2021 (8) TMI 849 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - HELD THAT - As perused the certified copies of the notices issued under Section 274 read with Section 271(1)(c) of the Act dated 20th June, 2014 for all these years wherein it is a fact that the ld. AR has not struck off one of the two limbs for levy of the penalty. In view of the above since the issue of notice itself is bad in law, it vitiates entire penalty proceedings and are liable to be quashed and thus, all the six penalty proceedings for respective years are quashed. The additional ground of the assessee is allowed.

Summary

Issues:
Challenge to penalty under Section 271(1)(c) of the Income Tax Act, 1961 for assessment years 2006-07 to 2011-12 based on vague notice; Jurisdictional aspect of penalty proceedings; Validity of notice under Section 274 read with Section 271(1)(c) of the Act.

Analysis:

Issue 1: Challenge to Penalty based on Vague Notice
The assessee contested the penalty under Section 271(1)(c) on the grounds that the notice issued under Section 274 read with Section 271(1)(c) was vague, as it did not specify the limb under which the penalty was leviable. The Tribunal noted that the notice did not strike off one of the two limbs for the penalty. Citing precedents, including the case of CIT Vs. SSA Emeralds, the Tribunal held that such a defect in the notice renders the penalty proceedings invalid. The Tribunal referred to the decision of the Hon'ble Delhi High Court in CIT Vs. Sahara India Life Insurance Co. Ltd., supporting the assessee's contention. Consequently, the Tribunal quashed all six penalty proceedings for the respective years.

Issue 2: Jurisdictional Aspect of Penalty Proceedings
The assessee raised a jurisdictional ground challenging the penalty proceedings, arguing that the notice under Section 274 read with Section 271(1)(c) was defective as it did not specify the appropriate clause for the penalty. The Tribunal admitted this additional ground, emphasizing that it goes to the root of the matter and can be raised at any point during the appeal. The Tribunal considered the certified copies of the notices and upheld the assessee's argument, ultimately leading to the quashing of all penalty proceedings.

In conclusion, the Appellate Tribunal ITAT DELHI allowed all six appeals filed by the assessee, ruling in favor of the assessee based on the invalidity of the notice issued under Section 274 read with Section 271(1)(c) for being vague and not specifying the limb under which the penalty was proposed. The Tribunal emphasized the importance of clear notices in penalty proceedings and cited relevant case law to support its decision.