing particulars of income" or "furnishing inaccurate particulars of income". Detailed Analysis: Issue 1: Validity of the Notice Issued Under Section 274 The primary contention of the Assessee was that the notice issued before imposing penalty was not in accordance with the law. Specifically, the show cause notice under Section 274 did not specify whether the penalty was for "furnishing inaccurate particulars of income" or "concealing particulars of income". This lack of specificity was argued to be fatal to the penalty proceedings. The Assessee cited the decision of the Karnataka High Court in CIT Vs. Manjunatha Cotton & Ginning Factory, where it was held that a show cause notice must clearly state the exact charge by striking out the irrelevant portion. The Tribunal agreed with this contention, noting that the show cause notice in the present case did not strike off the irrelevant portion, thereby failing to meet the legal requirements as laid down by the Karnataka High Court. Issue 2: Imposition of Penalty Under Section 271(1)(c) The Tribunal examined the imposition of penalty under Section 271(1)(c) in light of the defective notice. The Department's representative relied on various decisions, including those of the ITAT Bangalore Bench and the Mumbai ITAT, which took a contrary view regarding the necessity of specifying the charge in the notice. However, the Tribunal found these decisions either not applicable or not binding, as they were contrary to the jurisdictional High Court's ruling in Manjunatha Cotton & Ginning Factory. The Tribunal reiterated the principles laid down by the Karnataka High Court, emphasizing that: - The notice under Section 274 must specifically state the grounds for penalty. - The practice of using a printed form without striking out irrelevant portions does not satisfy legal requirements. - Penalty proceedings initiated on one ground cannot result in a penalty for another ground. - The Assessee must be clearly informed of the specific charge to ensure fair opportunity to contest the proceedings. The Tribunal concluded that the show cause notice in the present case was defective and did not meet the legal standards required for imposing a penalty under Section 271(1)(c). Consequently, the imposition of penalty was deemed unsustainable. Conclusion: The Tribunal allowed the Assessee's appeal, holding that the imposition of penalty under Section 271(1)(c) could not be sustained due to the defective notice under Section 274. The penalty was directed to be cancelled, and the appeal was allowed. The judgment underscores the importance of specificity and clarity in penalty notices to uphold the principles of natural justice. Pronouncement: The judgment was pronounced in the open court on February 27, 2019.
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