2018 (9) TMI 535 - AT - Income Tax

Appeal dismissed due to defective notice; penalty deletion upheld under Income-tax Act.

The appeal by the Revenue challenging the deletion of a penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961, was dismissed. The penalty ... Penalty u/s. 271(1)(c) - defective notice - Held that:- The 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. We are of the view that imposition of penalty cannot be sustained. Imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled. See Jeetmal Choraria Vs. ACIT [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, 1961.2. Adequacy of the show cause notice under Section 274 read with Section 271 of the Income-tax Act, 1961.Issue-Wise Detailed Analysis:1. Validity of the penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961:The appeal by the Revenue challenges the order of the Ld. CIT(A), Burdwan, which deleted the penalty imposed by the AO under Section 271(1)(c) of the Income-tax Act, 1961. The AO had imposed a penalty of Rs. 20,72,930/- on the assessee for the assessment year 2010-11, citing that the assessee made an undisclosed investment of Rs. 10,50,000/- in mutual funds and did not disclose an amount of TDS of Rs. 2,34,691/- and security charges receipt of Rs. 56,58,506/-. The AO added these amounts to the total income of the assessee as Undisclosed Income and Unexplained Investment, respectively. The penalty was imposed due to the lack of explanation from the assessee regarding these amounts. However, the Ld. CIT(A) deleted the penalty, leading the Revenue to appeal.2. Adequacy of the show cause notice under Section 274 read with Section 271 of the Income-tax Act, 1961:The crux of the matter lies in the adequacy of the show cause notice issued under Section 274 read with Section 271 of the Act. The ld. Counsel for the assessee argued that the show cause notice did not specify the specific charge against the assessee, i.e., whether it was for concealment of particulars of income or for furnishing inaccurate particulars of income. The notice was found to be vague as it did not strike out the irrelevant portion, leaving the assessee unaware of the exact charge. This argument was supported by several judicial precedents, including the decision of the Hon’ble Karnataka High Court in the case of CIT vs. SSA’s Emerald Meadows and the Hon’ble Bombay High Court in the case of CIT vs. Shri Samson Perinchery, which held that penalty imposition is invalid if the show cause notice does not specify the charge.The ld. DR opposed this submission by citing various case laws, but the Tribunal noted that the cited cases did not directly address the issue of specific charges in the show cause notice. The Tribunal referred to its earlier decision in the case of Jeetmal Choraria Vs. ACIT, which followed the principle that a defective show cause notice, which does not specify the charge, renders the penalty proceedings invalid.The Tribunal concluded that the show cause notice in the present case was indeed defective as it did not specify the charge against the assessee. Therefore, the imposition of penalty could not be sustained. The Tribunal upheld the order of the Ld. CIT(A) deleting the penalty and dismissed the appeal of the Revenue.Conclusion:The appeal of the Revenue was dismissed on the grounds that the show cause notice issued under Section 274 read with Section 271 of the Income-tax Act, 1961, was defective as it did not specify the charge against the assessee. The deletion of the penalty by the Ld. CIT(A) was sustained, and the order was pronounced in the open court on 07.09.2018.