2019 (6) TMI 1729 - AT - Income Tax

Penalty under section 271(1)(c) deleted due to defective notice under section 274 lacking specific charges

ITAT Amritsar held that penalty under section 271(1)(c) was invalid due to defective notice under section 274. The Assessing Officer issued a stereotyped ... Penalty u/s 271(1)(c) - non specifying the limb of the penalty imposable - stereotyped notice - defective notice u/s 274 - HELD THAT:- From the perusal of the notice issued u/s 274 r.w.s. 271(1)(c) apparently goes to prove that the Assessing Officer initiated the penalty proceedings by issuing the notice u/s 274/271(1)(c) of the Act without specifying whether the assessee has concealed ''particulars of income' or assessee has furnished 'inaccurate particulars of income', so as to provide adequate opportunity to the assessee to explain the show cause notice. Rather notice in this case has been issued in a stereotyped manner without applying any mind which is bad in law, hence is not a valid notice sufficient to impose penalty u/s 271(1)(c) of the Act., as held by the various Court including the Hon'ble Karnataka High Court in M/s SSA’s Emerald Meadows [2015 (11) TMI 1620 - KARNATAKA HIGH COURT] which has been affirmed by the Apex Court by dismissing the SLP and by the Apex Court in the case of ‘Dilip N. Shroff vs. JCIT’ [2007 (5) TMI 198 - SUPREME COURT] Hence, we have no hesitation to delete the penalty levied by the AO and affirmed by the Ld. CIT (A). Decided in favour of assessee. Issues:Appeal challenging penalty imposition u/s 271(1)(c) of the Income Tax Act, 1961. Additional ground raised regarding defective notice under section 274(1) read with section 271(1).Analysis:The judgment by the Appellate Tribunal ITAT Amritsar involved multiple issues regarding penalty imposition under section 271(1)(c) of the Income Tax Act, 1961. The first issue pertained to the Assessee's appeal challenging the levy of penalty amounting to Rs. 6.50 crores. The Assessee contended that the deposit made in a non-scheduled bank was a technical error due to ignorance of the law. The Assessee also argued that the maximum penalty should be based on interest earned, not the principal amount, citing relevant court decisions. The Tribunal considered the legal ground raised by the Assessee regarding the defective notice under section 274(1) read with section 271(1) and allowed it to be raised, following the principle established by the Hon'ble Supreme Court.The second issue involved the Revenue Department's appeal challenging the deletion of penalty imposed by the Assessing Officer. The Tribunal noted that the issue in this appeal was identical to the first appeal and dismissed it based on the decision made in the Assessee's appeal. Additionally, the Cross Objection filed by the Assessee was also dismissed as it did not survive after the decision on the Assessee's appeal.Regarding the legal ground raised by the Assessee, the Tribunal referred to the judgment in the case of M/s. SSA's Emerald Meadows and highlighted the importance of specifying the limb of penalty imposition in the notice under section 274. The Tribunal emphasized that the notice must clearly indicate whether the penalty is for concealing income or furnishing inaccurate particulars to allow the Assessee to respond appropriately. The Tribunal relied on various court decisions, including the Hon'ble Karnataka High Court and the Hon'ble Supreme Court, to support the conclusion that a notice without specifying the relevant limb is invalid and leads to non-application of mind by the Assessing Officer.In conclusion, the Tribunal allowed the Assessee's appeal, dismissed the Revenue Department's appeal, and rejected the Cross Objection. The judgment highlighted the significance of a valid notice specifying the grounds for penalty imposition and emphasized the need for clarity in penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961.