2021 (11) TMI 422 - AT - Income Tax

Penalty levied u/s 271(1)(c) - Defective notice u/s 274 - HELD THAT - On identical set of facts as decided in AVEE MEDI SURGICALS PVT. LTD. VERSUS ACIT, CENTRAL CIRCLE-6 NEW DELHI 2021 (7) TMI 669 - ITAT DELHI AO to assume jurisdiction u/s 271(1)(c), proper notice is necessary and the defect in notice u/s 274 of the Act vitiates the assumption of jurisdiction by the learned Assessing Officer to levy any penalty. In this case it clearly establish that the notice issued under section 274 read with 271 of the Act is defective and, therefore, we find it difficult to hold that the learned AO rightly assumed jurisdiction to pass the order levying the penalty. As a consequence of our findings above, we direct the Assessing Officer to delete the penalty in question - Decided in favour of assessee.

Summary

Issues involved:
Appeal against penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2007-08. Additional ground raised challenging the validity of the notice issued under section 274 r.w.s. 271.

Analysis:
The appeal was filed against the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for the Assessment Year 2007-08. The assessee raised grievances regarding the upholding of the penalty by the Commissioner of Income Tax [Appeals]. The additional ground of appeal challenged the validity of the notice issued under section 274 r.w.s. 271, stating that it was defective as it did not specify the appropriate clause under which the penalty was proposed to be imposed. The assessee sought permission to raise this additional ground, which was admitted based on the Supreme Court's ratio in a relevant case.

The debate centered around the validity of the notice issued under section 274 r.w.s. 271. The Assessing Officer contended that the notice was not defective as the intention for concealment of income was clear from the assessment order. However, the counsel for the assessee referred to previous Tribunal decisions in favor of the assessee on similar grounds. The Tribunal carefully considered the orders of the authorities below and the decisions of the Tribunal in previous cases, finding merit in the contentions raised by the assessee.

Citing legal precedents, including the case of CIT vs. Manjunatha Cotton & Ginning Factory, it was emphasized that the notice must specify the grounds under which the penalty is proposed to be levied. The High Court judgments supported the view that if the notice does not specify whether the penalty proceedings are for concealment of income or furnishing inaccurate particulars, it would be bad in law. The Tribunal upheld the decision in favor of the assessee based on these legal principles, directing the Assessing Officer to delete the penalty imposed under section 271(1)(c) of the Act.

In conclusion, the Tribunal allowed the appeal filed by the assessee, directing the Assessing Officer to delete the penalty levied under section 271(1)(c) of the Income Tax Act, 1961. The judgment was pronounced on 08.11.2021.