2019 (4) TMI 1026 - AT - Income Tax

Appeal allowed, penalty canceled under Income Tax Act for defective notice, order invalidated.

The Tribunal allowed the assessee's appeal for Assessment Year 2005-06, canceling the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. ... Condonation of delay - delay of 19 days in filing this appeal before the Tribunal  - health issues - reasonable and sufficient cause for delay - HELD THAT:- MST. KATIJI AND OTHERS [1987 (2) TMI 61 - SUPREME COURT]  laid down the principles for dealing with matters relating to condonation of delay, and the reasons of health issues cited by the assessee in the Affidavit (supra), we are of the view that the assessee was prevented by reasonable and sufficient cause from filing the appeal for Assessment Year 2005-06 on time. Thus Delay condoned. Defective notice issued u/s 274 r.w.s. 271 - non specification of charge - defective notice - HELD THAT:-  Notice issued by the Assessing Officer under Section 274 read with Section 271(l)(c) to be bad in law as it did not specify which limb of Section 271(l)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013 (7) TMI 620 - KARNATAKA HIGH COURT) - Decided in favour of assessee. Issues Involved:1. Condonation of delay in filing the appeal.2. Validity of penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961.3. Defective notice under section 274 r.w.s. 271 of the Income Tax Act, 1961.Detailed Analysis:1. Condonation of Delay in Filing the Appeal:The assessee's appeal was delayed by 19 days. The assessee submitted an affidavit explaining the delay due to health issues, specifically back pain and subsequent bed rest, which prevented timely communication with the authorized representative. The Tribunal considered the principles laid down by the Hon’ble Supreme Court in MST Katiji and Others (1987) 167 ITR 471 (SC), which emphasize a liberal approach in condonation matters to serve substantial justice. The Tribunal found the reasons provided to be reasonable and sufficient, thereby condoning the delay and admitting the appeal for adjudication.2. Validity of Penalty Proceedings under Section 271(1)(c) of the Income Tax Act, 1961:The assessee was penalized under section 271(1)(c) for an addition of Rs. 8,41,427/- due to the denial of exemption under section 54F, leading to a recomputation of capital gains. The penalty of Rs. 1,75,000/- was upheld by the CIT(A). The assessee contended that there was no concealment of income nor furnishing of inaccurate particulars, arguing that the penalty was unjustified and excessive.3. Defective Notice under Section 274 r.w.s. 271 of the Income Tax Act, 1961:The assessee raised additional grounds challenging the validity of the penalty notice issued under section 274 r.w.s. 271. It was argued that the notice was defective as it did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars. The Tribunal referred to the Hon’ble Karnataka High Court’s decision in CIT Vs. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar), which held that such ambiguity in the notice renders it invalid. The Tribunal found that the AO had not struck off the irrelevant portions in the notice, making it unclear which default was being penalized.The Tribunal also cited the Hon’ble Karnataka High Court’s decision in SSAS Emerald Meadows, which invalidated penalties based on similarly defective notices, a decision upheld by the Hon’ble Supreme Court.Conclusion:The Tribunal concluded that the notice issued under section 274 r.w.s. 271 was indeed defective and invalid. Consequently, the penalty proceedings and the resulting penalty order were also invalid. Therefore, the penalty levied under section 271(1)(c) for the Assessment Year 2005-06 was cancelled. Given this finding, the other grounds of appeal regarding the merits of the penalty became academic and were not adjudicated.Result:The assessee’s appeal for Assessment Year 2005-06 was allowed, and the penalty under section 271(1)(c) was cancelled.Order Pronouncement:The order was pronounced in the open court on April 16, 2019.