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2020 (2) TMI 946 - AT - Income TaxLevy of penalty u/s 271AAB - Validity of notice issued u/s 274 - 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 her case? - HELD THAT - From notice issued to the assessee, we find that there is no mention about various conditions provided u/s 271 AAB of the Act. In the notice dated 22.03.2016 the Ld. 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. It does not talk anything about various clauses of section 271AAB of the Act for levying penalty @10%/20%/30%. 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 specific charge against the assessee. 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. We accordingly allow the legal ground raised by the assessee challenging the validity of notice issued u/s 274 r.w.s. 271AAB of the Act and quash the penalty proceeding as void ab intio. - Decided in favour of assessee.
Issues Involved:
1. Validity of the penalty notice issued under Section 271AAB read with Section 274 of the Income Tax Act, 1961. 2. Confirmation of the penalty by the Commissioner of Income Tax (Appeals) [CIT(A)]. 3. Technical defect in the penalty notice. 4. Compliance with natural justice principles. 5. Applicability of judicial precedents. Issue-Wise Detailed Analysis: 1. Validity of the Penalty Notice Issued Under Section 271AAB Read with Section 274: The primary issue was whether the notice issued under Section 274 read with Section 271AAB of the Income Tax Act, 1961, was valid. The Tribunal observed that the notice 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 emphasized that a valid notice must clearly convey the charge against the assessee to provide a reasonable opportunity to be heard, as mandated by Section 274(1) of the Act. 2. Confirmation of the Penalty by the CIT(A): The CIT(A) had confirmed the penalty of ?2,04,900 levied by the Assessing Officer (AO) under Section 271AAB. The Tribunal noted that the CIT(A) upheld the penalty without addressing the technical defect in the notice. The Tribunal found this confirmation erroneous because the notice itself was defective. 3. Technical Defect in the Penalty Notice: The Tribunal found that the notice issued to the assessee was a generic proforma used for penalties under Section 271(1)(c) and did not specifically mention the conditions under Section 271AAB. This omission was deemed a "fatal error" and made the notice technically defective. The Tribunal relied on judicial precedents, including the Co-ordinate Bench decisions in the cases of DCIT vs. R. Elangovan and Ravi Mathur vs. DCIT, which held that such defective notices are invalid. 4. Compliance with Natural Justice Principles: The Tribunal stressed that the principles of natural justice require that the notice should be clear and specific about the charge against the assessee. The defect in the notice deprived the assessee of a fair opportunity to contest the penalty, thus violating the principles of natural justice. The Tribunal cited the Hon'ble Supreme Court's decision in the case of Dilip N Shraf, which emphasized compliance with natural justice in quasi-criminal proceedings under the Income Tax Act. 5. Applicability of Judicial Precedents: The Tribunal referred to several judicial precedents, including: - PCIT vs. Kulwant Singh Bhatia: The Hon'ble Jurisdictional High Court held that a notice must be specific about the charge to satisfy the requirements of natural justice. - DCIT vs. R. Elangovan: The Co-ordinate Bench held that a vague notice under Section 271AAB is invalid. - Pr. CIT vs. Sandeep Chandak: Distinguished by the Tribunal, as the defect in the notice in that case was covered under Section 292BB, which was not applicable in the present case. Conclusion: The Tribunal concluded that the penalty notice issued under Section 274 read with Section 271AAB was defective and invalid due to the lack of specificity regarding the conditions of the penalty. Consequently, the penalty proceedings were quashed as void ab initio, and the penalty of ?2,04,900 was deleted. The Tribunal allowed the appeal on legal grounds, rendering other grounds and arguments on the merits of the penalty academic and infructuous. The order was pronounced in the open Court on 19.02.2020.
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