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2019 (4) TMI 680 - AT - Income TaxPenalty u/s 271(1)(c) - non specification of charge - defective notice - 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) 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.
Issues Involved:
1. Validity of the penalty proceedings initiated under Section 271(1)(c) of the Income Tax Act, 1961. 2. Specificity of the show cause notice issued for penalty. Detailed Analysis: 1. Validity of the Penalty Proceedings Initiated Under Section 271(1)(c): The core issue in this appeal revolves around the validity of the penalty proceedings initiated under Section 271(1)(c) of the Income Tax Act, 1961. The Assessing Officer (AO) had imposed a penalty of ?13,74,146/- on the assessee for alleged concealment of income and furnishing of inaccurate particulars. The AO observed that the assessee had not substantiated the explanations provided and concluded that the additions made were due to gross and willful neglect by the assessee. The assessee contended that the penalty proceedings were invalid because the AO did not specify whether the penalty was for concealment of income or for furnishing inaccurate particulars. The assessee argued that this lack of specificity rendered the penalty proceedings void, citing precedents from the Karnataka High Court in the case of CIT & Ors. Vs. M/s Manjunatha Cotton and Ginning Factory & Ors. (2013) 359 ITR 565 and the Supreme Court in CIT & Anr. Vs. M/s SSA’s Emerald Meadows. The Tribunal examined the show cause notice dated 28.03.2016 and found that it did not clearly specify the charge under which the penalty was being levied. The Tribunal noted that the AO's failure to clearly state whether the penalty was for concealment of income or for furnishing inaccurate particulars was contrary to the provisions of law and the spirit of the decisions of the Hon’ble Supreme Court and High Court. 2. Specificity of the Show Cause Notice Issued for Penalty: The Tribunal emphasized the importance of specificity in the show cause notice issued under Section 271(1)(c). The Tribunal referenced several judicial precedents to support its view that a penalty notice must clearly specify the charge against the assessee. The Tribunal cited the Karnataka High Court's decision in CIT & Anr. Vs. M/s SSA’s Emerald Meadows, where the court held that a notice under Section 274 read with Section 271(1)(c) must specify which limb of Section 271(1)(c) the penalty proceedings were initiated under—whether for concealment of income or for furnishing inaccurate particulars of income. The Tribunal also referenced its own decisions in similar cases, such as Ashok Kumar Chordia vs. DCIT and Rajender Jain vs. ACIT, where penalties were deleted due to the AO's failure to specify the charge in the penalty notice. In these cases, the Tribunal held that the penalty was not sustainable because the AO had not recorded a clear finding on whether the assessee was guilty of concealment of income or furnishing inaccurate particulars. In conclusion, the Tribunal set aside the orders of the revenue authorities and cancelled the penalty, allowing the appeal in favor of the assessee. The Tribunal's decision was based on the principle that a penalty notice must clearly specify the charge against the assessee to be valid. Conclusion: The Tribunal allowed the appeal filed by the assessee, concluding that the penalty proceedings initiated under Section 271(1)(c) were invalid due to the lack of specificity in the show cause notice. The Tribunal's decision was grounded in established judicial precedents that emphasize the necessity for clear and specific charges in penalty notices. The penalty of ?13,74,146/- imposed by the AO was thus cancelled.
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