2018 (6) TMI 755 - AT - Income Tax

Tribunal cancels penalty for invalid show cause notice under Income-tax Act.

M/s. Subarna Rice Mill Versus Income-tax Officer, Wd-2 (3), Burdwan

The Tribunal allowed the appeal of the assessee, canceling the penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961. The penalty of Rs. ... Initiation of penalty u/s. 271(1)(c) - Non specification of charge - Held that:- Following the decision of Coordinate Bench of this Tribunal in the case of Jeetmal Choraria Vs. ACIT [2017 (12) TMI 883 - ITAT, KOLKATA] where it is held that the show cause notice issued u/s 274 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 does not strike out the inappropriate words - thus in these circumstances, we are of the view that imposition of penalty cannot be sustained - Decided in favor of assessee. Issues Involved:1. Validity of penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961.2. Defectiveness of the show cause notice issued under Section 274 read with Section 271 of the Act.3. Specificity of the charge in the show cause notice.Issue-wise Detailed Analysis:1. Validity of Penalty Imposed under Section 271(1)(c) of the Income-tax Act, 1961:The appeal concerns the penalty of Rs. 11,89,710/- imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income-tax Act, 1961. The penalty was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], Burdwan. The AO determined that the assessee had furnished inaccurate particulars of income to the tune of Rs. 45,76,023/-, leading to the imposition of the penalty. The assessee contested this decision, arguing that the penalty was invalid due to procedural defects in the show cause notice.2. Defectiveness of the Show Cause Notice Issued under Section 274 read with Section 271 of the Act:The assessee argued that the show cause notice issued under Section 274 of the Act did not specify the exact charge against them, i.e., whether the penalty was for 'concealment of particulars of income' or for 'furnishing inaccurate particulars of income.' This lack of specificity was highlighted as a significant procedural defect. The Tribunal noted that the AO had not struck out the irrelevant portion in the show cause notice, making it unclear what specific charge the assessee was being penalized for.3. Specificity of the Charge in the Show Cause Notice:The Tribunal referred to several judicial precedents to address the issue of specificity in the show cause notice. Notably, the Tribunal cited the decision of the Karnataka High Court in CIT vs. SSA’s Emerald Meadows, which held that a penalty under Section 271(1)(c) is invalid if the show cause notice does not specify whether the penalty is for concealment of income or furnishing inaccurate particulars of income. This decision was upheld by the Supreme Court, adding significant weight to the argument. The Tribunal also referred to similar decisions by the Bombay High Court and ITAT in other cases, which supported the view that a defective show cause notice invalidates the penalty proceedings.Conclusion:The Tribunal concluded that the imposition of the penalty could not be sustained due to the defective show cause notice, which failed to specify the exact charge against the assessee. The Tribunal followed the principle that where two views exist, the view favorable to the assessee should be adopted. Consequently, the penalty imposed and upheld by the CIT(A) was canceled, and the appeal of the assessee was allowed.Result:The appeal of the assessee was allowed, and the penalty imposed under Section 271(1)(c) was canceled. The order was pronounced in the open court on 14.06.2018.