Invalid penalty notice leads to cancellation of penalty under section 271(1)(c)

The Tribunal allowed the appeal, setting aside the CIT(A)'s order and directing the Assessing Officer to cancel the penalty levied under section 271(1)(c) due to the invalidity of the notice specifying the charge clearly. The Tribunal found that the penalty notice's ambiguity regarding the specific charge rendered it invalid, emphasizing the need to follow the view favorable to the assessee when two views are available.

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Issues:
Penalty under section 271(1)(c) for concealment of income and inaccurate particulars.

Analysis:
The appeal was filed against the order upholding the penalty under section 271(1)(c) for concealment of income. The Assessing Officer imposed the penalty after completing the assessment under section 143(3) by adding an amount on account of bad debts. The appellant argued that the notice issued did not specify the charge against them clearly, leading to ambiguity regarding the nature of the penalty. The appellant contended that the bad debt claimed was proper and did not amount to concealment or filing inaccurate particulars. The appellant cited relevant case law to support their argument.

The Departmental Representative supported the CIT(A)'s order, referring to a decision by the Hon'ble Madras High Court regarding the understanding of the notice's nature of default. The Departmental Representative also cited a decision by the Hon'ble Bombay High Court to argue that minor errors in the notice do not invalidate penalty proceedings. The appellant, in response, emphasized that if two views are possible on an issue, the one favorable to the assessee should be followed, citing a decision of the Hon'ble Supreme Court.

The Tribunal analyzed the issue of the sustainability of the penalty under section 271(1)(c) due to the inappropriate words in the notice not being struck off. Referring to a previous decision by a Co-ordinate Bench, the Tribunal found that the penalty notice's ambiguity regarding the specific charge pointed out rendered it invalid. The Tribunal concluded that the penalty was not sustainable and needed to be deleted, despite arguments citing non-jurisdictional High Court decisions. The Tribunal emphasized following the view favorable to the assessee when two views are available, as per the decision of the Hon'ble Supreme Court.

In conclusion, the Tribunal allowed the appeal, setting aside the CIT(A)'s order and directing the Assessing Officer to cancel the penalty levied under section 271(1)(c) due to the invalidity of the notice specifying the charge clearly.

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