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of <h1>Penalty Notice Deemed Invalid; Appeal Partly Allowed</h1> <h3>Sangeeta Management Consultancy Private Ltd. Indore Versus ITO-5 (1) Indore</h3> Sangeeta Management Consultancy Private Ltd. Indore Versus ITO-5 (1) Indore - TMI Issues Involved:1. Legality of the penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961.2. Validity of the show cause notice issued under Section 274 read with Section 271(1)(c).3. Whether the penalty was imposed for concealment of income or furnishing inaccurate particulars of income.Detailed Analysis:1. Legality of the Penalty Proceedings under Section 271(1)(c):The assessee challenged the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, amounting to Rs. 8,00,000/-. The penalty was upheld by the CIT(A)-II, Indore. The core argument was that the penalty proceedings were initiated without specifying the exact charge, i.e., whether it was for concealment of income or for furnishing inaccurate particulars of income. The Tribunal analyzed the notice issued under Section 274 read with Section 271(1)(c) and found it defective as it did not specify the charge clearly. The Tribunal relied on several judgments, including those from the Hon'ble Supreme Court and High Courts, which emphasized the necessity of specifying the charge in the penalty notice to uphold the principles of natural justice.2. Validity of the Show Cause Notice Issued under Section 274 Read with Section 271(1)(c):The Tribunal scrutinized the show cause notice issued to the assessee, which mentioned both charges—concealment of income and furnishing inaccurate particulars of income—without specifying which one applied. This ambiguity was deemed a significant defect. The Tribunal referred to the judgment in the case of Pr. CIT vs. Kulwant Singh Bhatia, where the Hon'ble High Court of Madhya Pradesh held that a notice must be specific about the charge to meet legal requirements. The Tribunal also cited the Supreme Court's ruling in CIT vs. SSA’s Emerald Meadows, which supported the necessity of a specific charge in the notice.3. Whether the Penalty was Imposed for Concealment of Income or Furnishing Inaccurate Particulars of Income:The Tribunal highlighted that the Assessing Officer (AO) failed to clearly indicate whether the penalty was for concealment of income or for furnishing inaccurate particulars of income. This lack of clarity was found to be a critical flaw, rendering the penalty proceedings void ab initio. The Tribunal cited the case of Varad Mehta, where a similar issue was adjudicated, emphasizing that a notice must explicitly mention the specific charge to ensure compliance with the principles of natural justice.Conclusion:The Tribunal concluded that the penalty notice issued under Section 274 read with Section 271(1)(c) was invalid due to the lack of specificity regarding the charge. Consequently, the subsequent penalty proceedings were deemed void ab initio. The Tribunal allowed the legal ground raised by the assessee, rendering other arguments on the merits of the penalty academic and dismissed them as infructuous. The appeal of the assessee was partly allowed.
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