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2023 (5) TMI 681 - AT - Income TaxPenalty u/s 271(1)(c) - Defective notice u/s 274 - non mentioning of specific charge in the notice issued u/s 274 - non striking off irrelevant limb and without specifying the charge for which notice was issued - HELD THAT - As in 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. The notice u/s. 274 r.w.s. 271(l)(c) of the Act were 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 the penalty order passed u/s 271(1)(c) of the Act by the Assessing Officer and the order of the CIT(A) in confirming the penalty order are erroneous - Appeal filed by the assessee is Allowed.
Issues Involved:
1. Dismissal of appeal in limine by CIT(A). 2. Initiation and finalization of penalty proceedings during the pendency of quantum appeal. 3. Imposition of penalty for both concealment of income and furnishing inaccurate particulars. 4. Lack of indication in the assessment order and penalty notice regarding the specific limb for penalty initiation. 5. Failure to consider the issue of condonation of delay empathetically. 6. Inadequate opportunity of hearing and explaining minor defects. 7. Validity of notices issued without ensuring valid service. Issue-wise Detailed Analysis: 1. Dismissal of Appeal in Limine by CIT(A): The assessee contended that the CIT(A) erred by dismissing the appeal summarily without discussing the merits, leading to injustice. The Tribunal noted that the CIT(A) dismissed the appeal due to an 8-month delay without calculating the days of delay or considering the assessee's explanation. The Tribunal found no evidence that the penalty order was served before 25/01/2018 and held that the CIT(A) should have accepted the assessee's contention and condoned the delay. 2. Initiation and Finalization of Penalty Proceedings During Pendency of Quantum Appeal: The assessee argued that penalty proceedings should not be initiated or finalized during the pendency of the quantum appeal. The Tribunal did not specifically address this issue in detail but focused on the procedural aspects of the penalty notice. 3. Imposition of Penalty for Both Concealment of Income and Furnishing Inaccurate Particulars: The assessee claimed that the penalty imposed for both limbs violated Section 271(1)(c) of the Income Tax Act. The Tribunal examined the notice issued under Section 274 read with Section 271 and found it to be a stereotype notice without specifying the charge, thus making it vague and invalid. 4. Lack of Indication in Assessment Order and Penalty Notice Regarding Specific Limb for Penalty Initiation: The Tribunal found that the notice did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars. Citing the Bombay High Court's decision in Mr. Mohd. Farhan A. Shaikh v. ACIT, the Tribunal held that an omnibus notice without striking off the irrelevant limb is vague and invalid. 5. Failure to Consider the Issue of Condonation of Delay Empathetically: The Tribunal noted that the CIT(A) dismissed the appeal without considering the assessee's affidavit explaining the delay due to prolonged ailment. The Tribunal condoned the delay in filing the appeal before the CIT(A) based on the medical certificate and affidavit provided by the assessee. 6. Inadequate Opportunity of Hearing and Explaining Minor Defects: The assessee argued that the CIT(A) failed to provide adequate opportunity for a hearing and to explain minor defects. The Tribunal did not specifically address this issue but focused on the procedural invalidity of the penalty notice. 7. Validity of Notices Issued Without Ensuring Valid Service: The assessee contended that mere issuance of notices without ensuring valid service is futile. The Tribunal found no material on record to show that the penalty order was served before 25/01/2018, supporting the assessee's claim. Conclusion: The Tribunal concluded that the penalty order passed under Section 271(1)(c) and the CIT(A)'s order confirming the penalty were erroneous due to the defective notice. The penalty order dated 27/04/2017 was quashed, and the assessee's appeal was allowed. The Tribunal emphasized the importance of specifying the charge in the penalty notice to avoid vagueness and ensure fair proceedings.
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