2023 (4) TMI 483 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - As argued notice was issued for both the limbs without strike off irrelevant limb and specifying the charge for which the notice was issued - HELD THAT - On perusal of the notices issued u/s 274 read with section 271(1)(c) of the Act we observe that the notice was issued stereotyped and the AO has not specified any limb or charge for which the notice was issued i.e., either for concealment of particulars of income or furnishing of inaccurate particulars of such income. It can be seen from the notice issued u/s 274 read with section 271(1)(c) of the Act, AO did not strike off irrelevant limb in the notice specifying the charge for which notice was issued. As could be seen from 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. Thus notice u/s. 274 r.w.s. 271(l)(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 penalty order passed u/s. 271(l)(c) of the Act by the Assessing Officer is bad in law - Decided in favour of assessee.

Summary

Issues involved:
The appeal against the order of the ld. Commissioner of Income Tax (Appeals) for assessment year 2012-13 regarding the penalty imposed under section 271(1)(c) on the disallowance of Rs. 5,26,469.

Details of Judgment:

Issue 1: Penalty proceedings initiated without specifying the exact limb of Section 271(1)(c) of the Act.

The Ld. Counsel argued that the penalty notice was issued without specifying the charge for which it was issued, making the penalty proceedings bad in law. Referring to relevant judgments, it was emphasized that the notice must clearly indicate the limb under which penalty is imposed. The Assessing Officer did not strike off the irrelevant limb in the notice, leading to ambiguity in the charge.

Issue 2: Impact of the Hon'ble Bombay High Court (Full Bench at Goa) judgment.

The Hon'ble Bombay High Court (Full Bench at Goa) held that an omnibus notice, without specifying the grounds of penalty proceedings, is vague and violates natural justice. The Court emphasized that the notice must inform the assessee of the exact charge for which penalty is initiated to ensure fairness and clarity in the proceedings.

Conclusion:

The Tribunal, following the precedent set by the Hon'ble Bombay High Court (Full Bench at Goa), quashed the penalty order under section 271(1)(c) for Assessment Year 2008-09. The penalty proceedings were deemed bad in law due to the failure to specify the relevant limb for which the penalty was imposed. As a result, the appeal of the assessee was allowed, and the other grounds raised were not addressed as the penalty order was already quashed.

Order pronounced on 11/04/2023.