2024 (6) TMI 985 - AT - Income Tax

Validity of penalty proceedings u/s 270A - due to failure to specify relevant clauses - show cause notice nowhere specified the corresponding limbs in clauses (a) to (f) to sub-section 9 read with sub- section (8) thereof - HELD THAT - In the instant appeal that the impugned penalty proceedings stand vitiated on account of the AO s failure to pinpoint the relevant clauses (a) to (f) to sub-section (9); while initiating the proceedings herein u/s. 270A(8) of the Act, thereby alleging under reporting of income as a sequence of misreporting. Faced with this situation, we find no merit in Revenue s arguments placing reliance on M/s. Veena Estate Pvt. Ltd. (supra) 2024 (1) TMI 701 - BOMBAY HIGH COURT once the issue before their lordships was that of the concerned appellant seeking to frame an additional substantial question of law in section 260A proceedings whereas the law regarding the tribunal s jurisdiction to entertain such a pure question of law, not requiring any further detailed investigation on facts, is already settled in NTPC Ltd. Vs. 1996 (12) TMI 7 - SUPREME COURT . That being the case, we are of the considered view that going by the foregoing judicial precedent, this tribunal is very much entitled to entertain and decide such a pure legal plea for the first time in section 254(1) proceedings. We accordingly reject the Revenue s instant technical arguments to conclude in light of section 270A (8) (9) r.w. clauses (a to f) that the AO s failure to pinpoint the corresponding default of assessee s part indeed vitiates the entire proceedings as per Schneider Electric South Asia Ltd. 2022 (3) TMI 1295 - DELHI HIGH COURT and Md. Farhan 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB) in section 271(1)(c) old penal provision. The impugned penalty stands deleted in very terms.

Summary

Issues: Validity of penalty proceedings under section 270A for under-reporting of income due to misreporting, failure to specify relevant clauses, jurisdiction of tribunal to decide legal plea for the first time in proceedings.

Analysis:

1. The appeal for the assessment year 2018-19 was against the National Faceless Appeal Centre's order dated 07.07.2022, concerning penalty proceedings under section 270A of the Income Tax Act, 1961. The primary issue raised was the validity of the penalty proceedings due to the Assessing Officer's failure to specify the relevant clauses (a) to (f) of sub-section (9) of section 270A in the show cause notice dated 09.06.2021. The argument was that this failure violated the requirements of section 270A(8) and (9) regarding under-reporting of income as a result of misreporting.

2. The Department contended that the issue was settled based on a recent decision of the jurisdictional high court in M/s. Veena Estate Pvt. Ltd. Vs. CIT, which rejected a similar plea in section 260A proceedings. It was argued that the lower authorities had considered the assessee's explanations in the penalty order and the appellate discussion, eliminating any prejudice to the assessee.

3. The Tribunal carefully considered the legal issue raised by the assessee regarding the Assessing Officer's failure to specify the relevant clauses under section 270A(9) while initiating the penalty proceedings. It distinguished the Department's reliance on the Veena Estate case, emphasizing that the tribunal had the jurisdiction to entertain and decide such legal pleas for the first time in section 254(1) proceedings. Citing relevant judicial precedents, including Schneider Electric South Asia Ltd. Vs. ACIT and Md. Farhan Vs. ACIT, the Tribunal concluded that the failure to pinpoint the corresponding default by the Assessing Officer vitiated the penalty proceedings, leading to the deletion of the imposed penalty.

4. Additionally, the Tribunal condoned the delay of 533 days in filing the appeal, noting that the assessee's condonation averments remained unrebutted by the Revenue. Consequently, the Tribunal allowed the assessee's appeal, pronouncing the order on 19th June 2024.