No Penalty since Notice u/s 274 do not Specify the Charge against Assessee and does not Strike Out the Inappropriate Words: ITAT [Read Order]

The Kolkata bench of ITAT recently held that penalty cannot be levied since show cause notice issued in the present case under Section 274 of the Income Tax Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income.

In instant case assessee has challenged the order of CIT(A) whereby the CIT(A) confirmed the order of AO imposing penalty u/s 271(1)(c) of the Income Tax Act, 1961 (Act).

During the assessment proceedings the AO came to know that assessee undisclosed a salary amount received from other party M/s. Vodafone Essar Spacetel Ltd. Besides the above interest income was also not declared in the return of income.

Based on this fact AO made additions and levied penalty against the assessee u/s 271 (1)(c) of the Act.

During the course of penalty proceedings, the assessee argued that the undisclosed income was happened not intentionally and was due to non-receipt of Form 16 from the previous employer M/s. Vodafone Essar Spacetel Ltd. This was not accepted by the revenue authorities and the AO imposed penalty equal to 200% of tax evaded amount and the CIT (A) later reduced to 100% of the tax sought to be evaded.

Before the tribunal the counsel for assessee contented that in the absence of a specific charge in the show cause notice u/s 274 of the Act, penalty levied is invalid. The assessee drew the attention of decision of the Karnataka High Court in the case of CIT vs. SSA’s Emerald Meadows wherein the Court viewed the penalty u/s 274 as bad in law as the show cause notice does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income.

While hearing both the parties’ contention and observing the Show cause notice issued in the present case, the tribunal found the contention of assessee was right and in such circumstances penalty cannot be sustained.

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