2019 (3) TMI 1460 - AT - Income Tax

Penalty u/s 271(1)(c) - non specification of charge - defective notice as it does not spell out the grounds on which the penalty is sought to be imposed - HELD THAT - As decided in COMMISSIONER OF INCOME TAX, BANGALORE AND THE INCOME TAX OFFICER, WARD-6 (3) , BANGALORE VERSUS M/S SSA S EMERALD MEADOWS 2015 (11) TMI 1620 - KARNATAKA HIGH COURT as relying on M/S MANJUNATHA COTTON AND GINNING FACTORY & OTHS., M/S. V.S. LAD & SONS, 2013 (7) TMI 620 - KARNATAKA HIGH COURT 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. As observed 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. - Decided in favour of assessee

Summary

Issues:
- Appeal filed against order dated 18/03/2014 by CIT(A)-XXV, New Delhi for Assessment Year 1995-96.
- Dispute over penalties imposed under section 271(1)(c) of the Act.
- Lack of specificity in the notice issued under sections 274 and 271(1)(c) regarding penalty proceedings initiation.

Analysis:
- The appeals involved challenges to penalties imposed under section 271(1)(c) of the Act for alleged concealment of income. The appellant contested the penalties related to various expenditures and interest payments. The CIT(A) upheld the penalties, leading to further appeals.
- The core issue revolved around the lack of specificity in the notice issued under sections 274 and 271(1)(c) regarding the initiation of penalty proceedings. The appellant argued that the inappropriate words in the notice were not struck off, creating ambiguity about the exact charges against them.
- The Tribunal examined the facts and circumstances, emphasizing that the appellant had provided all details during assessment proceedings, indicating no concealment. Citing precedents, the Tribunal highlighted the necessity for clear charges in penalty notices, as seen in the case of Sahiwal Investment & Trading Co. vs. ITO.
- Relying on legal interpretations, the Tribunal concluded that the penalty notice's lack of clarity rendered the penalty unsustainable. Despite arguments from the Revenue, the Tribunal favored the view favorable to the assessee, following the principle of resolving doubts in favor of the taxpayer.
- Ultimately, the Tribunal allowed the appeal of the assessee, directing the cancellation of the penalty imposed under section 271(1)(c). The appeal of the Revenue was dismissed, emphasizing the importance of clear and specific charges in penalty notices to uphold the validity of penalty proceedings.

This comprehensive analysis highlights the legal intricacies and precedents considered in the judgment, focusing on the lack of specificity in penalty notices and the consequent impact on the sustainability of penalties imposed under section 271(1)(c) of the Act.