Penalty under Section 271(1)(c) set aside for defective notice lacking specific charges against assessee

ITAT Raipur set aside penalty under Section 271(1)(c) due to defective notice. The AO failed to strike off irrelevant defaults and did not clearly specify the exact charges against the assessee in the show cause notice. This left the assessee unable to properly defend against the penalty proceedings. The tribunal held that the AO's failure to discharge statutory obligations under Section 274(1) violated procedural requirements, making the penalty unsustainable. The CIT(A)'s order upholding the penalty was reversed, and the penalty was quashed in favor of the assessee.

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Issues Involved:
1. Validity of Penalty under Section 271(1)(c) of the Income Tax Act.
2. Specificity of defaults in Show Cause Notices (SCNs) issued under Section 274 read with Section 271(1)(c).

Summary:

1. Validity of Penalty under Section 271(1)(c) of the Income Tax Act:
The appeal by the assessee challenges the penalty order under Section 271(1)(c) of the Income Tax Act, 1961, imposed by the Assessing Officer (A.O) and upheld by the Commissioner of Income-Tax (Appeals). The A.O had originally assessed the income of the assessee by adding unexplained cash deposits and undisclosed profit from share trading, leading to a penalty of Rs. 3,96,750/-. The CIT(A) upheld this penalty, noting the assessee's failure to explain the source of cash credits and undisclosed income during both assessment and appellate proceedings.

2. Specificity of defaults in Show Cause Notices (SCNs) issued under Section 274 read with Section 271(1)(c):
The assessee argued that the A.O failed to specify the exact default in the SCNs dated 29.12.2017 and 31.12.2017, which mentioned both "concealment of income" and "furnishing of inaccurate particulars of income" without striking off the irrelevant part. This lack of specificity allegedly deprived the assessee of a clear opportunity to defend against the penalty. The Tribunal observed that the SCNs did not validly convey the specific default, thus violating the statutory obligation to inform the assessee clearly. The Tribunal held that this failure rendered the penalty proceedings invalid.

Conclusion:
The Tribunal quashed the penalty of Rs. 3,96,750/- imposed under Section 271(1)(c), citing the A.O's failure to specify the exact default in the SCNs, which violated the mandate of Section 274(1). Consequently, the appeal was allowed, and the penalty order was set aside. The Tribunal refrained from addressing other contentions regarding the merits of the case.

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