2024 (5) TMI 1390 - AT - Income Tax

Levy of penalty u/s 271AAB - Defective Notice for Penalty Proceedings - show cause only mentioned the offence committed by the assessee by mentioning that assessee has concealed the particulars of income or furnished inaccurate particulars of income show cause notice is meant for initiating penalty proceedings u/s 271(1)(c) as AO has used the same show cause notice in the same format for initiating penalty proceedings u/s 271AA - whether the assessee has concealed the particulars of income or had furnished inaccurate particulars of income? HELD THAT - There is a greater onus casted on the Revenue to specifically mention in the show cause notice itself as to what offence the assessee has committed and also to mention the rate of penalty that is sought to be levied by the AO on the assessee i.e., 10% or 20% or 30% or 60% of undisclosed income, as the case may be. If none of these preliminary informations are mentioned in the show cause notice, then the show cause notice issued by the Ld. AO becomes completely defective and consequentially fatal and would vitiate the entire penalty proceedings. This issue, in any case, is no longer res integra in view of the decision of Kolkata Tribunal in the case of Sushil Kumar Paul 2022 (12) TMI 1008 - ITAT KOLKATA wherein as held there is no mention about various conditions provided u/s 271AAB - AO has very casually used the proforma used for issuing notice before levying penalty u/s 271(1)(c) of the Act for the concealment of income or furnishing of inaccurate particulars of income. Except mentioning the section 271AAB of the Act in the notice, it does not talk anything about the provisions of section 271AAB. Therefore, certainly such notice has a fatal error and technically is not a correct notice - Decided in favour of assessee.

Summary

Issues:
1. Justification of confirming the levy of penalty u/s 271AAB of the Act by Ld. CIT(A).
2. Validity of the show cause notice issued for initiating penalty proceedings u/s 271AAB of the Act.
3. Interpretation of the provisions of section 271AAB of the Act regarding the levy of penalty on undisclosed income.
4. Impact of defective show cause notice on penalty proceedings.

Detailed Analysis:
1. The appeal dealt with the confirmation of the penalty u/s 271AAB of the Income Tax Act by the Ld. CIT(A) for the Assessment Year 2013-14. The key issue was whether the Ld. CIT(A) was justified in upholding the penalty imposed by the Ld. AO.

2. The validity of the show cause notice issued for initiating penalty proceedings u/s 271AAB of the Act was questioned. The notice issued on 31/03/2015 mentioned the offence of concealing income, which was not in line with the specific provisions of section 271AAB. The notice failed to specify the rate of penalty to be levied, rendering it defective and raising concerns about the validity of the penalty proceedings.

3. The judgment analyzed the provisions of section 271AAB of the Act, which outline various penalty rates based on undisclosed income. The notice issued by the Ld. AO did not adhere to the requirements of the Act by failing to specify the applicable penalty rate. The judgment highlighted the importance of correctly mentioning the offence committed and the penalty rate in the show cause notice to ensure the validity of penalty proceedings.

4. The impact of a defective show cause notice on penalty proceedings was discussed, emphasizing the necessity of complying with statutory requirements. Citing a precedent, the judgment concluded that a notice lacking essential details, such as the offence and penalty rate, could vitiate the penalty proceedings. Consequently, the penalty levied under such circumstances would not be legally sustainable.

In conclusion, the appeal was allowed based on the technical aspect of the defective show cause notice, leading to the invalidation of the penalty proceedings under section 271AAB of the Income Tax Act for the Assessment Year 2013-14.