Tribunal cancels penalty due to defective notice under Income Tax Act

The Tribunal allowed the Assessee's appeal, ruling that the penalty under Section 271(1)(c) of the Income Tax Act could not be upheld due to the defective show cause notice under Section 274. The notice failed to specify the charge against the Assessee, leading to the cancellation of the penalty.

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Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of the show cause notice under Section 274 of the Income Tax Act, 1961.

Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The primary issue revolves around the imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961. The Assessee filed a return for the Assessment Year (A.Y.) 2011-12 declaring an income of Rs. 19,26,750/-, which included salary from M/s. Unitech Wireless (Tamil Nadu) Pvt. Ltd. However, the Assessee did not declare an additional salary of Rs. 15,31,426/- received from a previous employer, M/s. Vodafone Essar Spacetel Ltd., and interest income of Rs. 6,048/-. The Assessing Officer (AO) added these undisclosed incomes to the total income and initiated penalty proceedings under Section 271(1)(c) for concealment of income. The Assessee contended that the omission was inadvertent due to non-receipt of Form 16 from the previous employer. The AO imposed a penalty of 200% of the tax sought to be evaded, which was reduced to 100% by the Commissioner of Income Tax (Appeals) [CIT(A)].

2. Validity of the Show Cause Notice under Section 274 of the Income Tax Act, 1961:
The Assessee raised an additional ground of appeal regarding the validity of the show cause notice issued under Section 274. The Assessee argued that the notice did not specify whether the penalty was for "concealing particulars of income" or "furnishing inaccurate particulars of income," and the irrelevant portions were not struck out. This argument was supported by several judicial precedents, including the Karnataka High Court's decision in CIT vs. SSA’s Emerald Meadows and the Bombay High Court's decision in CIT vs. Shri Samson Perinchery, which held that a penalty notice must clearly specify the charge.

The Revenue argued that specifying the charge in the show cause notice is not mandatory, relying on various judicial pronouncements, including the Calcutta High Court's decision in Dr. Syamal Baran Mondal vs. CIT and the Bombay High Court's decision in CIT vs. Kaushalya.

The Tribunal considered these submissions and noted that the Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory had established that a vague notice that does not specify the charge is invalid. The Tribunal also referenced its own decision in the case of Suvaprasanna Bhattacharya vs. ACIT, which followed the same principle.

The Tribunal observed that the show cause notice in the present case did not specify the charge, making it vague and invalid. The Tribunal preferred to follow the view of the Karnataka High Court, which is favorable to the Assessee, and held that the imposition of penalty could not be sustained due to the defective notice.

Conclusion:
The Tribunal allowed the Assessee's appeal, holding that the imposition of penalty under Section 271(1)(c) could not be sustained due to the defective show cause notice under Section 274, which failed to specify the charge against the Assessee. The penalty was directed to be canceled.

Order:
The appeal of the Assessee is allowed, and the order was pronounced in the open Court on 10.01.2018.

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