2018 (4) TMI 1127 - AT - Income Tax

Invalid Penalty Imposed Under Income Tax Act Due to Defective Notice

The Tribunal dismissed the Revenue's appeal, confirming that the penalty imposed under Section 271(1)(c) of the Income Tax Act was invalid due to the ... Penalty u/s. 271(1)(c) - non specification of charge - defective notice - Held that:- Show cause notice issued in the present case 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. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. Thus imposition of penalty cannot be sustained. See Jeetmal Choraria Versus A.C.I.T. [2017 (12) TMI 883 - ITAT, KOLKATA] - Decided in favour of assessee. Issues Involved:1. Validity of the penalty imposed under Section 271(1)(c) of the Income Tax Act.2. Defective notice issued under Section 274 read with Section 271(1)(c) of the Income Tax Act.3. Reliance on judicial precedents and the applicability of the Supreme Court's decision in SSA’s Emerald Meadows.Issue-wise Detailed Analysis:1. Validity of the Penalty Imposed under Section 271(1)(c):The primary issue in this case was the validity of the penalty amounting to Rs. 75,27,573/- imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act. The Revenue's appeal was against the order of the Commissioner of Income Tax (Appeals) [CIT-A], Jalpaiguri, which had canceled this penalty. The Revenue argued that the penalty should be upheld based on the AO’s original order and requested the Tribunal to confirm the penalty. However, the Tribunal found that the CIT-A had rightly canceled the penalty, relying on several judicial precedents, including the decision of the Hon’ble Supreme Court in the case of SSA’s Emerald Meadows.2. Defective Notice Issued under Section 274 read with Section 271(1)(c):The respondent (assessee) contended that the penalty was imposed based on a defective notice dated 30-09-2014 issued under Section 274 r.w.s 271(1)(c) of the Act. The Tribunal noted that the notice did not specify the charge against the assessee, i.e., whether it was for concealing particulars of income or for furnishing inaccurate particulars of income. This defect rendered the notice invalid. The Tribunal referred to the decision of the Hon’ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory, which held that a vague notice not specifying the charge is not in compliance with the requirements of the Act.3. Reliance on Judicial Precedents and Applicability of the Supreme Court's Decision in SSA’s Emerald Meadows:The Tribunal considered various judicial precedents, including the decision of the Hon’ble Supreme Court in SSA’s Emerald Meadows, which dismissed the Revenue's Special Leave Petition (SLP) against the Karnataka High Court's decision in favor of the assessee. The Tribunal also referred to the Coordinate Bench's decision in the case of Jeetmal Choraria, which followed the Karnataka High Court's reasoning. The Tribunal emphasized that where two views are possible, the view favorable to the assessee should be adopted, as per the established legal principle.The Tribunal concluded that the penalty could not be sustained due to the defective notice and the judicial precedents supporting the assessee's position. Consequently, the Tribunal dismissed the Revenue's appeal and upheld the CIT-A's order canceling the penalty.Conclusion:The Tribunal dismissed the Revenue's appeal, confirming that the penalty imposed under Section 271(1)(c) of the Income Tax Act was invalid due to the defective notice issued under Section 274 r.w.s 271(1)(c). The decision was based on judicial precedents, including the Supreme Court's ruling in SSA’s Emerald Meadows, which favored the assessee. The order was pronounced in the open court on 20-04-2018.