“Section 274(2)”
The decision most relied on for Section 274(2) is CIT v. SSA’s Emerald Meadows (73 Taxmann.com 248), cited in 953 judgments on BharatTax.
Leading authorities on Section 274(2)
A notice issued under Section 274 read with Section 271(1)(c) is invalid if it fails to specify whether penalty proceedings are for concealment of particulars of income or furnishing inaccurate particulars of income. Such lack of specificity vitiates the penalty proceedings.
A penalty notice issued under section 274 read with section 271(1)(c) is invalid if it fails to specify the exact charge by not striking off the irrelevant limb (concealment of income or furnishing inaccurate particulars of income). Such an omnibus or vague notice renders the penalty proceedings bad in law, and any penalty imposed on its basis is liable to be quashed.
An order imposing penalty for failure to carry out a statutory obligation results from quasi-criminal proceedings. Penalty is not ordinarily imposed unless the party acted deliberately in defiance of law, was guilty of contumacious or dishonest conduct, or acted in conscious disregard of their obligation.
Penalty under section 271(1)(c) is not leviable for legally unsustainable claims if the assessee provides a substantiated, bona fide explanation without concealing facts or giving incorrect information. However, penalty is attracted if a claim is baseless, legally incorrect, and the explanation lacks bona fides.
A penalty levied under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars cannot be deleted merely due to technical defects in the penalty notice, such as not ticking the specific default, if the assessee understood the charges.
The Supreme Court, by dismissing the Special Leave Petition, affirmed that a penalty notice issued under Section 274 read with Section 271(1)(c) of the Income-tax Act is invalid if the Assessing Officer fails to specify the exact limb (furnishing inaccurate particulars of income or concealment of income) under which the penalty is initiated. This failure to frame a specific charge vitiates the penalty proceedings.
The Supreme Court in CIT v. Krishna SSK establishes principles for de novo assessment of co-operative sugar factories concerning the tax implications of sugar sales to members, acknowledging that such sales are regulated under Section 79(A) of the Maharashtra Co-operative Societies Act, 1960. These principles guide the computation of total income from these regulated transactions.
The strict rule of construction applies only to taxing provisions that create a charge for tax liability. It does not apply to machinery provisions that facilitate the assessment, collection, and recovery of tax.
