2020 (12) TMI 44 - AT - Income Tax

Penalty levied u/s 271(1)(c) - Defective notice - AO has not stricken out charge/fault which are not applicable in the case of assessee i.e. whether the assessee has concealed the particulars of its income or it has furnished inaccurate particulars of such income - HELD THAT - AO has not stricken out the irrelevant portion of the fault/charge which would have spelt out the specific fault/charge against the assessee as per section 271(1) (c) of the Act. Since the proposed notice itself is 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 relying on M/S SSA S EMERALD MEADOWS 2015 (11) TMI 1620 - KARNATAKA HIGH COURT and M/S MANJUNATHA COTTON AND GINNING FACTORY OTHS., M/S. V.S. LAD SONS, 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. Imposition of penalty and subsequently confirmed by the Ld. CIT(A) in the present cases cannot be sustained and the same is hereby deleted. Therefore, the appeals of assessee are allowed.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Validity of penalty notices issued under Section 271(1)(c) of the Income Tax Act, 1961.
3. Specificity and clarity of charges in the penalty notices.

Detailed Analysis:

1. Delay in Filing the Appeal:
The Tribunal noted a delay of 17 days in filing the appeal. Upon reviewing the application for condonation of delay and the accompanying affidavit, it was determined that the delay was reasonable and not intentional. Consequently, the delay was condoned, allowing the appeal to proceed.

2. Validity of Penalty Notices under Section 271(1)(c):
The primary issue raised by the assessee pertained to the validity of the penalty notices issued under Section 271(1)(c) for the Assessment Years (AY) 2011-12 and 2012-13. The notices failed to strike out the inapplicable charges, leaving ambiguity as to whether the penalty was for "concealment of income" or "furnishing inaccurate particulars of income." The assessee argued that such notices are invalid based on precedents set by the Karnataka High Court in CIT vs. Manjunatha Cotton & Ginning Factory and CIT vs. SSA’s Emerald Meadows, which were upheld by the Supreme Court. The Tribunal agreed, noting that the defective notices rendered the subsequent penalty proceedings invalid.

3. Specificity and Clarity of Charges in Penalty Notices:
The Tribunal scrutinized the penalty notices and confirmed that they did not specify the exact charge against the assessee, thus violating the principles of natural justice. The Tribunal cited several judicial precedents, including decisions from the Karnataka High Court, Bombay High Court, and Calcutta High Court, which supported the view that a penalty notice must clearly specify the charge to be valid. The Tribunal emphasized that ambiguity in the notice indicates non-application of mind by the Assessing Officer and invalidates the penalty proceedings.

Conclusion:
The Tribunal concluded that the penalty notices were defective due to the lack of specificity in the charges. Consequently, the penalties imposed under Section 271(1)(c) and confirmed by the CIT(A) were deemed invalid. The Tribunal relied on multiple judicial precedents to support its decision, including the Karnataka High Court's rulings in Manjunatha Cotton & Ginning Factory and SSA’s Emerald Meadows, as well as the Calcutta High Court's decision in PCIT vs. Dr. Murari Mohan Koley. The appeals were allowed, and the penalties were cancelled.