2022 (11) TMI 841 - AT - Income Tax

Penalty levied u/s 271(1)(c) - Defective u/s 274 - mentioning of both the charges - HELD THAT - Perusal of this notice shows that ld. AO has mentioned both the charges in the notice rather than raising a specific charge on the assessee. Such type of notices where specific charges are not levelled against the assessee, are found to be defective by various Hon'ble Courts. Since we are bound in the case of Brijendra Kumar Poddar 2021 (12) TMI 24 - CALCUTTA HIGH COURT Hon'ble Court dealing with the similar facts and the issues, confirmed the order of the Tribunal deciding against the Revenue taking note of the judgment in the case of CIT vs. Samson Perinchery 2017 (1) TMI 1292 - BOMBAY HIGH COURT laying down the ratio that if the show cause notice issued u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income, such show cause notice are defective. Thus we are inclined to hold that since the notice issued u/s 274 of the Act is defective, penalty proceedings are invalid and bad in law and liable to be quashed. In the result, legal grounds raised by the assessee challenging the levy of penalty u/s 271(1)(c) of the Act are allowed.

Summary

Issues:
Appeal against penalty under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2009-10 due to defective notice issued under section 274.

Analysis:
The appeal pertains to the Assessment Year 2009-10 against the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The assessee challenged the penalty on the grounds that the notice issued under section 274 was defective, rendering the penalty proceedings invalid and void ab initio. The assessee contended that the notice failed to classify the exact nature of the default for invoking the penalty, making the action arbitrary and unwarranted. The appeal raised concerns regarding the reliance on findings in the quantum proceedings without independent reasons, which were deemed unfounded. Additionally, the appellant argued that the penalty was imposed without considering the facts of the case in light of Explanation 1 appended to section 271(1)(c) of the Act.

The Tribunal considered the arguments presented by both parties. The penalty was imposed for concealment of income, with the necessary satisfaction by the Assessing Officer in the assessment order. However, the notice issued under section 274 of the Act on 14.12.2016 failed to specify the exact charge against the assessee, mentioning both charges of concealing income particulars and furnishing inaccurate particulars without raising a specific charge. The Tribunal noted that such defective notices have been deemed invalid by various High Courts. Citing the decision of the Hon'ble Jurisdictional High Court of Calcutta in a similar case, the Tribunal found that if the show cause notice does not specify the charge against the assessee, it is defective, following the judgment of the Hon'ble Bombay High Court. Consequently, the Tribunal held that the defective notice rendered the penalty proceedings invalid and quashed the penalty.

In conclusion, the Tribunal allowed the appeal filed by the assessee, ruling in favor of the appellant due to the defective notice issued under section 274, which made the penalty proceedings invalid and bad in law. The decision was based on the legal grounds raised by the assessee challenging the levy of the penalty under section 271(1)(c) of the Income Tax Act, 1961.