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2019 (7) TMI 298 - AT - Income TaxLevy of penalty u/s 271(1)(c) - defective notice - HELD THAT - Levy of penalty u/s 271(1)(c) to be bad in law as it did not specify in which limb of Section 271(1)(c) the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing inaccurate particulars of income. The entire penalty proceedings are, therefore, vitiated and no penalty is leviable. On this score itself similar view is taken by in the case of CIT vs. M/s. SSAs Emerald 2015 (11) TMI 1620 - KARNATAKA HIGH COURT . This decision is confirmed by the Hon ble Supreme Court 2016 (8) TMI 1145 - SC ORDER . In this view of the matter, the orders of the authorities below are set aside and penalty is cancelled. - Decided in favour of assessee.
Issues:
Levy of penalty under section 271(1)(c) of the I.T. Act, 1961 based on TP adjustment, disallowance of depreciation, and addition of notional interest. Analysis: The appeal was filed against the Order of the Ld. CIT(A)-1, New Delhi, challenging the penalty under section 271(1)(c) of the I.T. Act, 1961 for the assessment year 2007-2008. The assessee had initially declared NIL income, which was later assessed at &8377; 9,86,84,160/- after certain additions. The penalty proceedings were initiated based on these additions, including TP adjustment, disallowance of depreciation, and addition of notional interest. The ITAT allowed the appeal partly, remitting the TP adjustment issue back to the A.O./TPO and deleting the addition on account of notional interest. However, the addition for disallowance of depreciation was not contested by the assessee, leading to the initiation of penalty proceedings. During the penalty proceedings, the A.O. levied the penalty under section 271(1)(c) of the I.T. Act, 1961 specifically on the disallowance of depreciation amounting to &8377; 26,03,665/-. The A.O. mentioned that the assessee had furnished inaccurate particulars of income and concealed the income, thereby initiating the penalty proceedings. However, it was noted that the notice issued by the A.O. did not specify under which limb of Section 271(1)(c) the penalty proceedings were initiated, i.e., for concealment of particulars of income or furnishing inaccurate particulars of income. The ITAT found this lack of specificity in the notice to be a legal flaw, following the decision of the Hon'ble Karnataka High Court in the case of CIT vs. M/s. SSAs Emerald Meadows. The ITAT referenced the confirmation of this decision by the Hon'ble Supreme Court. Consequently, the ITAT held that the penalty proceedings were vitiated due to the defective notice and canceled the penalty, setting aside the orders of the authorities below. In conclusion, the ITAT allowed the appeal of the assessee, canceling the penalty under section 271(1)(c) of the I.T. Act, 1961 based on the legal flaw in the notice issued by the A.O. Order pronounced in the open Court.
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