2018 (3) TMI 1315 - AT - Income Tax

Appeal granted, penalty canceled for defective notice under Income Tax Act.

Quadeya Securities Pvt. Ltd. Versus D.C.I.T, Cir-5, Kolkata

The Tribunal allowed the appeal, canceling the penalty imposed under Section 271(1)(c) of the Income Tax Act, due to the defective notice issued under ... Penalty u/s. 271(1)(c) - non specification of charge - 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.2. Validity of the notice issued under Section 274 read with Section 271 of the Income Tax Act.3. Applicability of judicial precedents in determining the validity of penalty and notice.Issue-wise Detailed Analysis:1. Validity of Penalty Imposed under Section 271(1)(c) of the Income Tax Act:The appeal challenges the penalty of Rs. 5,18,590 imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, which was confirmed by the Commissioner of Income Tax (Appeals). The assessee's Authorized Representative (AR) argued that the penalty issue is covered by the Supreme Court's decision in SSA’s Emerald Meadows, asserting that the penalty was imposed based on a defective notice. The Departmental Representative (DR) supported the penalty, citing various judicial precedents to argue that the penalty was validly imposed.2. Validity of the Notice Issued under Section 274 Read with Section 271 of the Income Tax Act:The AR contended that the statutory notice issued by the AO was defective, as it did not specify the exact charge against the assessee—whether it was for concealment of income or furnishing inaccurate particulars. The AR relied on the Karnataka High Court's decision in CIT vs SSA’s Emerald Meadows, which was upheld by the Supreme Court. The DR, however, referred to several judgments, including those from the Calcutta High Court and Mumbai ITAT, to argue that the notice's defect does not invalidate the penalty proceedings as long as the assessee was given an opportunity to be heard.3. Applicability of Judicial Precedents:The Tribunal considered the written submissions and case laws cited by both parties. The DR referenced decisions from various High Courts and ITAT benches to support the validity of the penalty despite the defective notice. The Tribunal noted that different High Courts have divergent views on this issue. The Bombay High Court's decision in CIT vs Kaushalya and the Patna High Court's decision in Mithila Motor's (P.) Ltd. held that a defect in the notice does not invalidate penalty proceedings if the assessee was aware of the charges and given an opportunity to be heard. Conversely, the Karnataka High Court in Manjunatha Cotton & Ginning Factory emphasized the importance of a clear and specific charge in the notice.Tribunal's Conclusion:The Tribunal preferred the view favoring the assessee, as established by the Karnataka High Court in Manjunatha Cotton & Ginning Factory and supported by the Supreme Court's dismissal of the Revenue's Special Leave Petition in SSA’s Emerald Meadows. The Tribunal found that the notice issued to the assessee did not specify the charge, rendering it defective. Consequently, the imposition of penalty could not be sustained. The Tribunal canceled the penalty of Rs. 5,18,590 and allowed the assessee's appeal.Final Judgment:The Tribunal allowed the appeal, canceling the penalty imposed under Section 271(1)(c) of the Income Tax Act, due to the defective notice issued under Section 274 read with Section 271. The order was pronounced in the open court on 23-03-2018.