INCOME TAX ACT, 1961

Section 271(1)(c) Section 274

Penalty under section 271(1)(c) - Validity - Non-specification of charge in notice issued under section 274 -

Assessee had challenged the order of CIT(A) wherein the CIT(A) confirmed the order of the AO imposing penalty on the assessee under section 271(1)(c). Before the CIT(A), the assessee submitted that show cause notice, before imposing penalty, issued under section 274 does not specifically mention the charge against the assessee, i.e., whether it was with regard to furnishing of inaccurate particulars of income or concealing particulars of income. CIT(A), however, did not agree with the submission of the assessee and confirmed the order of the AO imposing penalty on the assessee.Held: In the show cause notice issued under section 274. AO had not struck down the irrelevant portion as to whether the charge against the assessee was for concealing particulars of income or furnishing of inaccurate particulars of income. On the facts of the present case, evidently the show cause notice under section 271(1)(c) dated 31-12-2008 was defective as it did not spell out the grounds on which the penalty was sought to be imposed. Imposing of penalty under section 271(1)(c) was bad in law and invalid for the reason that the show cause notice under section 274 does not specify the charge against the assessee as to whether it was for concealment of particulars of income or furnishing of inaccurate particulars of income. The assessee further brought to notice that as against the decision of the Karnataka High Court the revenue preferred an appeal in [SLP in CC No.11485 of 2016] : 2016 TaxPub(DT) 4242 (SC) and the Supreme Court by its Order, dated 5-8-2016 dismissed the SLP preferred by the department. The show cause notice under section 271(1)(c) does not strike out the inappropriate words. In these circumstances, imposition of penalty could not be sustained.

Followed:CIT & Anr. Manjunatha Cotton & ginning Factory, (2014) 359 ITR 565 (Karn) : 2014 TaxPub(Dt) 202 (Karn-HC), CIT v. SA's Emerald Meadows ITA No. 380 pf 2015, dated 23-11-2015] : 2018 TAxPub(DT) 953 (Karn-HC). Distinguished:CIT v. Durga Enterprises (2014) 44 Taxmann.com 442 (Karn), Skylight Hospitality LLP v. Asstt. CIT (2018) 92 Taxmann.com 93 (SC) : 2018 TAxPub(Dt) 1823 (SC) and Earthmoving Equipment Service Corporation v. DCIT, (2017) 84 taxmann.com 51 (Mum) : 2017 TaxPub(DT) 1242 (Mum-Trib).

REFERRED : P.M. Abdulla v. ITO, ITA No. 1223 & 1224/Bang/2012, Order, dated 17-10-2016 and A Nagarju [ITA No. 2196/Bang/2016 dated 6-4-2018].

FAVOUR : In assessee's favour.

A.Y. : 2006-07

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