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2021 (1) TMI 836 - AT - Income TaxPenalty u/s 271(1)(c) - defective notice u/s 274 - As argued notice does not spell out the exact charge against the assessee i.e., whether the assessee is guilty in furnishing inaccurate particulars of income or concealing particulars of income - HELD THAT - On the facts of the present case that the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed - 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. 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. - Decided in favour of assessee.
Issues Involved:
1. Delay in filing appeals by the Revenue and Cross Objections (C.O.) by the assessee. 2. Validity of the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. 3. Defectiveness of the show cause notice under section 274 of the Act. Detailed Analysis: 1. Delay in Filing Appeals and Cross Objections: The Revenue's appeals faced a one-day delay, explained due to administrative reasons, which was condoned as it was not inordinate. The assessee's C.O. had a 327-day delay, attributed to the previous Chartered Accountant's failure to advise filing a C.O. and subsequent counsel's advice. The Tribunal accepted the reasons and condoned the delay, noting that under Rule 27 of the ITAT Rules, 1963, an assessee can support the appealed order on any desired ground. 2. Validity of Penalty under Section 271(1)(c): The Revenue appealed against the CIT(A)'s order, which deleted the penalty imposed by the AO under section 271(1)(c). The AO's penalty was based on the assessee's failure to file returns despite substantial income from land transactions, detected during a search under section 132. The assessee filed returns in response to a notice under section 153A, which the AO accepted but imposed penalties for furnishing inaccurate particulars of income. The CIT(A) canceled the penalties, citing the Karnataka High Court's ruling in CIT vs. Manjunatha Cotton & Ginning Factory, which held that penalty cannot be imposed merely because the assessee accepted the assessment unless it is discernible that the addition was due to concealment or inaccurate particulars of income. 3. Defectiveness of Show Cause Notice under Section 274: The assessee raised an additional ground in the C.O., questioning the validity of the penalty order due to a defective show cause notice under section 274. The notice did not specify whether the penalty was for concealing income or furnishing inaccurate particulars. The Tribunal examined the show cause notices and found that the AO did not strike off the irrelevant portion, thus failing to specify the exact charge. Citing the Karnataka High Court's decision in CIT vs. Manjunatha Cotton and Ginning Factory, it was held that a show cause notice must clearly state the grounds for penalty to meet the principles of natural justice. The Tribunal concluded that the defective notice rendered the penalty unsustainable. The Tribunal upheld the CIT(A)'s order deleting the penalties, though for different reasons, emphasizing that the imposition of penalty based on an invalid notice could not be sustained. The appeals by the Revenue were dismissed, and the cross objections by the assessee were partly allowed.
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