2020 (10) TMI 717 - AT - Income Tax

Penalty levied u/s 271(1)(c) - Defective notice - non striking inappropriate words - no mention under which limb of provisions of Section 271(1)(c) of the Act the Assessing Officer has levied penalty? - HELD THAT - Notices u/s 274 r.w.s. 271 was issued on 29.12.2017 for the assessment year 2010- 2011 and 2011-12 and the inappropriate words in the said notice have not been struck off. Therefore it is not understood as to under which limb of provisions of Section 271(1)(c) AO has levied penalty. Since the said show cause notices issued u/s 274 did not specify the charge against the assessee as to whether it was for concealing the particulars of income or for furnishing inaccurate particulars of income therefore the penalty orders passed under Section 271(1)(c) of the Act in pursuance to the said notices were rightly reversed by ld CIT(A) - SEE M/S SSA S EMERALD MEADOWS 2015 (11) TMI 1620 - KARNATAKA HIGH COURT AND M/S MANJUNATHA COTTON AND GINNING FACTORY OTHS. M/S. V.S. LAD SONS 2013 (7) TMI 620 - KARNATAKA HIGH COURT - Decided in favour of assessee.

Summary

Issues:
Appeals against deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961 for assessment years 2010-11 & 2011-12.

Analysis:
1. The revenue challenged the deletion of penalty by the ld CIT(A) based on the decision of Hon'ble Supreme Court in CIT vs. SSA's Emerald Meadows. The Departmental Representative argued that the decision in Shanmugavael Nadar case stated that rejection of SLP through a non-speaking order is not a binding precedent. The revenue contended that the penalty should be reinstated.

2. The assessee's counsel supported the ld CIT(A)'s decision, emphasizing that the penalty notices did not specify the charge against the assessee clearly. The notices issued under section 274 r.w.s. 271 lacked clarity on whether it was for concealing income or furnishing inaccurate particulars. The counsel cited the decision of Hon'ble Karnataka High Court in CIT vs. Manjunatha Cotton & Ginning Factory, upheld by the Supreme Court in CIT vs. SSA's Emerald Meadows, to justify the deletion of penalty.

3. The ITAT found that the notices issued by the Assessing Officer did not clearly specify the grounds for initiating penalty under section 271(1)(c). The inappropriate words in the notices were not struck off, leading to ambiguity. The ITAT noted that the ld CIT(A) relied on the Karnataka High Court's decision in Manjunatha Cotton case and the Supreme Court's decision in SSA's Emerald Meadows case to delete the penalty. The ITAT upheld the ld CIT(A)'s decision, stating that the penalty was rightly deleted due to lack of clarity in the penalty notices.

4. The ITAT concluded that the ld CIT(A) followed the judicial discipline by adhering to the decisions in Manjunatha Cotton and SSA's Emerald Meadows cases. As the penalty notices did not specify the grounds clearly, the penalty levied under section 271(1)(c) was rightly deleted. The ITAT dismissed the revenue's appeals and upheld the orders of the ld CIT(A) to delete the penalties.

In summary, the ITAT upheld the deletion of penalties for the assessment years 2010-11 & 2011-12, citing lack of clarity in the penalty notices issued under section 274 r.w.s. 271 and following the decisions of the Karnataka High Court and the Supreme Court in related cases.