2019 (7) TMI 1367 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice for not mentioning the specific charge - 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.

Summary

Issues Involved:
1. Validity of penalty notices issued under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961.
2. Whether the penalty imposed under Section 271(1)(c) is maintainable when the notice does not specify the exact charge against the assessee.

Issue-wise Detailed Analysis:

1. Validity of Penalty Notices Under Section 274 r.w.s. 271(1)(c):

The Assessee contended that the penalty notices dated 30.06.2016 and 27.04.2016 issued by the Assessing Officer (AO) under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 were defective as they did not specify the specific charge, i.e., whether the penalty was for concealment of income or for furnishing inaccurate particulars of income. The Assessee relied on the decision of the Hon'ble Supreme Court in the case of SSA’s Emerald Meadows, which held that such defective notices are not maintainable.

The Department, represented by the learned Departmental Representative (DR), argued that the penalty notices were valid and the penalty imposed should be upheld. The DR cited various judgments, including those from the Hon’ble Calcutta High Court and the ITAT Mumbai, which held that the absence of a specific charge in the penalty notice does not invalidate the penalty proceedings.

The Tribunal considered the rival submissions and the written submissions filed by the DR. It noted that the Coordinate Bench of the Tribunal in the case of Jeetmal Choraria had elaborately discussed similar facts and preferred to follow the ratio laid down by the Hon’ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory. The Tribunal emphasized that when there are two views on an issue, the view favorable to the assessee should be adopted, as enunciated by the Hon’ble Supreme Court in the case of Vegetable Products Ltd.

The Tribunal observed that the penalty notices issued in the present case did not specify the charge against the assessee, making them defective. The Tribunal also noted that the Hon’ble Supreme Court had dismissed the Special Leave Petition (SLP) filed by the Revenue against the judgment in the case of SSA’s Emerald Meadows, thereby upholding the principle that defective notices are not maintainable.

2. Maintainability of Penalty Imposed Under Section 271(1)(c):

The Tribunal found that the penalty notices issued to the assessee did not specify the charge of offense committed by the assessee, i.e., whether it was for concealing particulars of income or for furnishing inaccurate particulars of income. Consequently, the notices were held to be defective.

The Tribunal further noted that the Hon’ble Supreme Court had dismissed the SLP in the case of Sundaram Finance Ltd., where the issue was similar. However, the Tribunal emphasized that when there are conflicting judgments from the Hon’ble Supreme Court, the view favorable to the assessee should be adopted, as per the principle established in the case of Vegetable Products Ltd.

Based on these observations, the Tribunal set aside the order of the Commissioner of Income Tax (Appeals) and canceled the penalty imposed by the AO under Section 271(1)(c) for the assessment years 2012-13 and 2013-14.

Conclusion:

The Tribunal allowed the appeals filed by the assessee, holding that the penalty notices issued under Section 274 read with Section 271(1)(c) were defective for not specifying the exact charge. Consequently, the penalty imposed under Section 271(1)(c) was canceled. The Tribunal's decision was based on the principle that when there are two views on an issue, the view favorable to the assessee should be adopted.