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2019 (4) TMI 208 - AT - Income TaxPenalty u/s 271(1)(c) - defective notice issued u/s. 274 - non specification of charge - non of strike out the inappropriate words in notice - HELD THAT - 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. See COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013 (7) TMI 620 - KARNATAKA HIGH COURT) - Decided in favour of assessee.
Issues Involved:
1. Validity of the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961. 2. Defectiveness of the statutory notice issued under Section 274 read with Section 271 of the Act. 3. Application of judicial precedents and principles laid down by various High Courts and the Supreme Court. Detailed Analysis: 1. Validity of the Penalty Imposed under Section 271(1)(c): The core issue in this case revolves around the validity of the penalty imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee argued that the penalty imposed was based on a defective notice issued under Section 274 read with Section 271(1)(c) of the Act. The assessee's representative cited the decision of the Hon’ble Supreme Court in the case of SSA’s Emerald Meadows, asserting that the imposition of penalty on a defective notice is not maintainable. 2. Defectiveness of the Statutory Notice: The assessee contended that the statutory notice dated 03-12-2012 issued by the Income Tax Officer (ITO) under Section 274 read with Section 271 of the Act was defective. The notice did not specify the exact charge against the assessee, i.e., whether the penalty was for concealing particulars of income or furnishing inaccurate particulars of income. This argument was supported by the decision of the Hon’ble Karnataka High Court in the case of CIT vs SSA’s Emerald Meadows, which was affirmed by the Hon’ble Supreme Court by dismissal of the Special Leave Petition (SLP) filed by the Revenue. 3. Application of Judicial Precedents: The Department's Representative (DR) relied on various judicial precedents to support the validity of the penalty. These included: - The judgment of the Hon’ble Calcutta High Court in Dr. Syamal Baran Mondal vs. CIT, which stated that Section 271 does not mandate specific terms for recording satisfaction about concealment of income. - The ITAT Mumbai's decision in Trishul Enterprises vs. DCIT, which held that mere non-striking off specific parts of the notice does not invalidate it. - The Hon’ble Bombay High Court’s decision in CIT vs. Smt. Kaushalya, which emphasized that the issuance of notice is an administrative device and a mistake in the notice language does not invalidate the penalty proceedings. However, the Tribunal preferred to follow the principle laid down by the Hon’ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory, which ruled that a notice under Section 274 must specify the charge against the assessee. The Tribunal noted that the Hon’ble Supreme Court in the case of Vegetable Products Ltd. established that when two views are possible, the one favorable to the assessee should be adopted. Conclusion: The Tribunal found that the notice dated 03-12-2012 issued under Section 274 read with Section 271 of the Act did not specify the charge of the offence committed by the assessee, rendering it defective. The Tribunal also noted that the Revenue's SLP against this judgment was dismissed by the Hon’ble Supreme Court. Respecting the judicial precedents, the Tribunal concluded that the imposition of the penalty could not be sustained due to the defective notice. Consequently, the penalty of ?65,180/- levied by the AO and confirmed by the CIT(A) was cancelled, and the assessee's appeal was allowed. Order Pronounced: The appeal of the assessee was allowed, and the order was pronounced in the open court on 29.03.2019.
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