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2020 (10) TMI 137 - AT - Income TaxPenalty u/s 271 - Defective notice - whether the assessee is guilty of concealment of income or of furnishing inaccurate particulars of income? - HELD THAT - Once the notice issued by the AO under section 274 r.w.s. 271 of the Act is found to be defective because there is no specific allegation made by the AO regarding this aspect as to whether the assessee is guilty of concealment of income or guilty of furnishing inaccurate particulars of income, the said notice cannot be accepted as valid even if such specific allegation is made by the AO in the Assessment Order. In our considered opinion, the AO has to make a specific allegation in the Assessment Order also and that will satisfy this requirement that the AO was satisfied about reason of initiating penalty proceedings but even after that, the allegation should be specific and clear in the penalty notice also because the assessee has to submit reply in the course of penalty proceedings on the basis of allegation in the penalty notice only and not on the basis of allegation in the Assessment Order and therefore, even if specific allegation is made by the AO in the Assessment Order, the defect in the penalty notice does not get rectified even under section 292B Rectification of mistake - HELD THAT - In the present case, this is not the case of the Revenue that any judgment of Hon ble jurisdictional High Court was not considered by the Tribunal in the present case. In fact, this is admitted position that the Tribunal order is following the binding judgment of Hon ble Karnataka High Court rendered in the case of CIT Vs. Manjunatha Cotton and Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT and therefore, in the facts of the present case, this judgment of Hon ble Gujarat High Court is also not rendering any help to the Revenue. We find that there is no apparent mistake in the impugned Tribunal order. - Decided in favour of assessee.
Issues Involved:
1. Validity of the penalty order due to alleged concealment of income or furnishing inaccurate particulars of income. 2. Applicability of judicial precedents cited by the Revenue. 3. Examination of the Tribunal's adherence to jurisdictional High Court judgments. 4. Assessment of the penalty notice's compliance with legal requirements. Detailed Analysis: Issue 1: Validity of the Penalty Order The core issue revolves around whether the penalty order is valid when the notice under section 274 r.w.s. 271 of the Income Tax Act, 1961, did not specify whether the penalty was for concealment of income or for furnishing inaccurate particulars of income. The Tribunal previously held that the penalty order was invalid based on the judgment of the Hon’ble Karnataka High Court in the case of Manjunath Cotton and Ginning Factory Vs. CIT, which mandates clarity in the notice regarding the specific charge against the assessee. Issue 2: Applicability of Judicial Precedents Cited by the Revenue The Revenue relied on several judicial pronouncements to argue against the Tribunal's decision: - CIT Vs. Sri Durga Enterprises: This case dealt with the validity of a notice under section 148 of the Act, not section 274 r.w.s. 271, and was deemed not applicable. - Jaysons Infrastructure (I) (P) Ltd. Vs. ITO: The Tribunal in this case did not consider the binding judgment of the jurisdictional High Court in Manjunath Cotton and Ginning Factory, making it inapplicable. - Sundaram Finance Ltd. Vs. ACIT: The facts differed as the relevant columns in the notice were marked, unlike the present case. The Tribunal emphasized following the jurisdictional High Court's judgment over other High Courts. - ACIT Vs. Sourastra Kutch Stock Exchange: This judgment highlighted that non-consideration of a jurisdictional High Court's judgment constitutes a mistake. However, the Tribunal had followed the jurisdictional High Court's judgment in the present case. Issue 3: Examination of the Tribunal's Adherence to Jurisdictional High Court Judgments The Tribunal reiterated that it had followed the binding judgment of the Hon’ble Karnataka High Court in Manjunath Cotton and Ginning Factory. This judgment outlines that a penalty notice must specifically state whether it pertains to concealment of income or furnishing inaccurate particulars, and failure to do so offends the principles of natural justice. Issue 4: Assessment of the Penalty Notice's Compliance with Legal Requirements The Tribunal found that the penalty notice issued by the AO did not make a clear and specific allegation, thus rendering it defective. The Tribunal emphasized that the AO must make a specific allegation in both the Assessment Order and the penalty notice. The defect in the penalty notice could not be rectified under section 292B of the Act. The Tribunal concluded that the penalty proceedings are distinct from the assessment proceedings, and the specific grounds must be clear in the penalty notice to allow the assessee to respond appropriately. Conclusion: The Tribunal dismissed the Miscellaneous Petition filed by the Revenue, holding that there was no apparent mistake in its earlier order. The Tribunal upheld its previous decision invalidating the penalty order due to the defective notice under section 274 r.w.s. 271 of the Act, in line with the jurisdictional High Court's judgment. The Tribunal's adherence to the principles of natural justice and specific legal requirements for penalty notices was reaffirmed.
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