2024 (7) TMI 140 - AT - Income Tax

Penalty u/s. 271(1)(c) - non specification of clear charge u/s 274 - whether the order passed u/s. 271(1)(c) was bad in view of the fact that both, at the time of initiation as well as at the time of imposition of the penalty, AO was not clear as to which limb of section 271(1)(c) was attracting? - HELD THAT - Time of issuing the notice u/s. 274 r.w.s. 271(1)(c), AO is not aware of the fact as to whether assessee is going in appeal or not on the quantum additions made. Hence, the notice so issued for initiating penalty proceedings must contain a specific charge out of the two charges contained in section 271(1)(c) for imposing a penalty on the assessee. We note that in the present case before us, the facts and circumstances are altogether different from the peculiar set of facts as contained in the case of Veena Estates (P) Ltd 2024 (1) TMI 701 - BOMBAY HIGH COURT - The observations and findings arrived at by the Hon ble Court in that case are specific to those peculiar set of facts. In the case of Mohd. Farhan A. Shaikh 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB) held that contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must be precise. It should give no room for ambiguity. Penalty imposed in the present case, since similar facts are present in this appeal - Assessee appeal of assessee.

Summary

Issues:
Challenge to penalty order under section 271(1)(c) of the Income-tax Act, 1961 for Assessment Year 2015-16 based on defective notice issued by the Assessing Officer.

Analysis:
1. Additional Ground Raised by Assessee:
- Assessee challenged the penalty imposition of Rs. 10,46,312 under section 271(1)(c) due to a defective notice issued by the Assessing Officer. The additional ground raised was admitted for adjudication based on legal nature.

2. Assessee's Argument:
- Assessee's counsel argued that the notice issued by the Assessing Officer did not specify a specific charge for the penalty, citing judicial precedents. The counsel emphasized that a specific charge is essential for maintaining the penalty.

3. Revenue's Counter-Argument:
- The Senior DR for the Revenue referred to a different case law to counter the assessee's submissions. It was argued that the defect in the notice did not cause real prejudice or breach of natural justice principles, and thus, the penalty was rightfully imposed.

4. Judicial Precedent Analysis:
- The Tribunal analyzed the judicial precedents cited by both parties. It was noted that a contravention of a mandatory condition for communication to be valid is fatal, and a notice must be precise and unambiguous. The Tribunal followed the precedent set by the Hon'ble Jurisdictional High Court of Bombay in a similar case and deleted the penalty.

5. Decision and Conclusion:
- The Tribunal found that the facts of the present case were different from the case cited by the Revenue. Relying on the judicial precedent, the penalty imposed on the assessee was deleted due to the defective notice issued by the Assessing Officer. Consequently, the appeal of the assessee was allowed.

6. Final Order:
- The Tribunal pronounced the order on 28 June 2024, allowing the appeal of the assessee and deleting the penalty imposed under section 271(1)(c) for Assessment Year 2015-16.