2021 (2) TMI 73 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - Defective notice - assessment of income from house property - no ITR was filed by the assessee for any of the assessment years - assessee as argued for defective notice issued - assessee had received rental income as his share of income from house property and since, the income exceeded maximum amount which is chargeable to tax, assessee was liable to file return of income u/s 139 - HELD THAT - Notices issued by the AO for levy of penalty u/s 271(1)(c) of the Act to be bad in law as it did not specify in which limb of section 271(1)(c) the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing inaccurate particulars of income. The show-cause notices are, therefore, bad in law and illegal and, as such, the entire penalty proceedings are vitiated and no penalty is leviable against the assessee in any of the years. On this scope itself, similar views is taken by the Hon ble Karnataka High Court in the case of CIT Vs. M/s SSAs Emerald Meadows 2015 (11) TMI 1620 - KARNATAKA HIGH COURT and this decision is confirmed by the Hon ble Supreme Court 2016 (8) TMI 1145 - SC ORDER . Hon ble Delhi High Court in the case of Pr. CIT Vs. M/s Sahara India Life Insurance Company Ltd. 2019 (8) TMI 409 - DELHI HIGH COURT , following the above decisions of Karnataka High Court did not find any error in the order of the Tribunal in cancelling the penalty. - Decided in favour of assessee.

Summary

Issues:
Challenging the levy of penalty u/s 271(1)(c) of the IT Act based on the validity of show-cause notices.

Analysis:
The appeals were against orders of the Ld. CIT(Appeals)-15, Delhi, challenging the penalty under section 271(1)(c) of the IT Act. The AO found that the assessee had received rental income exceeding the taxable amount but had not filed any income tax return. The AO issued notices under section 148 of the Act and imposed penalties for willfully failing to file the return. The Ld. CIT(A) upheld the penalty. The assessee argued that the show-cause notices were invalid and relied on a judgment of the Delhi High Court. The Revenue contended that the failure to strike off a column in the notice did not invalidate the penalty. The AO's notices did not specify the grounds for initiating penalty proceedings under section 271(1)(c), rendering them illegal. The Tribunal referred to decisions of the Karnataka High Court and the Supreme Court, confirming that such notices were defective. The Delhi High Court also upheld the cancellation of penalties in similar cases. The Tribunal, relying on precedent, concluded that the penalty proceedings were vitiated due to the defective notices, canceling the penalties in all appeals.

This judgment highlights the importance of issuing valid show-cause notices specifying the grounds for initiating penalty proceedings under section 271(1)(c) of the IT Act. Failure to do so renders the penalty proceedings illegal and not sustainable. The Tribunal's decision was based on established legal principles and consistent judicial precedents. The assessee successfully argued that the defective notices invalidated the penalty imposition, leading to the cancellation of penalties in all appeals. The case underscores the significance of procedural compliance in tax matters and the consequences of inadequate notice issuance in penalty proceedings.