2022 (7) TMI 634 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - non-strike off of the irrelevant part in the notice issued u/s.271(l)(c) - whether the notice was issued for concealment of income or for furnishing inaccurate particulars of income? - HELD THAT - As in the case of Mr. Mohd. Farhan A. Shaikh 2021 (3) TMI 608 - BOMBAY HIGH COURT while dealing with the issue of non-strike off of the irrelevant part in the notice issued u/s.271(l)(c) of the Act, held that assessee must be informed of the grounds of the penalty proceedings only through statutory notice and an omnibus notice suffers from the vice of vagueness. Ratio of this full bench decision supra squarely applies to the facts of the assessee's case as the notice u/s. 274 r.w.s. 271(1)(c) of the Act was issued without striking off the irrelevant portion of the limb and failed to intimate the assessee the relevant limb and charge for which the notices were issued. Thus, respectfully following the said decision we hold that the penalty order passed u/s. 271(1)(c) of the Act by the Assessing Officer is bad in law and accordingly the penalty order passed u/s. 271(1)(c) of the Act for Assessment Years 2000-01 to 2003-04 is quashed. - Decided in favour of assessee.

Summary

Issues:
- Appeal against penalty under Section 271(1)(c) of the Income Tax Act, 1961 for assessment years 2000-01 to 2003-04.

Analysis:
1. The appeal was filed against the penalty imposed by the Commissioner of Income Tax (Appeals) under Section 271(1)(c) of the Act. The assessee contended that the penalty initiation was invalid as the notice did not specify whether it was for concealment of income or furnishing inaccurate particulars, citing relevant court decisions.

2. The contention was supported by the ld. CIT (Appeals) acknowledging the lack of specificity in the notice. However, the penalty was sustained based on the assessee admitting to charging commission on transactions. The issue of notice specificity was crucial, as highlighted by the Hon'ble Bombay High Court in a similar case, emphasizing that the notice must clearly inform the assessee of the grounds for penalty.

3. The decision by the Hon'ble Bombay High Court (Full Bench at Goa) in another case reiterated the importance of precise notice under Section 271(1)(c). It emphasized that an omnibus notice lacking specificity would be vague and prejudicial to the assessee's rights. This decision was applied to the present case, leading to the quashing of the penalty order due to the defective notice.

4. The judgment concluded that the penalty order was invalid in law due to the defective notice issued under Section 271(1)(c). Consequently, the penalty order for the assessment years in question was quashed, and the appeals of the assessee were allowed. The decision was based on the principle that penalty proceedings must stand on their own and not rely on ambiguous or vague notices for validity.