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2022 (6) TMI 1008 - AT - Income TaxPenalty u/ 271(1)(c) - defective notice u/s 274 - Non specification of specific charge - as submitted Penalty order is bad in law for the reason that the Show cause notice for levy of penalty did not specify whether the said notice is for concealment of income or furnishing of inaccurate particulars - HELD THAT - Since no specific charge was framed either in the show cause notice or in the body of penalty order, and there was failure on the part of Ld. AO to frame specific charge against the assessee, the penalty would not be sustainable in the eyes of law. By deleting the impugned penalty, we allow the appeal of assessee.
Issues Involved:
1. Validity of the penalty notice issued under Section 271(1)(c) of the Income Tax Act. 2. Specificity of charges in the penalty notice. 3. Legal precedents relevant to the validity of penalty notices. Detailed Analysis: 1. Validity of the Penalty Notice Issued Under Section 271(1)(c): The assessee contested the penalty on the grounds that the penalty notice issued was defective. The primary argument was that the show cause notice for the penalty did not specify whether it was for concealment of income or for furnishing inaccurate particulars. This ambiguity, according to the assessee, rendered the penalty notice invalid. The assessee's argument was supported by various judicial precedents, including the decision of the Hon'ble Apex Court in SSA's Emerald Meadows and the Hon'ble Karnataka High Court in CIT V/s Manjunatha Cotton & Ginning Factory. The revenue, however, contended that the assessee understood the contents of the notice and that the penalty proceedings were valid. 2. Specificity of Charges in the Penalty Notice: The penalty was levied for several additions, including bad-debt claims, advances written-off, reduction in Capital WIP, and Short-Term Capital Gains. The Ld. AO initiated penalty proceedings without specifying the exact charge for each head of addition. The penalty notices issued were vague and did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars. The assessee argued that this lack of specificity violated the principles of natural justice, as the assessee was not informed of the exact grounds on which the penalty was being levied. The Tribunal noted that concealment of income and furnishing inaccurate particulars are distinct charges and must be specified clearly. The failure to do so would vitiate the penalty proceedings. 3. Legal Precedents Relevant to the Validity of Penalty Notices: The Tribunal referred to various judicial precedents to support its decision. The Hon'ble High Court of Madras in Babuji Jacob Vs. ITO held that a penalty notice must specifically state whether the penalty is for concealment of income or for furnishing inaccurate particulars. The Hon'ble Bombay High Court in PCIT V/s Goa Coastal Resorts and Recreation (P.) Ltd and CIT Vs. Samson Perinchery also supported the view that non-specific penalty notices are invalid. The Tribunal also referred to the decision of the Hon'ble Bombay High Court in Mohd. Farhan A. Shaikh V/s DCIT, which emphasized the need for precision in penalty notices and held that an omnibus notice suffers from vagueness and non-application of mind. Conclusion: The Tribunal concluded that the penalty notices issued to the assessee were vague and did not specify the exact charges. This lack of specificity violated the principles of natural justice and rendered the penalty proceedings invalid. The Tribunal allowed the appeal by deleting the impugned penalty, noting that going into the merits of the penalty was academic in nature given the invalidity of the penalty notices. The appeal was thus partly allowed, and the order was pronounced on 08th June, 2022.
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