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2019 (5) TMI 286 - AT - Income TaxPenalty u/s 271(1)(c ) - defective notice issued u/s. 274 - non specification of charge - HELD THAT - We find that the notice dt. 19.03.2013 issued u/s 274 r.w.s 271 of the Act, copy of the same is on record, does not specify the charge of offence committed by the assessee viz whether had concealed the particulars of income or had furnished inaccurate particulars of income. Hence the said notice is to be held as defective. See JEETMAL CHORARIA VERSUS A.C.I.T., CIRCLE-43, 2017 (12) TMI 883 - ITAT, KOLKATA and M/S MANJUNATHA COTTON AND GINNING FACTORY OTHS., M/S. V.S. LAD SONS, 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. Defective notice under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961. Detailed Analysis: Validity of the Penalty Imposed Under Section 271(1)(c) of the Income Tax Act, 1961: The primary issue in these appeals is whether the penalty imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961, is valid. The assessee argued that the penalty was based on a defective notice issued under Section 274 read with Section 271(1)(c) of the Act. The assessee relied on the decision of the Hon'ble Supreme Court in the case of SSA’s Emerald Meadows, which held that a defective notice cannot sustain the imposition of a penalty. The Department, on the other hand, argued that the penalty was valid and relied on various judgments, including those from the Hon'ble Calcutta High Court and the Hon'ble Bombay High Court, which supported the view that a mere mistake in the language of the notice or non-striking of the inaccurate portion cannot invalidate the notice. Defective Notice Under Section 274 Read with Section 271(1)(c) of the Income Tax Act, 1961: The assessee contended that the statutory notice dated 19.03.2013 issued under Section 274 read with Section 271 of the Act was defective. The notice did not specify whether the penalty was for "concealment of income" or for "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. The Department countered this by citing various judgments, including those from the Hon'ble Bombay High Court and the Hon'ble Patna High Court, which held that the issuance of notice is an administrative device for informing the assessee about the proposal to levy penalty. According to these judgments, a mere mistake in the language used or non-striking of the inaccurate portion cannot by itself invalidate the notice. Tribunal's Findings: The Tribunal considered the rival submissions and the written submissions filed by the Department. It noted that the Coordinate Bench of the Tribunal in the case of Jeetmal Choraria had elaborately discussed similar issues and preferred to follow the ratio laid down by the Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory, supported by the established principle enunciated by the Hon'ble Supreme Court in the case of Vegetable Products Ltd. The Tribunal found that the notice dated 19.03.2013 did not specify the charge of the offense committed by the assessee, i.e., whether it was for "concealing particulars of income" or "furnishing inaccurate particulars of income." Hence, the notice was held to be defective. The Tribunal also noted that the Revenue's Special Leave Petition (SLP) against the judgment in SSA’s Emerald Meadows was dismissed by the Hon'ble Supreme Court, thereby upholding the view that a defective notice cannot sustain the imposition of a penalty. Conclusion: Respectfully following the judicial precedents, the Tribunal canceled the penalties levied by the AO under Section 271(1)(c) of the Act for the Assessment Years 2009-10, 2010-11, and 2011-12. The grounds raised by the assessee in all three appeals were allowed, and the appeals were decided in favor of the assessee. Result: The three appeals of the assessee were allowed, and the penalties imposed under Section 271(1)(c) of the Income Tax Act, 1961, were canceled. Order pronounced in the open court on 30.04.2019.
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