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2019 (4) TMI 1299 - AT - Income TaxLevy of penalty 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. 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:
- Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2014-15. - Validity of notice issued for initiation of penalty proceedings. - Proper recording of satisfaction in passing assessment order. Analysis: 1. Levy of Penalty under Section 271(1)(c): The appeal was against the order of CIT(A)-3, Bangalore, upholding the levy of penalty under section 271(1)(c) of the Income Tax Act for Assessment Year 2014-15. The AO had initiated penalty proceedings simultaneously with the assessment, and after considering the assessee's replies, levied a penalty which was partly sustained by CIT(A)-3. The appellant challenged the validity of the penalty, arguing that no default attracting section 271(1)(c) had been committed. The Tribunal examined the notice issued by the AO for the penalty, which did not specify whether it was for concealment of income or furnishing inaccurate particulars. Citing the decision of the Hon'ble Karnataka High Court, the Tribunal held that such a notice was invalid, and consequently, the penalty proceedings and orders were also invalid. Therefore, the penalty levied under section 271(1)(c) for the Assessment Year 2014-15 was canceled. 2. Validity of Notice for Initiation of Penalty Proceedings: The Tribunal carefully considered the notice issued by the AO for initiating penalty proceedings under section 271(1)(c) for the Assessment Year 2014-15. It was observed that the notice failed to specify the nature of default, i.e., whether it was for concealment of income or furnishing inaccurate particulars. Relying on the judgment of the Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory, the Tribunal emphasized that a notice lacking such specificity renders the penalty proceedings and resulting orders invalid. The Tribunal's decision was consistent with the legal principles outlined in the judgment, leading to the cancellation of the penalty imposed in this case. 3. Proper Recording of Satisfaction in Passing Assessment Order: The appellant contended that the AO had erred in passing the impugned order, and the CIT(A) had also erred in partially confirming it. The Tribunal, however, focused on the specific issue of the defective notice for penalty proceedings, as it was a crucial factor in determining the validity of the penalty imposed under section 271(1)(c). By following the legal precedents set by the Hon'ble Karnataka High Court, the Tribunal concluded that the notice issued by the AO was deficient, leading to the cancellation of the penalty. This analysis overshadowed the other contentions raised by the appellant regarding the assessment order, as the primary issue of notice validity was deemed sufficient to quash the penalty. In conclusion, the Tribunal allowed the assessee's appeal for the Assessment Year 2014-15 based on the invalidity of the notice issued for initiating penalty proceedings under section 271(1)(c). The detailed analysis of the notice's deficiencies and the legal principles governing such notices formed the basis for canceling the penalty, rendering other grounds of appeal on the merits of the penalty levy as academic and unnecessary for adjudication.
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