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2020 (6) TMI 175 - AT - Income TaxPenalty u/s. 271(1 )(c) - Defective notice - non specification of charge - no mention of specific fault/charge as to whether assessee had concealed the particulars of his income or furnished inaccurate particulars of such income' - HELD THAT - We note that the AO has not stricken out the irrelevant portion of the fault/charge which would have spelt out the specific fault/charge against the assessee. According to the Ld. Counsel, since the proposed notice itself is a defective, all subsequent proceedings are bad in law and the penalty imposed by the AO u/s. 271(1)(c) of the Act and confirmed by the Ld. CIT(A) should be cancelled.' As decided in JEETMAL CHORARIA VERSUS A.C.I.T., CIRCLE-43, 2017 (12) TMI 883 - ITAT, KOLKATA show cause notice u/s 274 of the Act does not strike out the inappropriate words.show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. In these circumstances, we are of the view that imposition of penalty cannot be sustained. - Decided in favour of assessee.
Issues Involved:
1. Validity of the penalty order under Section 271(1)(c) of the Income-tax Act, 1961. 2. Specificity of the charge in the show cause notice under Section 274 of the Act. Detailed Analysis: 1. Validity of the penalty order under Section 271(1)(c) of the Income-tax Act, 1961: The assessee challenged the order of the Assessing Officer (AO) imposing a penalty under Section 271(1)(c) of the Income-tax Act, 1961, for the Assessment Year (AY) 2014-15. The AO issued a notice to the assessee for initiating penalty proceedings for "concealment of income/furnishing inaccurate particulars of income." The AO concluded that the assessee committed both faults and levied a penalty of ?7,65,378/-. The Tribunal noted that the AO's action of not striking down one of the faults (either concealment of income or furnishing inaccurate particulars) was bad in law. The Tribunal emphasized that the AO must clearly specify the fault for which the penalty is being proposed, as supported by the decisions of higher courts. 2. Specificity of the charge in the show cause notice under Section 274 of the Act: The Tribunal highlighted that it has consistently held that the AO must specify whether the penalty is being imposed for "concealment of particulars of income" or "furnishing inaccurate particulars of income." The AO's failure to strike out the inapplicable fault renders the notice defective. This view is supported by the Hon’ble Karnataka High Court in the case of CIT vs. SSA’s Emerald Meadows and CIT vs. Manjunatha Cotton and Ginning Factory, where the courts held that imposing a penalty based on a defective show cause notice is invalid. The Hon’ble Supreme Court also dismissed the revenue's appeal against this view. The Tribunal also referred to the decisions of the Hon’ble Bombay High Court and ITAT in similar cases, which supported the requirement for specificity in the show cause notice. Supporting Case Laws: The Tribunal discussed various case laws cited by the Departmental Representative (DR) but found them not applicable to the present case. The Tribunal referred to its decision in the case of Jeetmal Choraria vs. ACIT, where it was held that the defect in the show cause notice cannot be cured by the assessment order. The Tribunal preferred to follow the view of the Hon’ble Karnataka High Court over the Hon’ble Bombay High Court, as the former is more favorable to the assessee. Conclusion: The Tribunal concluded that the imposition of the penalty and its confirmation by the Commissioner of Income Tax (Appeals) [CIT(A)] could not be sustained due to the defective show cause notice. The penalty was directed to be canceled, and the appeal of the assessee was allowed. Final Decision: The appeal of the assessee was allowed, and the penalty imposed under Section 271(1)(c) was deleted. The order was pronounced in the open court on 5th June 2020.
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