Income Tax Penalty Notice u/s 274 is invalid if it does not specify the charge against assessee
The brief facts of the case is that the assessing officer had imposed penalty of Rs. 4,04,350/- u/s 271(1)(c) by issuing notice u/s 274 of The Income Tax Act (The Act). The assessee submitted that that the AO has issued show cause notice u/s 274 r.w.s. 271(1)(c) of the Act dated 31.03.2015 calling upon the assessee to show cause as to why penalty should not be imposed for concealment of particulars of income or for furnishing inaccurate particulars of income. The ld. Counsel argued that the said notice had been issued in a standard format and in a mechanical manner without application of mind by the AO. The ld counsel further argued that the notice had been issued without indicating the limb on which the penalty was proposed to be levied thereby depriving the assessee to reply to the specific charge on which the penalty was levied. In other words the AO had mentioned both the limbs as contemplated by in section 271(1)( c) of the Act which is a substantive defect going to the root of the matter and therefore the penalty notice is bad in law. Whereas, the ld. DR submitted that though the AO had mentioned both the limbs in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act but the assessee had been given proper and sufficient opportunity to respond to the said notice and therefore it cannot be said that the assessee was deprived of the opportunity to reply to the specific charge.
Upon hearing both the sides, ITAT was of the view that non-mentioning of relevant limb in the penalty notice is a substantive defect and infirmity which goes to the root of the matter and is not curable a the later stage. The case of the assessee is squarely covered by the decision of the Hon’ble Apex Court case of CIT vs. SSA’s Emerald Meadows (2016) 73 Taxman 248. In the said decision , the Hon’ble Court has dismissed the SLP filed by the Revenue by observing that there is no merit in the petition of the revenue upholding the order of Hon’ble High Court wherein the decision of the coordinate division bench of Hon’ble Karnataka High Court in the case of CIT Vs Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565 has been followed. In all the above decision it has been held that non mentioning of relevant limb or non striking off of irrelevant limb in the penalty notice is a substantive defect in the imitation of proceedings itself and the consequent penalty levied on the basis of such defective notice can not be sustained. In view of these facts and circumstances of the case, ITAT inclined to set aside the order passed by the Ld. CIT(A) and direct the AO to delete the penalty.
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