2022 (3) TMI 344 - AT - Income Tax

Penalty levied u/s 271(1)(c) - Defective notice u/s 274 - non strike of irrelevant portion in notice - additional ground was raised contending that penalty order is bad in law as the penalty proceedings were initiated and penalty was levied without specifying the exact limb of Section 271(1)(c) - HELD THAT - On perusal of the notice issued u/s 274 read with section 271(1)(c) of the Act we observe that the notice issued was stereotyped and the Assessing officer has not specified any limb or charge for which the notice was issued i.e., either for concealment of particulars of income or furnishing of inaccurate particulars of such income. It can be seen from the notice issued u/s 274 read with section 271(1)(c) of the Act, Assessing Officer did not strike off irrelevant limb in the notice specifying the charge for which notice was issued. As decided in MR. MOHD. FARHAN A. SHAIKH . 2021 (3) TMI 608 - BOMBAY HIGH COURT while dealing with the issue of non-strike off of the irrelevant part in the notice issued u/s.271(l)(c) of the Act, held that assessee must be informed of the grounds of the penalty proceedings only through statutory notice and an omnibus notice suffers from the vice of vagueness. Thus notice u/s. 274 r.w.s. 271(1)(c) of the Act were issued without striking off the irrelevant portion of the limb and failed to intimate the assessee the relevant limb and charge for which the notices were issued. Thus we hold that the penalty order passed u/s. 271(l)(c) of the Act by the Assessing Officer is bad in law and accordingly the penalty order passed u/s. 271(l)(c) of the Act for Assessment Year 2003-04 is quashed - Decided in favour of assessee.

Summary

Issues:
1. Additional grounds of appeal challenging penalty levied u/s 271(1)(c) of the Act.
2. Validity of penalty notice specifying the exact limb of Section 271(1)(c) of the Act.
3. Impact of the Hon'ble Bombay High Court (Full Bench at Goa) judgment on the penalty proceedings.

Analysis:

1. The appeal was filed against the penalty levied u/s 271(1)(c) of the Act for the AY 2003-04. The assessee raised additional grounds challenging the validity of the penalty. The Ld. Counsel argued that the penalty order was bad in law as the penalty proceedings were initiated without specifying the exact limb of Section 271(1)(c) of the Act. The Ld. Counsel contended that the notice issued did not specify the charge for which the penalty was imposed, rendering the penalty unsustainable. The Tribunal admitted the additional ground as it was a purely legal issue without the need for fresh facts verification.

2. The Ld. Counsel further argued that the penalty notice was issued without striking off the irrelevant limb of Section 271(1)(c) of the Act, leading to ambiguity in the charge against the assessee. The Tribunal observed that the notice was stereotyped and lacked specificity regarding the charge for which the penalty was imposed. Citing a judgment of the Hon'ble Bombay High Court (Full Bench at Goa), it was held that an omnibus notice without specifying the grounds of penalty proceedings is vague and violates the principles of natural justice.

3. The Tribunal's decision was influenced by the judgment of the Hon'ble Bombay High Court (Full Bench at Goa) in a similar case, emphasizing the importance of informing the assessee of the grounds of penalty proceedings through a specific notice. Following the precedent, the Tribunal ruled in favor of the assessee, quashing the penalty order passed u/s 271(1)(c) of the Act for the AY 2003-04. The decision highlighted the necessity of precise notices in penalty proceedings to ensure fairness and justice. As a result, the appeal of the assessee was allowed based on the invalidity of the penalty order.

This detailed analysis of the judgment showcases the legal intricacies involved in challenging the penalty levied under Section 271(1)(c) of the Income Tax Act and the significance of specific and unambiguous notices in penalty proceedings to uphold the principles of natural justice.