2018 (5) TMI 1924 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice - non-striking off the irrelevant charge - HELD THAT - The issue involved in the present case is also covered by the order of a coordinate bench of the Tribunal in the case of Meherjee Cassinath Holdings Pvt. Ltd. Vs. ACIT, Circle 4(2), Mumbai 2017 (5) TMI 904 - ITAT MUMBAI wherein the Tribunal after deliberating at length on the issue under consideration in the backdrop of various judicial pronouncements, had concluded that the non-striking off the irrelevant charge in the notice clearly reflects the non application of mind by the A.O, and would resultantly render the order passed under Sec. 271(1)(c) as invalid and void ab initio. We thus, without prejudice to our observations on non-maintainability of the penalty imposed by the A.O under Sec. 271(1)(c) on merits, also vacate the same for the reason that even otherwise as he had failed to strike off the irrelevant default in the SCN issued to the assessee, hence there is a clear absence of valid assumption of jurisdiction on his part. The order passed by the CIT(A) is set aside and penalty imposed under Sec. 271(1)(c) is vacated. - Decided in favour of assessee.

Summary

Issues:
Jurisdiction for imposing penalty under Sec.271(1)(c) and maintainability of penalty under Sec.271(1)(c) on merits.

Analysis:

1. Background: The appeal was filed against the order passed by the CIT(A)-38, Mumbai, which arose from the A.O's order under Sec.271(1)(c) for A.Y 2009-10, regarding the purchase of an immovable property.

2. Assessment Proceedings: The A.O found that the assessee had acquired a share in a property and made an addition to the income under Sec. 56(2)(vii)(b). Penalty proceedings were also initiated under Sec. 271(1)(c) by issuing a 'Show cause' notice.

3. CIT(A) Decision: The CIT(A) sustained the addition under Sec. 56(2)(vi) but not under Sec. 56(2)(vii), as it was not an outright transfer. The penalty imposed by the A.O was confirmed by the CIT(A).

4. Grounds of Appeal: The appeal challenged the penalty under Sec. 271(1)(c) on the grounds of jurisdiction and maintainability. The A.R argued that the penalty for A.Y 2009-10 was invalid due to the assignment deed being from A.Y 2008-09.

5. Tribunal Decision: The Tribunal noted that the assignment deed was from A.Y 2008-09, making the penalty for A.Y 2009-10 invalid. The 'Show cause' notice lacked specificity, violating Sec. 274. Citing legal precedents, the Tribunal quashed the penalty due to the absence of valid jurisdiction.

6. Legal Precedents: The Tribunal referenced Supreme Court and High Court judgments emphasizing the importance of specifying the default in penalty notices. The non-striking off of irrelevant charges in the notice rendered the penalty invalid.

7. Conclusion: The Tribunal allowed the appeal, setting aside the penalty of &8377;1,06,570 imposed under Sec. 271(1)(c) for lack of valid jurisdiction. The CIT(A)'s order was overturned, and the penalty was vacated.

This detailed analysis of the judgment highlights the issues of jurisdiction and maintainability of the penalty under Sec. 271(1)(c) in a thorough and legally accurate manner.