2018 (3) TMI 1307 - AT - Income Tax

Invalid penalty under Sec 271(1)(c) due to defective notice. Appeal allowed, penalty canceled.

Sri Pradeep Singh Gurung Versus D.C.I.T, Cir-3, Siliguri

The Tribunal held that the penalty imposed under Section 271(1)(c) of the Income Tax Act was not valid due to a defective notice that failed to specify ... Penalty u/s. 271(1)(c) - non specification of charge - defective notice - Held that:- We find that the notice dt. 24-12-2012 issued u/s. 274 r.w.s 271 of the Act does not specify the charge of offence committed by the assessee viz whether had concealed the particulars of income or had furnished inaccurate particulars of income. Hence the said notice is to be held as defective. - Decided in favour of assessee. Issues Involved:1. Validity of penalty imposed under Section 271(1)(c) of the Income Tax Act based on a defective notice issued under Section 274 read with Section 271.2. Interpretation of precedents regarding the requirement of specifying the charge in the penalty notice.Issue-wise Detailed Analysis:1. Validity of Penalty Imposed Under Section 271(1)(c) Based on Defective Notice:The primary issue in this appeal was whether the penalty imposed under Section 271(1)(c) of the Income Tax Act was valid, given that the notice issued under Section 274 read with Section 271 was allegedly defective. The appellant argued that the penalty notice dated 27-01-2014 did not specify whether the penalty was for 'concealment of income' or 'furnishing inaccurate particulars of income,' rendering it defective. The appellant relied on the decision of the Hon'ble Karnataka High Court in CIT vs SSA’s Emerald Meadows, which was upheld by the Hon'ble Supreme Court.The respondent, represented by the ld. Sr. DR, contended that the penalty was valid and relied on several judicial precedents, including the judgment of the Hon'ble Calcutta High Court in Dr. Syamal Baran Mondal Vs. CIT, which stated that Section 271 does not mandate the recording of satisfaction in specific terms. The respondent also referred to various decisions from the Mumbai ITAT and the Bombay High Court, which held that mere non-striking of the inaccurate portion in the notice does not invalidate the penalty proceedings.2. Interpretation of Precedents Regarding the Requirement of Specifying the Charge in the Penalty Notice:The Tribunal considered the rival submissions and the case laws cited by both parties. It noted that the same set of written submissions had been filed before the Coordinate Bench of the Tribunal in the case of Jeetmal Choraria, where the Tribunal had elaborately discussed the facts and principles laid down by various High Courts. The Tribunal in Jeetmal Choraria preferred to follow the ratio laid down by the Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory, which emphasized that when there are two views on an issue, the view favoring the assessee should be adopted, as enunciated by the Hon'ble Supreme Court in Vegetable Products Ltd.The Tribunal observed that the show cause notice issued in the present case did not specify the charge against the assessee, i.e., whether it was for concealing particulars of income or furnishing inaccurate particulars of income. This lack of specificity rendered the notice defective. The Tribunal also noted that the Hon'ble Supreme Court had dismissed the Special Leave Petition (SLP) filed by the Revenue against the judgment in SSA’s Emerald Meadows, thereby upholding the principle that a defective notice invalidates the penalty proceedings.Conclusion:The Tribunal held that the imposition of penalty in the present case could not be sustained due to the defective notice. It directed the cancellation of the penalty of Rs. 6,85,727/- levied by the AO under Section 271(1)(c) of the Act and confirmed by the CIT-A. Accordingly, the grounds raised by the assessee in the appeal for the A.Y. under consideration were allowed.Order:The appeal of the assessee was allowed, and the penalty imposed was canceled. The order was pronounced in the open court on 23-03-2018.