2022 (10) TMI 987 - HC - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - As argued non striking off the inaccurate particular of income portion in the notice under section 274 - HELD THAT - On facts it is found that the assessee s aim to offer interest income on income tax refund was an inadvertent and bona fide error and no contumacious conduct has been established by the assessing officer. The revenue filed appeal before the Tribunal. The Tribunal after considering the correctness of the order passed by the CIT also found that notice issued by the assessing officer under Section 271(1)(c) of the Act was defective, inasmuch as the irrelevant portion of the notice has not been struck off. Therefore, the assessee did not have adequate opportunity to put forward their submission in response to the penalty notice. The learned Senior Counsel had referred to the decision of this Court in the case of Principal CIT, Central - 2 Kolkata Vs. Brijendra Kumar Poddar 2021 (12) TMI 24 - CALCUTTA HIGH COURT where the Court took into consideration the decision in the case of CIT Vs. MANJUNATHA COTTON GINNING FACTORY 2013 (7) TMI 620 - KARNATAKA HIGH COURT and dismissed the appeal filed by the revenue. Thus we find that the correct legal position has not been noted by the CIT but the learned Tribunal as well. No substantial question arising for consideration in this appeal.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Validity of penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961.

Analysis:

*Delay in filing the appeal:*
The High Court noted a delay of 603 days in filing the appeal. Upon reviewing the relevant dates, it was determined that the appellant/revenue would be entitled to an extension of the period of limitation for filing the appeal under various statutes by the Hon'ble Supreme Court. Consequently, the court allowed the application and condoned the delay in filing the appeal.

*Validity of penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961:*
The primary issue in this case was whether the penalty imposed by the assessing officer under Section 271(1)(c) of the Act was legally sustainable. The Commissioner of Income Tax (Appeals) had set aside the penalty, considering that the mere confirmation of an addition does not automatically warrant a penalty under Section 271(1)(c). The CIT(A) correctly noted that the assessing officer failed to establish contumacious conduct on the part of the assessee in inadvertently offering interest income on income tax refund. The Tribunal also found the penalty notice defective as the irrelevant portion had not been struck off, depriving the assessee of a fair opportunity to respond. The High Court, referring to relevant case law, concluded that no substantial question arose for consideration in the appeal, ultimately leading to the dismissal of the appeal and closure of the stay application.

In summary, the High Court addressed the delay in filing the appeal and the validity of the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961. The decision highlighted the importance of establishing contumacious conduct for penalty imposition and ensuring procedural fairness in penalty notices. The judgment underscored the need for adherence to legal principles and proper notice requirements in tax penalty proceedings.