2022 (10) TMI 896 - AT - Income Tax

Penalty passed u/s 271(1)(c) - Non specification of charge - premise of defective and undetermined allegation - HELD THAT - In the light of judgement rendered in Dilip N Shroff 2007 (5) TMI 198 - SUPREME COURT and CIT Vs Samson Pericherry 2017 (1) TMI 1292 - BOMBAY HIGH COURT and recently in Mohd. Farhan A. Shaikh Vs DCIT 2021 (3) TMI 608 - BOMBAY HIGH COURT we are on the considered view that, since the provision of section 271(1)(c) is calamitous, albeit commercial, consequences, and mandatory, hence brooks no trifling or dilution therewith, as a result in the instant case the SCN dt 22/03/2013 issued u/s 274 r.w.s. 271(1)(c) of the Act without specifying any limb or charge, is invalid and untenable in the eyes of law, consequently we set aside the first appellate order and quashed the order of penalty passed u/s 271(1)(c) of the Act, being bad in law - Appeal of the appellant assessee is allowed in terms of aforestated observation.

Summary

Issues:
Challenge to penalty order u/s 271(1)(c) of the Income-tax Act, 1961 based on defective notice and undetermined allegation.

Analysis:
The appeal before the Appellate Tribunal challenged the penalty order passed by the Commissioner of Income Tax (Appeals) under section 250 of the Income-tax Act, 1961, which originated from a penalty order issued by the Income Tax Officer under section 271(1)(c) of the Act. The grounds of appeal included contentions regarding the levy of penalty and the legality of the penalty order due to vagueness and ambiguity in the initiation of penalty proceedings without specifying any limb under section 271(1)(c). The appellant argued that there was a lack of application of mind by the Assessing Officer in imposing the penalty, and the notice issued was defective as it did not strike off irrelevant limbs, leading to a specific charge. The controversy centered around the survival of the penalty order based on defective and undetermined allegations.

During the physical hearing, the appellant's counsel contended that the penalty imposition lacked proper application of mind by the Assessing Officer, while the departmental representative acknowledged the deficiency in the notice issued. The Tribunal, after considering the arguments of both parties and relevant legal provisions, examined the show-cause notice issued under section 274 read with 271(1)(c), along with case laws cited by both sides. Referring to judgments of the Supreme Court and the High Court of Bombay, the Tribunal emphasized the calamitous and mandatory nature of section 271(1)(c), concluding that the show-cause notice issued without specifying any limb or charge was invalid and untenable in law. Consequently, the Tribunal set aside the first appellate order and quashed the penalty order under section 271(1)(c) as being legally flawed.

As a result of the Tribunal's findings, the appeal of the appellant assessee was allowed, and the penalty order was deemed invalid and set aside. The Tribunal pronounced its order in open court in accordance with the ITAT Rules, 1963.