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2019 (5) TMI 997 - AT - Income TaxPenalty levied u/s. 271(1)(c) - addition on account of excess deduction claimed u/s. 36(1)(viia)(a) Non specification of charge - defective notice - HELD THAT - Following the decision of Coordinate Bench of this Tribunal in the case of Jeetmal Choraria Vs. ACIT 2017 (12) TMI 883 - ITAT, KOLKATA where it is held that the show cause notice issued u/s 274 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 does not strike out the inappropriate words - thus in these circumstances, we are of the view that imposition of penalty cannot be sustained - Decided in favor of assessee.
Issues Involved:
1. Validity of the penalty notice issued under Section 274 read with Section 271 of the Income-tax Act, 1961. 2. Specificity of the charge in the penalty notice – whether it pertains to concealment of income or furnishing inaccurate particulars of income. 3. Legal precedents and judicial interpretations regarding defective penalty notices. Issue-wise Detailed Analysis: 1. Validity of the Penalty Notice Issued Under Section 274 Read with Section 271 of the Income-tax Act, 1961: The Revenue challenged the order of the Commissioner of Income Tax (Appeals) [CIT(A)] that deleted the penalty imposed under Section 271(1)(c) of the Act. The penalty was initially imposed by the Assessing Officer (AO) based on an assessment determining the total income at ?2,29,85,380 against the returned income of Nil, attributing the addition to excess deduction claimed under Section 36(1)(viia)(a) of the Act. The AO considered this as suppressed and undisclosed income, leading to the initiation of penalty proceedings under Section 271(1)(c) by invoking notice under Section 274 read with Section 271 of the Act. 2. Specificity of the Charge in the Penalty Notice: The penalty notice issued by the AO did not specify whether the charge against the assessee was for "concealment of particulars of income" or "furnishing inaccurate particulars of income." The notice contained a generic statement: "you have concealed the particulars or furnished inaccurate particulars of such income." This lack of specificity was highlighted as a critical issue. The assessee's counsel referenced the decision of the Karnataka High Court in CIT vs. SSA’s Emerald Meadows, which followed the precedent set in CIT vs. Manjunatha Cotton and Ginning Factory. The courts held that a penalty notice must clearly specify the charge, failing which it is invalid. The Supreme Court also upheld this view by dismissing the Special Leave Petition (SLP) against the Karnataka High Court's decision. 3. Legal Precedents and Judicial Interpretations Regarding Defective Penalty Notices: The Revenue's representative opposed the assessee's arguments by citing various case laws. However, the Tribunal noted that the decisions cited by the Revenue, including those from the Calcutta High Court and Mumbai ITAT, did not specifically address the issue of defective penalty notices in the context of Section 274. The Tribunal referred to a detailed analysis in the case of Jeetmal Choraria vs. ACIT, which discussed the relevance of specific charges in penalty notices. The Tribunal emphasized that the principle of natural justice requires clear communication of charges to the assessee. The Tribunal also reviewed conflicting judicial views, noting that while the Bombay High Court in CIT vs. Kaushalya and the Patna High Court in CIT vs. Mithila Motors held that minor defects in notices do not invalidate penalty proceedings, the Karnataka High Court's view in Manjunatha Cotton & Ginning Factory, which requires specific charges in penalty notices, should be preferred. This preference is based on the legal principle that when two views exist, the one favorable to the assessee should be adopted. Conclusion: The Tribunal concluded that the penalty notice issued to the assessee was invalid due to the lack of specificity regarding the charge. It followed the Karnataka High Court's view that such defects render the notice and subsequent penalty proceedings void. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the penalty and dismissed the Revenue's appeal. Order Pronouncement: The appeal of the Revenue was dismissed, and the order was pronounced in the open court on 9th May 2019.
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