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2025 (2) TMI 534 - AT - Income TaxLevy of penalty u/s. 271AAB(1A) - non specification of clear charge - allegation of vague notice - HELD THAT - A bare perusal of provision of section 271AAB would show that the penalty under aforesaid section can be levied under different circumstances for different violations. Although while recording satisfaction AO mentioned that penalty is being initiated u/s. 271AAB(1A) however no specific offence as mentioned under sub-section (1A) has been ambiguously specified by the AO. The vagueness and ambiguity in mind of the AO is writ large even while issuing notice u/s. 274 r.w.s 271AAB. While issuing notice the AO has not even bothered to mention sub section under which penalty has been levied. Hence specific charge for levy of penalty in the notice is missing in the notice. This makes the notice vague. In the case of Jaina Marketing Associates 2024 (3) TMI 1007 - ITAT DELHI while dealing with similar issue deleted penalty levied u/s. 271AAB of the Act. The notice has been issued by the AO in mechanical manner. For parity of reasons penalty levied u/s. 271AAB is directed to be deleted. Decided in favour of assessee.
ISSUES PRESENTED and CONSIDERED
The core issue considered in this legal judgment is the validity of the penalty notice issued under Section 271AAB of the Income Tax Act, 1961. Specifically, the Tribunal examined whether the notice issued by the Assessing Officer (AO) was vague and ambiguous due to the failure to specify the exact charge or sub-section under which the penalty was being levied. The Tribunal also considered whether such vagueness rendered the penalty unsustainable. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents Section 271AAB of the Income Tax Act provides for the levy of penalties in cases where a search has been initiated, and undisclosed income is discovered. The section outlines different rates of penalty depending on whether the undisclosed income was admitted, substantiated, and declared in the return of income. Specifically, Section 271AAB(1A) applies to searches initiated after the Taxation Laws (Second Amendment) Bill, 2016. The penalty rates under this section are 30% if the income is admitted and substantiated, and 60% if not. The Tribunal referenced the decision in Jaina Marketing & Associates vs. DCIT, where it was held that a penalty notice must clearly specify the charge against the assessee to be valid. Court's Interpretation and Reasoning The Tribunal observed that the AO's notice did not specify the sub-section or the precise charge under which the penalty was being levied. This lack of specificity rendered the notice vague and ambiguous. The Tribunal emphasized that for a penalty notice to be valid, it must clearly communicate the charge to the assessee, allowing them to understand and respond to the allegations. Key Evidence and Findings The Tribunal found that the AO had issued the penalty notice in a mechanical manner without specifying the relevant sub-section of Section 271AAB. The notice merely mentioned the section number without detailing whether the penalty was being levied under clause (a) or (b) of Section 271AAB(1A). Application of Law to Facts The Tribunal applied the legal requirement that a penalty notice must be clear and specific. In this case, the lack of specificity in the AO's notice meant that the assessee was not properly informed of the charge against them. This failure to specify the charge violated the principles of natural justice, which require that the assessee be given a reasonable opportunity to understand and contest the penalty. Treatment of Competing Arguments The appellant argued that the penalty notice was vague and did not specify the charge, making it unsustainable. The respondent, representing the department, contended that the findings of the AO and the CIT(A) should be upheld, arguing that the assessee had been given an opportunity to be heard. However, the Tribunal sided with the appellant, emphasizing the importance of specificity in penalty notices. Conclusions The Tribunal concluded that the penalty notice issued under Section 271AAB was invalid due to its vagueness and lack of specificity. As a result, the penalty levied was unsustainable, and the appeal of the assessee was allowed. SIGNIFICANT HOLDINGS The Tribunal held that a penalty notice under Section 271AAB must clearly specify the charge against the assessee. The absence of such specificity renders the notice vague and invalid. The Tribunal reiterated the principle that the levy of a penalty requires a clear communication of the charge to the assessee, ensuring compliance with the principles of natural justice. Core Principles Established The judgment reinforces the principle that penalty notices must be precise and unambiguous, specifying the exact charge and sub-section under which the penalty is being levied. This requirement is crucial to uphold the assessee's right to a fair hearing and to contest the penalty effectively. Final Determinations on Each Issue The Tribunal determined that the penalty notice was invalid due to its vagueness and lack of specificity. Consequently, the penalty imposed under Section 271AAB was deleted, and the appeal was allowed.
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