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2020 (12) TMI 347 - AT - Income TaxPenalty levied u/s. 271(1)(c) - Defective notice - non specification of charge - HELD THAT - In the penalty notice inappropriate words have not been struck off. Even the last line of the said notice only speaks of Section 271 and does not even mention of section 271(1)(c) - here that the penalty order is based on furnishing of inaccurate particulars but the notice is not specifying exactly on which limb the penalty u/s 271(1)(c) has been initiated. From the notice dated 6.3.2014, it can be seen that the Assessing Officer was not sure under which limb of provisions of Section 271 the assessee is liable for penalty. Therefore, the issue is squarely covered by the decision in case of M/s SSA' Emerald Meadows, 2015 (11) TMI 1620 - KARNATAKA HIGH COURT and Manjunatha Cotton Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT wherein, it was held that notice u/s.274 of the Act specifically states as to whether penalty is being proposed to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of income. As inappropriate words in the penalty notice have not been struck off and the notice does not specify as to under which limb of the provisions, the penalty u/s 271(1)(c) has been initiated, therefore, we are of the considered opinion that the ld CIT(A) was not justified in confirming the penalty levied u/s 271(1)(c) - Decided in favour of assessee.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Justification of penalty levied under Section 271(1)(c) of the Income Tax Act, 1961. 3. Validity of the penalty notice under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961. Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The appeal was filed by the assessee with a delay of 96 days. The assessee submitted a condonation petition, attributing the delay to the negligence and inaction of their authorized representative. The Tribunal, after hearing the submissions, found sufficient reasons for the delay and decided to condone it, thereby admitting the appeal for adjudication. 2. Justification of Penalty Levied under Section 271(1)(c) of the Income Tax Act, 1961: The primary grievance of the assessee was the confirmation of the penalty levied under Section 271(1)(c) by the CIT(A). The penalty of ?5,38,480 was imposed by the Assessing Officer (AO) for concealment of income and furnishing inaccurate particulars of income, based on additions amounting to ?17,05,527. The assessee argued that the penalty order was bad in law as the notice under Section 274 read with Section 271 did not specify the charge, i.e., whether it was for concealment of particulars of income or for furnishing inaccurate particulars of income. The assessee relied on the decisions of the Karnataka High Court in CIT vs. Manjunatha Cotton & Ginning Factory and the Supreme Court in CIT Vs. SSA’s Emerald Meadows to support their contention. 3. Validity of the Penalty Notice under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961: The Tribunal examined the penalty notice and found that inappropriate words were not struck off and the notice did not specify the exact charge under Section 271(1)(c). The Tribunal noted that the AO was not sure under which limb of Section 271 the penalty was being initiated. This ambiguity rendered the penalty notice defective, as established by the Supreme Court in SSA’s Emerald Meadows and the Karnataka High Court in Manjunatha Cotton & Ginning Factory. The Tribunal also referenced similar cases from ITAT Delhi and Bangalore, which supported the assessee’s position. The Tribunal rejected the Revenue's argument that the issue of invalid notice was not raised before the lower authorities, citing that the defect in the notice caused prejudice to the assessee and violated principles of natural justice. The Tribunal emphasized that the AO's non-application of mind and failure to specify the charge in the penalty notice invalidated the penalty proceedings. Conclusion: The Tribunal concluded that the penalty levied under Section 271(1)(c) was not sustainable due to the defective notice and non-application of mind by the AO. Consequently, the penalty order was quashed, and the appeal of the assessee was allowed. The order was pronounced on 07/12/2020.
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