2021 (11) TMI 135 - AT - Income Tax

Invalid Penalty Proceedings Due to Lack of Specific Contravention in Notice

Jagannath Cement Works (P) Limited Versus Income Tax Officer, Ward-3 (4) Kolkata

The Tribunal found the initiation of penalty proceedings without specifying the contravention in the notice to be invalid. Relying on judicial precedents, ... Penalty u/s 271(1)(c) - non specific mention in the show-cause notice issued u/s 274 - whether the assessee is guilty of having 'furnished inaccurate particulars of income' or of having 'concealed particulars of such income', the initiation of penalty proceedings itself was bad in law - HELD THAT:- Whether the assessee is guilty of having 'furnished inaccurate particulars of income' or of having 'concealed particulars of such income', the initiation of penalty proceedings itself was bad in law and the penalty order passed in pursuance thereof is liable to be quashed being invalid. He has invited our attention to the relevant penalty notice to point out that the irrelevant portion, viz. 'furnished inaccurate particulars of income' or 'concealed particulars of such income' was not struck off by the AO. It is observed that the Coordinate Bench of this Tribunal in the case of Suvaprasanna Bhattacharya [2015 (12) TMI 43 - ITAT KOLKATA] had an occasion to consider a similar issue in the identical fact situation and the order passed by the AO imposing penalty u/s 271(1)(c) was held to be invalid by the Tribunal relying on the decision of the Hon'ble Karnataka High Court in the case of CIT & Another -vs.-Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] In our opinion, the decision of the Coordinate Bench of this Tribunal rendered in the case of Suvaprasanna Bhattacharya [2015 (12) TMI 43 - ITAT KOLKATA] by relying on the decision of the Hon'ble Karnataka High Court in the case of CIT & Another -vs.-Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] is squarely applicable in the present case.- Decided in favour of assessee. Issues:Initiation of penalty proceedings under section 271(1)(c) without specific mention in the show-cause notice, validity of penalty order.Analysis:The appeal was against the confirmation of a penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The assessee, a Company involved in job works and trading, filed its return declaring total income. The Assessing Officer determined the total income after making additions for unexplained cash expenditure. Penalty proceedings were initiated, and the penalty was imposed since the explanation offered was not accepted. The CIT(Appeals) confirmed the penalty, leading to the appeal before the Tribunal.During the hearing, the assessee challenged the initiation of penalty proceedings, arguing that the penalty notice did not specify whether the assessee was guilty of furnishing inaccurate particulars of income or concealing income. The Tribunal referred to a similar case and a decision by the Hon'ble Karnataka High Court, stating that a penalty notice without specifying the contravention is invalid. The Tribunal also cited a case from the Hon'ble Calcutta High Court, which upheld the cancellation of a penalty due to a defective notice. Relying on these precedents, the Tribunal canceled the penalty imposed under section 271(1)(c) and allowed the appeal of the assessee.In conclusion, the Tribunal found that the initiation of penalty proceedings without specifying the contravention in the notice was invalid, following judicial pronouncements and decisions by the Hon'ble Jurisdictional High Court. As a result, the penalty imposed on the assessee was canceled, and the appeal was allowed.