Show Cause Notice issued by AO does not properly specify the charge against the assessee

The Income Tax Appellate Tribunal ruled that a show cause notice issued by the Assessing Officer (AO) was invalid because it failed to specify the exact charge against the assessee. The notice did not clearly state whether the penalty was for concealing income or providing inaccurate particulars, making it impossible for the assessee to properly defend themselves. Consequently, the penalty imposed and confirmed by the CIT(A) was cancelled.

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH: KOLKATA

[Before Shri J. Sudhakar Reddy, AM & Shri A. T. Varkey, JM]

I.T.A. No. 573/Kol/2019
Assessment Year: 2008-09

M/s. Chanda More F. L. (on) Shop
(PAN: AAEFC1893M)
Appellant 

Vs. 

Income-tax Officer, Ward-1(3), Asansol
Respondent

Date of virtual Hearing 16.12.2020
Date of Pronouncement 05.01.2021
For the Appellant N o n e
For the Respondent Smt. Ranu Biswas, Addl. CIT

ORDER

Per Shri A. T. Varkey, JM:

This appeal has been preferred by the assessee against the order of Ld. CIT(A), Asansol dated 21.01.2019 confirming the penalty imposed by the AO u/s. 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”).

2. None appeared on behalf of the assessee. However, at the outset, we note from a perusal of the show cause notice dated 29.10.2010 issued by the ITO, Ward-1(3), Asansolu/s. 274 of the Act wherein he does not specify the fault/charge on which he proposed to levy penalty against the assessee u/s. 271(1)(c) of the Act. We note that the AO has not stricken down either of the limbs which are distinct faults /charge specified in Section 271(1)(c ) of the Act i.e. ‘concealed the particular of income’ or ‘furnished inaccurate particulars of such income’. Without striking out one of the limbs, the assessee is called upon by the AO to defend both the faults/charges and since both the faults/charges arediscernible from the show cause notice, the show cause notice is bad in law for not specifying the fault for which the assessee is being proceeded against.

3. From the aforesaid discussion we note that the AO has not stricken out the irrelevantportion of the fault/charge which would have spelt out the specific fault/charge against theassessee. According to us, since the proposed show-cause notice itself is a defective, all subsequent proceedings are bad in law and the penalty imposed by the AO u/s. 271(1)(c) of the Act and confirmed by the Ld. CIT(A) should be cancelled. For taking such a decision we rely on the decision of the Hon’ble Karnataka High Court in the case of CIT vs. SSA’s Emerald Meadows in ITA No.380 of 2015 dated 23.11.2015 wherein the Hon’ble Karnataka High Court following its own decision in the case of CIT vs Manjunatha Cotton andGinning factory (2013) 359 ITR 565 took a view that imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act 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.

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