2019 (8) TMI 772 - AT - Income Tax

Penalty u/s 271(1)(c) - vague/defective notice - non-striking of the irrelevant portion - additional ground - HELD THAT - We find that the decision of Hon'ble High Court of Telangana A.P. in the case of Smt. Baisetty Revathi 2017 (7) TMI 776 - ANDHRA PRADESH HIGH COURT being a latest judgment, has considered the very same issue and held that non-striking of the irrelevant portion of the notice issued u/sec. 274 is invalid. The very same judgment has been followed by the coordinate bench of this tribunal in the case of Konchada Sreeram 2017 (11) TMI 1164 - ITAT VISAKHAPATNAM . Therefore, respectfully following above referred to judicial precedents, we hold that the notice issued u/s 274 read with section 271, dated 18/03/2016 is invalid and, therefore penalty order passed by the Assessing Officer, dated 28/09/2016 is hereby cancelled.

Issues: Validity of penalty notice under section 271(1)(c) of the Income Tax Act, 1961

Detailed Analysis:

1. Background: The appeal by the assessee was against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2013-14, where penalty proceedings were initiated under section 271(1)(c) of the Income Tax Act, 1961.

2. Additional Ground Raised: The assessee raised an additional ground before the Tribunal challenging the validity of the penalty notice issued under section 271(1)(c) due to the Assessing Authority not striking off the irrelevant portion of the notice, making it invalid in law.

3. Legal Issue Raised: The Assessing Officer's notice was deemed vague by the assessee, leading to a legal issue regarding the validity of the notice. The assessee argued that the notice did not specify whether it was for concealment of income or furnishing inaccurate particulars, rendering it invalid.

4. Admission of Additional Ground: The Tribunal admitted the additional ground raised by the assessee, citing the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd., emphasizing the need to consider legal issues necessary for assessing an assessee's tax liability.

5. Validity of Notice: The Tribunal deliberated on the validity of the penalty notice issued by the Assessing Officer, considering arguments from both sides. The assessee contended that the notice was unclear about the nature of the penalty, while the Departmental Representative argued it was a premature but valid notice.

6. Decision on Notice Validity: After examining the notice issued under section 271(1)(c), the Tribunal found it to be vague and not specifying the grounds clearly, similar to precedents from the Hon'ble High Court of Telangana & A.P. The Tribunal referred to previous cases where notices lacking specificity were deemed invalid, leading to the cancellation of the penalty order.

7. Judicial Precedents: The Tribunal relied on recent judgments, such as the case of Smt. Baisetty Revathi, to determine the invalidity of the notice. The decision was also supported by a coordinate bench ruling in a similar case, emphasizing the importance of clear and specific grounds in penalty notices.

8. Cancellation of Penalty: Based on the findings regarding the invalidity of the notice, the Tribunal concluded that the penalty order passed by the Assessing Officer was not sustainable. Consequently, the penalty levied on the assessee was canceled, and the appeal was allowed in favor of the assessee.

In conclusion, the Tribunal's detailed analysis and reliance on legal precedents led to the cancellation of the penalty imposed on the assessee due to the invalidity of the penalty notice under section 271(1)(c) of the Income Tax Act, 1961.

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