C.VIJAYALAKSHMI,SIVAKASI vs. DCIT, CC-2, MADURAI
Facts
The assessee appealed against the penalty order confirmed by the Ld. CIT(A) for AY 2012-13. The assessee's contention was that the penalty notice issued by the AO was invalid as it did not specify the exact fault for which the penalty was proposed.
Held
The Tribunal held that the show cause notice issued by the AO was bad in law because it did not specify the exact fault (concealment of income or furnishing inaccurate particulars) for which the penalty was being levied. This defect vitiated the penalty itself.
Key Issues
Whether the penalty notice issued under Section 271(1)(c) r.w.s. 274 of the Income Tax Act, 1961, is invalid for not specifying the exact fault for which penalty is proposed to be levied?
Sections Cited
271(1)(c), 274
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:: 2 :: C. Vijayalakshmi
At the outset, the Ld.AR of the assessee raised a legal issue that the penalty levied u/s.271(1)(c) of the Income Tax Act, 1961 (hereinafter in short 'the Act') is not sustainable, since the notice issued by the AO before imposing of penalty was invalid, because, it didn't specify the exact fault on which the penalty is proposed to be levied and drew our attention to show cause notice issued by the AO u/s.271(1)(c) r.w.s.274 of the Act dated 31.12.2016 for AY 2012-13, which we perused and will adjudicate this legal issue.
As discussed, the assessee has assailed the action of the Ld. CIT(A) confirming the penalty u/s.271(1)(c) of the Act, which penalty was imposed by AO according to assessee without having juri iction. According to assessee, the Ld.CIT(A) while passing the impugned order has not considered the fact that the notice issued by the AO before imposition of the penalty didn't specify the exact fault on which the penalty is proposed to be levied i.e. whether the assessee had furnished inaccurate particulars of income or have concealed the income and hence notice is bad in law, which vitiates levy of penalty.
In respect of the aforesaid legal issue, first of all we have perused the show cause notice (SCN) issued by the AO u/s 271(1)(c) r.w.s. 274 of the Act dated 31.12.2016 for AY 2012-13 by virtue of which the AO gave notice to the assessee 'as to why the penalty should not be levied u/s.271(1)(c) of the Act or not? On perusal of of the the impugned SCN dated :: 3 :: C. Vijayalakshmi 31.12.2016, we note that the fault specified in Section 271(1)(c) of the Act, is given i.e. “the assessee have concealed the particulars of his income" or "furnishing inaccurate particulars of such income", meaning the AO has put to notice the assessee on both the faults, In other words, without striking down the inapplicable fault which could have specified which fault AO has found assessee at default [i.e. whether he is proposing penalty for the fault of "concealment of particulars of income" or "for furnishing of inaccurate particulars of income"], he has put to notice assessee for default of both faults. We note that by not striking down one of fault, the assessee was unable to defend properly the charge/fault, against which, the AO was proposing to levy penalty. In such factual background, the Tribunal has consistently held such notices to be bad in law for not specifying the specific fault for which the assessee being proceeded against for levy of penalty. And this action of the Tribunal has been upheld by several judgments of the various High Courts including the Hon'ble juri ictional High Court of Madras in the case of Babuji Jacob v. ITO reported in (2021) 430 ITR 259 (Mad). We also note that the Full bench of the Hon'ble Bombay High Court in the case of Mohd. Farhan A. Shaikh v. DCIT reported in [2021] 434 ITR 1 (Bombay) dated 11.03.2021 held that the show cause notice issued prior to levy of penalty without specifying the fault/charge against which the assessee is being proceeded, would vitiate the penalty itself. And thus, the Hon'ble High :: 4 :: didn't explicitly convey to the assessee, the specific fault/charge the assessee is being proceeded for levy of penalty. Resultantly, the show cause notice is found to be defective/invalid, and therefore, it is held to be bad in law. For doing that we also rely on the decision of the Hon'ble Karnataka High Court in the case of CIT v. Manjunatha Cotton and Ginning Factory reported in (2013) 359 ITR 565 (Kar) and the Department's SLP against it has been dismissed by the Hon'ble Supreme Court. We also find that Hon'ble Karnataka High Court in the case of CIT v. SSA's Emerald Meadows, reported in (2016) 73 taxmann.com 241 (Kar) endorsed the same view in Manjunatha Cotton and Ginning Factory (supra) and held as under:- "
The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (for short 'the Act'), to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the in the case of CIT Vs. Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565/218 Taxman 423/35 taxmann.com 250(Kar). :: 5 :: C. Vijayalakshmi
In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court. The appeal is accordingly dismissed."
Respectfully following the judicial precedents as well as the binding decision of the Hon'ble juri ictional High Court in the case of Babuji Jacob (supra), the Full bench of the Hon'ble Bombay High Court's in the case of Mohd. Farhan A. Shaikh (supra), we hold the impugned notice issued dated 31.12.2016 for AY 2012-13 to be bad in law and consequently, direct the deletion of the penalty levied in this case.
In the result, appeal filed by the assessee is allowed. Order pronounced on the 31st day of December, 2024, in Chennai. (जगदीश) (एबी टी. वर्की) (JAGADISH) (ABY T. VARKEY) लेखा सदस्य/ACCOUNTANT MEMBER न्यायिक सदस्य/JUDICIAL MEMBER चेन्नई/Chennai, दिनांक/Dated: 31st December, 2024. TLN, Sr.PS आदेश की प्रतिलिपि अग्रेषित/Copy to: 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT, Chennai / Madurai / Salem / Coimbatore. 4. विभागीयप्रतिनिधि/DR 5. गार्डफाईल/GF शमारणित सच्ची प्रति CERTIFIEDउप/सहायक पंजीवन / डी.डी.ओ./ DYJASST.
