2020 (6) TMI 605 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice - non specification of charge - HELD THAT - In CIT vs Manjunatha Cotton and Ginning factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT took a view that imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. As observed that the 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. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. The plea of the ld. Counsel for the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. Imposition of penalty in the present case cannot be sustained - Decided in favour of assessee.

Summary

Issues:
Appeal against penalty imposition under section 271(1)(c) of the Income Tax Act, 1961 for non-disclosure of full salary received from multiple employers.

Analysis:
1. The Assessee appealed against the penalty imposed by the AO under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2011-12, challenging the confirmation by CIT(A).
2. The penalty was initiated due to the Assessee's failure to declare the full salary received from two companies while filing the return of income, resulting in a total salary of ?19,78,447 instead of the declared ?7,84,124.
3. The Assessee contended that the non-disclosure was unintentional, a genuine mistake made by the representative who filed the return, and corrected during assessment without any objection, asserting it was not a case of concealment or furnishing inaccurate particulars but a bona fide error.
4. The AO and CIT(A) upheld the penalty imposition, leading to the Assessee's appeal to the Tribunal.
5. The Assessee argued that the show cause notice issued by the AO did not specify whether the penalty was for furnishing inaccurate particulars of income or concealing income, citing the Hon'ble Karnataka High Court's decision in CIT vs. Manjunatha Cotton & Ginning Factory.
6. The Tribunal concurred, emphasizing that the show cause notice failed to specify the charge against the Assessee, as required by law, following precedents and holding that the penalty imposition was unsustainable due to the notice's deficiencies.
7. Reference was made to the Hon'ble Supreme Court's decision in Amitabh Bachchan case to distinguish proceedings under section 263 from penalty proceedings under section 271(1)(c).
8. Ultimately, the Tribunal ruled in favor of the Assessee, holding that the penalty imposition was invalid due to the defective show cause notice and directed its deletion, allowing the appeal.

This detailed analysis covers the issues involved in the legal judgment, highlighting the key arguments, legal precedents, and the final decision of the Tribunal.