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2022 (1) TMI 285 - AT - Income TaxPenalty levied u/s 271(1)(c) - Defective notice u/s 274 - addition of deemed dividend U/s 2(22)(e) - HELD THAT - On perusal of the aforesaid notice it is clear that AO has not specified whether the penalty is being levied on account of concealment of particulars of income or furnishing of inaccurate particulars of income. In this regard, we have gone through the case of Jurisdictional High court referred by learned counsel in the case of Mohd. Farhan A. Shaikh 2021 (3) TMI 608 - BOMBAY HIGH COURT . There is nothing before us on hand to differs from the issue raised in the cases cited so as to take a different view on this issue. Therefore, since the issue on hand being squarely covered following the principle of consistency, we find merit in the submission of the assessee and direct the Assessing Officer to delete the penalty since, the notice issued under section 274 read with section 271(1)(c) dated 18th March 2015 was bad in law. Since, we have deleted the penalty on account of invalid notice issued under section under section 274 read with section 271(1)(c) - Decided in favour of assessee.
Issues Involved:
1. Validity of the notice under section 274 read with section 271(1)(c) of the Income Tax Act, 1961. 2. Legality of the penalty levied for furnishing inaccurate particulars of income. Detailed Analysis: 1. Validity of the Notice under Section 274 read with Section 271(1)(c): The primary issue raised by the appellant was that the notice dated 18th March 2015 was defective as it did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars of income. The appellant argued that such a defect renders the notice bad in law. The relevant ground stated: “The learned CIT(A) erred in confirming order of penalty of ?3,30,000/- levied under section 271(1)(c) on addition of deemed dividend U/s 2(22)(e) without appreciating that the Notice under section 274 read with section 271(1)(c) dated 18.03.2015 is bad in law as it does not specify whether the penalty is levied for concealment of income or furnishing inaccurate particulars of income and hence the penalty of ?3,30,000/- may be deleted.” The Tribunal examined the notice and found that it indeed did not specify the grounds for the penalty. The notice stated: “Whereas in the course of proceedings before me for the Assessment year 2009-10 appears that you have concealed the particulars of your income or furnished inaccurate particulars of such income.” The Tribunal referenced the Jurisdictional High Court's decision in Mohd. Farhan A. Shaikh vs. DCIT (2021) 434 ITR 1 (Bom), which held that a defect in the notice, such as not striking off irrelevant matter, vitiates the penalty proceedings. The High Court emphasized that the notice must be precise and leave no room for ambiguity. The Tribunal also cited the Co-ordinate Bench decision in ITA No.4630 & 4631/Mum/2019, which followed the same principle and deleted the penalty due to a similar defect in the notice. 2. Legality of the Penalty Levied for Furnishing Inaccurate Particulars of Income: The Assessing Officer had levied a penalty of ?3,30,000/- for furnishing inaccurate particulars of income, based on the addition of deemed dividend under section 2(22)(e) of the Act. The assessee had received a loan of ?10 lakhs from Growmore Investment and Developers Private Limited, in which the assessee held an 11.50% shareholding. This loan was treated as deemed dividend and added to the assessee's total income. The Tribunal, however, did not delve into the merits of this penalty because it had already found the notice to be invalid. Following the principle of consistency and the precedents set by the Jurisdictional High Court and Co-ordinate Bench, the Tribunal directed the Assessing Officer to delete the penalty. Conclusion: The Tribunal concluded that the notice issued under section 274 read with section 271(1)(c) was invalid due to its failure to specify the grounds for the penalty. Consequently, the penalty of ?3,30,000/- was deleted. The Tribunal did not address other grounds on the merits of the case since the penalty was already deleted on procedural grounds. Order: The appeal of the assessee was allowed, and the penalty levied was directed to be deleted. The order was pronounced in the open court on 04.01.2022.
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