2019 (7) TMI 982 - AT - Income Tax

Penalty Cancelled: Invalid Notice Invalidates Proceedings

The Tribunal allowed the assessee's appeal against the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, due to a defective notice ... Penalty u/s 271(1)(c) - defective notice - HELD THAT:- We find that the notice dt. 26.03.2013 issued u/s. 274 r.w.s 271 does not specify the charge of offence committed by the assessee viz whether had concealed the particulars of income or had furnished inaccurate particulars of income. Hence the said notice is to be held as defective. See JEETMAL CHORARIA VERSUS A.C.I.T., CIRCLE-43, [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. Defective notice under Section 274 read with Section 271(1)(c) of the Act.3. Precedents and judicial decisions relevant to the issue of defective notice.Detailed Analysis:1. Validity of the Penalty Imposed under Section 271(1)(c):The appeal was filed by the assessee against the order dated 20.03.2019 for AY 2010-11 passed by the CIT(A), Durgapur, confirming the penalty imposed by the AO under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was imposed ex parte of the assessee.2. Defective Notice under Section 274 read with Section 271(1)(c):The primary contention raised by the assessee was that the statutory notice dated 26.03.2013 issued by the AO under Section 274 read with Section 271 of the Act was defective. The assessee relied on the decision of the Hon'ble Karnataka High Court in the case of CIT vs. SSA's Emerald Meadows, which was confirmed by the Hon'ble Supreme Court. The assessee argued that the notice did not specify whether the penalty was for concealment of income or for furnishing inaccurate particulars of income, making it defective.3. Precedents and Judicial Decisions:The Revenue, represented by the Ld. DR, relied on various judicial precedents to support the validity of the penalty despite the alleged defect in the notice. Key cases cited included:- The Hon'ble Calcutta High Court in Dr. Syamal Baran Mondal vs. CIT, which held that Section 271 does not mandate specific terms for recording satisfaction about concealment.- The ITAT Mumbai in Trishul Enterprises vs. DCIT, which dismissed the contention regarding the failure to strike off the relevant part of the notice under Section 274.- The Hon'ble Bombay High Court in CIT vs. Smt. Kaushalya, which stated that mere non-striking off of the inaccurate portion does not invalidate the notice.The Tribunal considered these precedents but found the reasoning in the case of SSA's Emerald Meadows more persuasive. It was noted that where two views exist, the one favoring the assessee should be adopted, as per the Hon'ble Supreme Court's principle in Vegetable Products Ltd.The Tribunal observed that the notice dated 26.03.2013 did not specify the charge against the assessee, making it defective. The Tribunal followed the decision of the Hon'ble Karnataka High Court in Manjunatha Cotton & Ginning Factory, which held that a vague notice attributable to non-application of mind by the AO invalidates the penalty proceedings.The Tribunal also noted that the Revenue's Special Leave Petition (SLP) against the decision in SSA's Emerald Meadows was dismissed by the Hon'ble Supreme Court, reinforcing the position that a defective notice cannot sustain a penalty.Conclusion:The Tribunal concluded that the penalty imposed under Section 271(1)(c) could not be sustained due to the defective notice issued under Section 274. The penalty of Rs. 9,24,927/- was canceled, and the appeal of the assessee was allowed.Order:The appeal of the assessee was allowed, and the order was pronounced in the open court on 17.07.2019.