Tribunal quashes Rs. 1,90,000 penalty due to jurisdiction issue and Show Cause Notice flaws.

The Tribunal quashed the penalty of Rs. 1,90,000/- imposed by the Assessing Officer under Section 271(1)(c) due to the invalid assumption of jurisdiction and the inadequacy of the Show Cause Notice. The appeal was allowed in favor of the assessee, and the other grounds of appeal were left open and not adjudicated.

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Issues Involved:
1. Validity of jurisdiction assumed by the Assessing Officer (AO) for imposing penalty under Section 271(1)(c) of the Income-tax Act, 1961.
2. Adequacy of the Show Cause Notice (SCN) issued under Section 274 read with Section 271(1)(c) of the Income-tax Act, 1961.

Summary:

Issue 1: Validity of Jurisdiction Assumed by the AO
The assessee challenged the jurisdiction assumed by the AO for imposing a penalty under Section 271(1)(c) of the Income-tax Act, 1961. The AO had issued a Show Cause Notice (SCN) under Section 274 read with Section 271(1)(c) on 30.10.2017, but failed to specify the exact default'whether it was for "concealment of income" or "furnishing inaccurate particulars of income." The Tribunal observed that both defaults are distinct and require clear specification. The AO's failure to strike off the irrelevant default in the SCN indicated non-application of mind, thus invalidating the jurisdiction assumed for imposing the penalty.

Issue 2: Adequacy of the Show Cause Notice
The Tribunal noted that the SCN issued by the AO used the conjunction "OR" between the two defaults, which did not clearly convey to the assessee the specific default for which the penalty proceedings were initiated. This ambiguity deprived the assessee of a fair opportunity to defend against the penalty. The Tribunal relied on several judicial pronouncements, including the Supreme Court's judgment in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, which emphasized the necessity of specifying the exact charge in the SCN. The Tribunal concluded that the SCN's failure to specify the default rendered the penalty proceedings invalid.

Conclusion:
The Tribunal quashed the penalty of Rs. 1,90,000/- imposed by the AO under Section 271(1)(c) due to the invalid assumption of jurisdiction and the inadequacy of the SCN. Consequently, the other grounds of appeal raised by the assessee were left open and not adjudicated. The appeal was allowed in favor of the assessee.

Order Pronounced:
The order was pronounced in open court on 14th September 2023.

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