2021 (10) TMI 421 - HC - Income Tax

Penalty u/s 271 - Defective notice u/s 274 - Non specification of charge - notice in printed form - HELD THAT - As carefully examined the notices issued by the AO (Annexures-D and D1) to initiate proceedings u/s 274 read with 271 of the said Act of 1961. The notice issued in the said printed format, though specifies delete the inappropriate words and paragraphs, the tick mark is found with respect to the clause have concealed the particulars of your income . The next limb of the said clause remains undeleted as the penalty order deals with only the first limb of concealment of the particulars of income. The validity of the order of penalty must be determined on the basis of the initiation of penalty proceedings. The defects being ex facie apparent in the notices issued, the initiation of proceedings being vitiated, the impugned order of the Tribunal confirming the order of the authorities cannot be sustained and is accordingly set aside. Decided in favour of the Assessee and against the Revenue.

Summary

Issues:
Assessment of penalty under Section 271(1)(c) of the Income Tax Act, 1961 based on defective notices issued under Section 274 read with 271 of the Act.

Analysis:
The appellant, an individual and proprietor of a wholesale business, filed an appeal under Sec. 260A of the Income Tax Act, challenging the order of the Income Tax Appellate Tribunal related to assessment years 2003-04 and 2004-05. The Assessing Officer had made additions to the appellant's income and initiated penalty proceedings under Section 271(1)(c) of the Act. The Commissioner of Income Tax (Appeals) and the Appellate Tribunal upheld the penalty, leading to the current appeal.

The appellant argued that there was no concealment or suppression of income, and the penalty proceedings were unjustified. Reference was made to previous court decisions highlighting the importance of specific grounds for penalty imposition. The appellant contended that the notices issued were defective and not in conformity with the law, citing cases to support this claim.

On the other hand, the Revenue's counsel defended the actions of the authorities and the Tribunal, stating that the Assessing Officer's decision was valid. However, upon examination, the High Court found that the notices issued by the Assessing Officer were defective. The notices did not specify the grounds for penalty imposition clearly, violating principles of natural justice.

Referring to a previous judgment, the High Court emphasized the importance of the initiation of penalty proceedings being based on specific grounds. As the defects in the notices were evident, the initiation of penalty proceedings was deemed vitiated. Consequently, the Tribunal's order confirming the penalty was set aside, and the appeal was allowed in favor of the Assessee. No costs were awarded in the matter.