2022 (2) TMI 387 - AT - Income Tax

Penalty levy u/s. 271(1)(c) - Defective notice - show cause does not strike off/delete the inappropriate/irrelevant/not applicable portion - HELD THAT - We find that the notice in this is an omnibus show-cause notice as it does not strike off/delete the inappropriate/irrelevant/not applicable portion. Such a generic notice betrays a non-application of mind. Hence, the penalty levied pursuant to such a notice is not legally sustainable in law. See MR. MOHD. FARHAN A. SHAIKH 2021 (3) TMI 608 - BOMBAY HIGH COURT - Hence we hold that the Assessing Officer was bereft of valid jurisdiction as the notice issued to assessee is unsustainable in law - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdictional validity of the penalty notice issued under section 271(1)(c) of the Income Tax Act.
2. Merits of the penalty levied by the Assessing Officer (AO).

Issue-wise Detailed Analysis:

1. Jurisdictional Validity of the Penalty Notice:
The primary issue raised by the assessee was the jurisdictional validity of the penalty notice issued under section 271(1)(c) of the Income Tax Act. The assessee argued that the notice did not specify the exact charge, i.e., whether the penalty was for "concealment of particulars of income" or "furnishing inaccurate particulars of income." The Commissioner of Income-tax (Appeals) [CIT(A)] upheld the penalty, referencing an ITAT Mumbai Bench decision, and stated that administrative lapses, such as non-striking off of inaccurate portions, do not invalidate the notice.

However, the Appellate Tribunal referred to the Full Bench decision of the Hon'ble Bombay High Court in the case of Farhan A. Shaikh Vs. PCIT, which emphasized that the notice must clearly specify the charge to enable the assessee to defend themselves effectively. The Tribunal noted that the Supreme Court in various cases, including Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax and Citizen Cooperative Society Ltd. v. Asst. CIT, Hyderabad, reiterated that the ratio decidendi of a judgment binds as a precedent. The Tribunal found that the notice issued to the assessee was an omnibus show-cause notice, which did not strike off the irrelevant portions, thus betraying non-application of mind. Consequently, the penalty levied pursuant to such a notice was deemed legally unsustainable.

2. Merits of the Penalty Levied:
Given that the Tribunal quashed the penalty order on jurisdictional grounds, the merits of the penalty levied by the AO were not adjudicated. The Tribunal stated that since the penalty was deleted by quashing the penalty order, any further adjudication on the merits would be of academic interest only and thus, was not engaged into.

Conclusion:
In conclusion, the Tribunal allowed the assessee's appeal, holding that the penalty notice issued was invalid due to non-specification of the exact charge, rendering the penalty levied unsustainable in law. The Tribunal's decision was pronounced in the open court on 03.02.2022.