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2022 (8) TMI 1176 - AT - Income TaxPenalty u/s 271(1)(c) - Defective notice u/s 274 - addition on account of provision for diminution in the value of investment AND on account of prior period expenditure - allegation of non specification of charge - HELD THAT - On perusal of the aforesaid notice it is clear that A.O has not specified whether the penalty is levied on account of concealment of particular of income or furnishing of inaccurate particulars of income. In this regard we have gone through the case of jurisdictional High Court referred by ld. Counsel in the case of Mohd. Farhan A. Shaikh Vs. DCIT 2021 (3) TMI 608 - BOMBAY HIGH COURT 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) was bad in law. - Decided in favour of assessee.
Issues Involved:
1. Inadmissibility of expenses claimed by the assessee for AY 2012-13 and 2013-14. 2. Deletion of penalty amounting to Rs. 3,18,94,000/- under Section 271(1)(c) of the Income-tax Act, 1961. 3. Validity of the notice issued under Section 274 of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Inadmissibility of Expenses Claimed by the Assessee: The revenue contended that the assessee ignored the findings of the Tax Auditor regarding the inadmissibility of certain expenses for AY 2012-13 and 2013-14. The Assessing Officer (A.O) disallowed Rs. 9,67,00,000/- as a provision for diminution in the value of investments and Rs. 16,00,000/- as prior period expenditure. Additionally, Rs. 5,89,12,582/- was disallowed under Section 40(a)(ia) of the Act. The assessee argued that all necessary details were disclosed in the return of income, tax audit report, and financial statements, and no concealment or inaccurate particulars of income were furnished. However, the A.O disagreed and levied a penalty based on these disallowed amounts. 2. Deletion of Penalty Under Section 271(1)(c) of the Income-tax Act, 1961: The A.O levied a penalty of Rs. 3,18,94,000/- under Section 271(1)(c) of the Act, which was contested by the assessee. The assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], who dismissed the appeal. During the appellate proceedings, the assessee argued that the A.O did not specify the limb of Section 271(1)(c) under which the penalty was levied, showing non-application of mind. The assessee relied on the decision in Mohd. Farhan A. Shaikh Vs. DCIT (2021) 434 ITR 1 (Bom), which held that not striking off the irrelevant portion in the notice vitiates penalty proceedings. The Tribunal found merit in this argument, noting that the A.O had not specified whether the penalty was for concealment of income or furnishing inaccurate particulars of income, rendering the notice invalid. 3. Validity of the Notice Issued Under Section 274 of the Income-tax Act, 1961: The Tribunal examined the notice issued under Section 274 read with Section 271(1)(c) and found that it did not specify the grounds for penalty, i.e., whether it was for concealment of particulars of income or furnishing inaccurate particulars of income. This non-specification was deemed a violation of the principles of natural justice as it did not provide the assessee a clear opportunity to defend itself. The Tribunal cited the Full Bench decision of the Bombay High Court in Mohd. Farhan A. Shaikh Vs. DCIT, which mandates that the notice must be precise and unambiguous. The Tribunal also referred to the ITAT Mumbai decision in M/s Bhavya Shashank Shanbhag Vs. DCIT, which supported the view that an omnibus notice is invalid. Conclusion: The Tribunal concluded that the penalty levied under Section 271(1)(c) was invalid due to the defective notice issued under Section 274. Consequently, the penalty of Rs. 3,18,94,000/- was directed to be deleted. The appeal of the revenue was allowed, and the order of the CIT(A) was set aside. Order Pronouncement: The order was pronounced in the open court on 29.07.2022.
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