2024 (12) TMI 192 - AT - Income Tax

Penalty u/s 271(1)(c) - defect in the notice issued for imposition of penalty - HELD THAT - In view of the decision of case of Thakur Prasad Sao Sons (P.) Ltd 2024 (5) TMI 787 - CALCUTTA HIGH COURT the appeal was not allowable merely on the basis of the defect in the notice issued for imposition of penalty. The addition on account of share capital made was confirmed by the Tribunal. It is observed that the Ld. CIT(A) issued as many as 8 notices to the assessee and as there was no compliance, the penalty imposed was confirmed. The notices were sent by email but there was no representation before the Ld. CIT(A). Assessee requested that the matter may be set aside so that proper submission could be made before the CIT(A). Thus, in order to be fair to both the assessee as well as the Revenue, we consider it necessary in the interest of justice that the order of the CIT(A) is set aside to be done de novo after affording an opportunity of being heard to the assessee and the assessee shall be free to raise all contentions before the Ld. CIT(A) as neither the issue of defect in the notice was raised before the CIT(A) nor any finding has been given in this regard. Hence, grounds of appeal are allowed for statistical purposes.

Summary

Issues:
Appeals against orders of Commissioner of Income Tax (Appeals) for AYs 2007-08 & 2008-09; Imposition of penalty under section 271(1)(c) of Income Tax Act, 1961; Defect in notice issued for penalty imposition; Proper representation before appellate authority.

Detailed Analysis:

1. Imposition of Penalty for AY 2007-08:
The appellant filed the return of income for AY 2007-08, which was later found erroneous and prejudicial to Revenue's interests. Subsequently, penalty proceedings under section 271(1)(c) were initiated, resulting in a penalty imposition of Rs. 2,84,15,638. The appellant appealed to the Commissioner of Income Tax (Appeals) but failed to pursue the case adequately. The appeal was dismissed on both procedural and substantive grounds, citing lack of proper representation and failure to prove the genuineness of share capital. In the appeal before the Tribunal, the appellant argued that the penalty should be canceled due to a defective notice issued. However, the Tribunal, relying on legal precedent, held that the notice complied with the necessary requirements, and the appeal was allowed for a de novo hearing before the CIT(A) for proper representation and consideration of all contentions.

2. Defect in Notice and Legal Interpretation:
The appellant contended that the notice issued for penalty imposition was defective, citing a legal judgment requiring specific mention of grounds under section 271(1)(c). However, the Tribunal referred to a High Court judgment emphasizing the importance of legal fiction created by section 271(1B) and Explanation 5A, which mandates satisfaction of the Assessing Officer for penalty initiation. The Tribunal highlighted that the notice adequately referred to concealed income particulars mentioned in the assessment order, fulfilling the requirements of natural justice. The Tribunal's decision was based on the principle of statutory interpretation, emphasizing that legislative intent should be derived from the language used, and the notice issued was valid and compliant with legal provisions.

3. Proper Representation and De Novo Hearing:
The Tribunal acknowledged the lack of proper representation by the appellant before the CIT(A) and the importance of affording an opportunity to be heard. In the interest of justice and fairness to both parties, the Tribunal set aside the CIT(A) order for AY 2007-08 and AY 2008-09, directing a de novo hearing after providing the appellant with a chance to present all contentions. The decision aimed to ensure procedural fairness and adherence to legal requirements, allowing for a comprehensive review of the case based on proper representation and consideration of all relevant factors.

In conclusion, the Tribunal's judgment focused on upholding procedural fairness, adherence to legal requirements, and statutory interpretation principles, ensuring that both parties have a fair opportunity to present their case and address all relevant issues before the appellate authority.