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2021 (3) TMI 398 - AT - Income TaxLevy of penalty u/s 271(1)(c) - defective notice - Non specification of charge - Assessing Officer had failed to strike off the irrelevant default while calling upon the assessee to explain as to why penalty u/s 271(1)(c) of the I.T Act may not be imposed on him - HELD THAT - Failure on the part of the A.O to clearly put the assessee to notice as regards the default for which penalty under Sec. 271(1)(c) was sought to be imposed on him by failing to strike off the irrelevant default in the SCN , dated 23.12.2016, had left the assessee guessing of the default for which he was being proceeded against for. As observed by us hereinabove, the Tribunal in the case of a related party of the assessee viz. Smt Divya Shailesh Bhadaliya 2019 (2) TMI 1793 - ITAT MUMBAI quashed the penalty imposed by the A.O u/s 271(1)(c), for the reason, that the A.O had wrongly assumed jurisdiction without validly putting the assessee to notice vide his SCN issued under Sec. 274 r.w.s 271(1)(c) as regards the default for which the penalty was sought to be imposed on her. As the facts and the issue involved in the case of the assessee before us remains the same, we, thus, in terms of our observations recorded hereinabove find no reason to take a different view and are unable to persuade ourselves to sustain the penalty imposed by the A.O under Sec. 271(1)(c) - Decided in favour of assessee.
Issues Involved:
1. Validity of the show cause notice under Sec. 274 r.w.s. 271(1)(c) of the Income Tax Act, 1961. 2. Jurisdictional defect in penalty proceedings under Sec. 271(1)(c). 3. Non-specification of the precise charge for penalty imposition. 4. Confirmation of penalty despite satisfactory explanation and documentary evidence. Issue-wise Detailed Analysis: 1. Validity of the Show Cause Notice: The assessee contended that the show cause notice issued under Sec. 274 r.w.s. 271(1)(c) was invalid as it did not specify the precise charge for the imposition of penalty. The notice failed to strike off the irrelevant default, thereby not clearly informing the assessee whether the penalty was for "concealment of income" or "furnishing inaccurate particulars of income." This lack of specificity was argued to have deprived the assessee of a fair opportunity to respond. 2. Jurisdictional Defect in Penalty Proceedings: The penalty proceedings initiated by the A.O were challenged on the grounds of jurisdictional defect. The A.O was accused of not validly putting the assessee on notice regarding the specific default for which the penalty was being imposed. The Tribunal noted that the A.O had initiated penalty proceedings without clearly pointing out the default in the assessment order, merely stating that the proceedings were for "furnishing inaccurate particulars and concealment of income." 3. Non-Specification of the Precise Charge: The Tribunal observed that the two defaults under Sec. 271(1)(c), namely "concealment of income" and "furnishing inaccurate particulars of income," are distinct and operate in separate fields. It was obligatory for the A.O to clearly specify the default in the show cause notice. The failure to do so indicated a non-application of mind and rendered the notice invalid. The Tribunal cited several judicial pronouncements, including the Hon’ble Supreme Court's judgments in Dilip Shroff Vs. Jt. CIT and T. Ashok Pai Vs. CIT, which emphasized the necessity of specifying the charge in penalty proceedings. 4. Confirmation of Penalty Despite Satisfactory Explanation: The assessee argued that the CIT(A) erred in confirming the penalty despite the assessee providing a satisfactory explanation substantiated by documentary evidence. The Tribunal found merit in this argument, noting that the penalty proceedings were initiated without proper jurisdiction and the assessee was not given a fair opportunity to defend against the specific charge. Conclusion: The Tribunal concluded that the penalty imposed under Sec. 271(1)(c) was invalid due to the A.O's failure to specify the precise charge in the show cause notice. This failure deprived the assessee of a fair opportunity to respond, thereby violating the principles of natural justice. Consequently, the Tribunal set aside the order of the CIT(A) and vacated the penalty of ?6,02,767/- imposed by the A.O. Order Pronounced: The appeal filed by the assessee was allowed, and the penalty was quashed. The order was pronounced in the open court on 03.03.2021.
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