2022 (6) TMI 397 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - as argued notice issued u/s 274 of the Act is defective as it does not specify the limb on which the penalty was proposed to be levied - HELD THAT - We find that the notice u/s 274 read with Section 271(1)(c ) has been issued in a mechanical manner and in standard format without mentioning one of the two limbs on which the penalty was proposed to be levied. In other words, the notice mentioned both the limbs i.e. considering of record as well as furnishing of income inaccurate manner which is not permissible under the Act. In view of these facts we do not find any infirmity in the order of Ld. CIT(A). Non-mentioning of relevant limb in the penalty notice in substantive defect and infirmity which is not curable. The case of the assessee is squarely covered by several decisions as discussed by the Ld. CIT(A) at length in the appellate order including the decision of Hon ble Jurisdictional High Court in the case of CIT vs. SSA s Emerald Meadows 2015 (11) TMI 1620 - KARNATAKA HIGH COURT and in the case of CIT vs. Manjunatha Cotton and Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT In view of these facts and circumstances of the case, we are inclined to uphold the order passed by the Ld. CIT(A) by dismissing the revenue s appeal.

Summary

Issues:
1. Appeal against deletion of penalty under Section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
The Appellate Tribunal ITAT Kolkata heard an appeal by the revenue against the Commissioner of Income Tax(Appeals)-3, Kolkata's order for the assessment year 2010-11. The sole issue raised was the deletion of a penalty of Rs. 70,55,520/- imposed under Section 271(1)(c) by the Assessing Officer. The revenue contended that the penalty deletion was due to a defective notice under Section 274 that did not specify the limb for penalty imposition.

The Tribunal noted a discrepancy in the appeal filing date but proceeded to hear the appeal on merit. It referenced decisions of Jurisdictional High Courts supporting the assessee's position. The penalty proceedings were initiated based on a notice dated 13.08.2015, where the penalty was imposed for undisclosed income. The Commissioner deleted the penalty citing a substantive defect in the notice, which did not specify the limb for penalty imposition, relying on relevant case laws.

After reviewing the facts and arguments, the Tribunal found the penalty notice was issued mechanically without specifying the limb for penalty imposition, rendering it impermissible under the Act. Non-mentioning of the relevant limb in the notice was deemed a substantive defect, not curable. The Tribunal upheld the Commissioner's order based on precedents cited, including decisions of the Jurisdictional High Court. Consequently, the revenue's appeal was dismissed, affirming the deletion of the penalty.

In conclusion, the Appellate Tribunal ITAT Kolkata upheld the decision of the Commissioner to delete the penalty under Section 271(1)(c) due to a defective notice lacking specification of the penalty imposition limb. The Tribunal's ruling was supported by legal precedents, leading to the dismissal of the revenue's appeal.