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2020 (2) TMI 261 - AT - Income TaxPenalty u/s 271AAB(1)(c) - Defective notice - whether the notice issued u/s 274 r.w.s. 271AAB of the Act suffers from fatal error and technical defect thereby not providing an opportunity to the assessee to plead his case? - Admission of additional legal ground - HELD THAT - In view of the ratio held by the Hon'ble Apex Court in the case of National Thermal Power Company Limited 1996 (12) TMI 7 - SUPREME COURT admit the additional legal ground for adjudication. For levying penalty u/s 271AAB of the Act the Ld. A.O needs to primarily issue notice u/s 274 of the Act so for initiating proceedings u/s 271AAB of the Act the Ld. A.O has to first pass through the hurdle of Section 274. Three notices issued to the assessee on 22.03.2016, 03.06.2016 and 16.09.2016, we find that there is no mention about various conditions provided u/s 271 AAB - A.O has very casually used the proforma used for issuing notice before levying penalty u/s 271(1)(c) of the Act for the concealment of income or furnishing of inaccurate particulars of income. Except mentioning the Section 271AAB of the Act in the notice it does not talk anything about the provision of section 271AAB. Certainly such notice has a fatal error and technically is not a correct notice in the eyes of law because it intends to penalize an assessee without spelling about the charge against the assessee. We, therefore respectfully following the judgment of jurisdictional High Court in the case of PCIT V/s Kulwant Singh Bhatia 2018 (5) TMI 960 - MADHYA PRADESH HIGH COURT , decision of Co-ordinate Bench of Chennai in the case of DCIT V/s R. Elangovan 2018 (4) TMI 1553 - ITAT CHENNAI and Jaipur Bench in the case of Ravi Mathur Vs DCIT 2018 (6) TMI 1128 - ITAT JAIPUR and in the given facts and circumstances of the case wherein the matter written in the body of the notice issued u/s 274 of the Act does not refer to the charges of provision of Section 271AAB of the Act makes the alleged notice defective and invalid and thus deserves to be quashed. Since the penalty proceedings itself has been quashed the impugned penalty stands deleted. Thus assessee succeeds on legal ground challenging the validity of notice issued u/s 274 r.w.s. 271AAB of the Act.
Issues Involved:
1. Validity of notice issued under section 274 read with section 271AAB of the Income Tax Act. 2. Confirmation of penalty under section 271AAB of the Income Tax Act. Detailed Analysis: 1. Validity of Notice Issued Under Section 274 r.w.s. 271AAB of the Income Tax Act: The primary issue raised by the assessee was the validity of the notice issued under section 274 read with section 271AAB of the Income Tax Act. The assessee contended that the notice was defective as it did not specify the charge against the assessee, making it illegal and unsustainable in law. The assessee relied on various judicial pronouncements, including the case of National Thermal Power Company Limited, to argue that the notice lacked the necessary details required under section 271AAB, such as the percentage of penalty and the specific clause under which the penalty was being levied. The Tribunal observed that the notice issued by the Assessing Officer (AO) did not specify the conditions under section 271AAB, such as the percentage of penalty (10%, 20%, or 30%) and the specific clause (a, b, or c) under which the penalty was being levied. The Tribunal noted that the AO had used a general proforma for issuing the notice, which did not meet the requirements of law. The Tribunal emphasized that the notice should clearly convey the charge against the assessee to provide a reasonable opportunity to defend themselves. The Tribunal referred to several judicial precedents, including the cases of Shri Vivek Chugh, DCIT vs. R. Elangovan, and Pr. CIT vs. Sandeep Chandak, to support its conclusion that a vague and non-specific notice is invalid. The Tribunal also noted that the Hon'ble Jurisdictional High Court in the case of PCIT vs. Kulwant Singh Bhatia had held that a defective notice under section 274 read with section 271(1)(c) is not sustainable in law. Based on these observations, the Tribunal concluded that the notice issued to the assessee was defective and invalid, as it did not specify the charge against the assessee under section 271AAB. Consequently, the penalty proceedings initiated based on such a defective notice were quashed. 2. Confirmation of Penalty Under Section 271AAB of the Income Tax Act: The second issue was the confirmation of the penalty of ?64,22,348/- levied by the AO under section 271AAB of the Income Tax Act. The assessee argued that the penalty was not in accordance with the law and should be deleted. The AO had initiated penalty proceedings under section 271AAB based on the addition of ?6,07,306/- to the assessee's income, which was not surrendered during the search and was subsequently added during the assessment. The Tribunal noted that since the penalty proceedings were quashed on the preliminary legal ground of a defective notice, there was no need to address the merits of the penalty. The Tribunal emphasized that the defective notice rendered the penalty proceedings invalid, and therefore, the penalty of ?64,22,348/- was deleted. Conclusion: The Tribunal allowed the appeal of the assessee on the preliminary legal ground, quashing the penalty proceedings initiated under section 271AAB due to a defective notice. Consequently, the penalty of ?64,22,348/- was deleted. The grounds raised on the merits of the penalty were dismissed as infructuous. The appeal for the Assessment Year 2014-15 was partly allowed.
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