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2021 (4) TMI 1131 - HC - Income TaxPenalty imposed u/s 271AAB - Defective notice - Non specification of clear charge - HELD THAT - As rightly pointed out by the assessee, Section 271AAB of the Act, which deals with penalty consists of three contingencies. Therefore, the Assessing Officer should point out to the assessee as to under which of the three clauses, he chooses to proceed against the assessee so as to enable the assessee to give an effective reply. Since the same has not been mentioned, the assessee has been denied reasonable opportunity to put forth their submissions. The Tribunal, has verbatim reproduced the penalty notice and we find that the notice is absolutely vague and none of the irrelevant portions had been struck off nor the relevant portions had been marked or indicated. Hence, the Tribunal is right in observing that the penalty could not have been levied based on such defective notice and more particularly, when the assessee has been strenuously canvassing the jurisdictional issue from the inception. The decisions of the Karnataka High Court in the cases of Manjunatha Cotton and Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT and SSA's Emerald Meadows 2015 (11) TMI 1620 - KARNATAKA HIGH COURT and the decision of this Court in the case of Babuji Jacob 2020 (12) TMI 574 - MADRAS HIGH COURT clearly support our above conclusion. For all the above reasons, we find no grounds to interfere with the common order passed by the Tribunal. - Decided in favour of assessee.
Issues:
- Validity of notice under Section 274 read with Section 271AAB - Application of Section 292BB to penalty levied - Comparison of case laws with the facts of the present case - Applicability of rulings in similar cases - Rightfulness of vacating penalty under Section 271AAB Analysis: 1. Validity of Notice under Section 274 read with Section 271AAB: The Revenue appealed against the Tribunal's decision to vacate the penalty imposed on the assessee under Section 271AAB of the Income Tax Act. The Revenue argued that the notice clearly stated the penalty proceedings under Section 271AAB, and the assessee had knowledge of the penalty imposition. However, the Tribunal held that the notice was defective as it did not specify under which clause of Section 271AAB the penalty was proposed. The Tribunal emphasized that the procedure for imposing penalties must be strictly followed, and the assessee should be informed of the specific grounds for the penalty. The Tribunal found the notice to be vague and defective, supporting the assessee's contention that the penalty proceedings were without jurisdiction due to the deficiencies in the notice. 2. Application of Section 292BB to Penalty Levied: The Tribunal did not apply the provisions of Section 292BB to the penalty levied under Section 271AAB. The Revenue argued that the penalty was correctly imposed based on the assessment order, but the Tribunal disagreed. The Tribunal emphasized that penalty proceedings are independent of assessment and must adhere to the prescribed procedures. The Tribunal's decision to vacate the penalty was based on the defective notice and the lack of specificity regarding the grounds for the penalty under Section 271AAB. 3. Comparison of Case Laws and Applicability of Rulings: The Revenue compared the case of the assessee to other judgments, arguing that the Tribunal erred in not applying certain rulings. However, the Tribunal upheld its decision to vacate the penalty, stating that the notice's defects were fundamental and vitiated the entire proceedings. The Tribunal cited case laws from the Karnataka High Court and a decision from the Madras High Court to support its conclusion that the notice was defective and the penalty could not be upheld. 4. Rightfulness of Vacating Penalty under Section 271AAB: Ultimately, the High Court dismissed the tax case appeals, confirming the Tribunal's decision to vacate the penalty under Section 271AAB. The Court agreed with the Tribunal's reasoning that the notice was defective, denying the assessee a reasonable opportunity to respond effectively to the proposed penalty. The Court emphasized that the penalty proceedings must adhere to the prescribed procedures, and the defective notice rendered the penalty imposition invalid. In conclusion, the High Court upheld the Tribunal's decision, emphasizing the importance of adherence to procedural requirements in penalty proceedings and the necessity of providing clear and specific grounds for imposing penalties under the Income Tax Act.
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