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2022 (10) TMI 118 - AT - Income TaxValidity of notice issued u/sec 274 r.w.s 271(1)(c) - whether the penalty is levied for concealment of particulars of income or furnishing inaccurate particulars of income? - HELD THAT - Notice issued for levying of penalty is invalid and the A.O. has not applied his mind and non striking of charge in the penalty notice i.e. whether the charge is for concealment of income or furnishing of in accurate particulars of income. We find the Jurisdictional Honble High Court of Bombay in Mohd Farhan A Shaikh 2021 (3) TMI 608 - BOMBAY HIGH COURT has dealt on this disputed issue of not striking off charge in the penalty notice would vitiate the penalty proceedings. Appeal of assessee allowed.
Issues Involved:
1. Deletion of penalty of Rs.4,85,51,154/- levied under Section 271(1)(c) of the Income Tax Act. 2. Validity of the notice issued under Section 274 read with Section 271(1)(c) of the Income Tax Act. Detailed Analysis: 1. Deletion of Penalty of Rs.4,85,51,154/- Levied Under Section 271(1)(c) of the Income Tax Act: The Revenue filed an appeal against the CIT(A)'s order that deleted the penalty of Rs.4,85,51,154/- levied by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act. The AO had denied the assessee's claim for deduction under Section 80IA of the Act, leading to an addition of Rs.10,46,24,128/-, among other disallowances. The AO initiated penalty proceedings and issued a show cause notice for levying the penalty, which the assessee contested, arguing there was no concealment of income or furnishing of inaccurate particulars. Despite the assessee's defense, the AO imposed the penalty. The CIT(A) considered the grounds of appeal, the findings of the AO, and judicial decisions, ultimately deleting the penalty. The CIT(A) observed that the penalty order was premature, void, and non-est since the quantum appeal was still pending before the ITAT. The CIT(A) relied on the Bombay High Court's decision in R.B. ShreeramDurgaprasad v. CIT, which held that penalty proceedings could not be initiated while an appeal against the quantum order was pending. Consequently, the CIT(A) deleted the penalty and allowed the first ground of appeal. 2. Validity of the Notice Issued Under Section 274 Read with Section 271(1)(c) of the Income Tax Act: The assessee filed additional grounds in the cross-objection, challenging the validity of the notice issued under Section 274 read with Section 271(1)(c) of the Act. The assessee argued that the notice was defective as it did not specify whether the penalty was for concealment of income or for furnishing inaccurate particulars of income. The ITAT considered the Bombay High Court's decision in Mohd Farhan A Shaikh Vs. DCIT, which held that a defective notice that does not strike off the irrelevant part vitiates the penalty proceedings. The ITAT found that the AO had not specified the charge in the penalty notice, making it invalid. The ITAT observed that the penalty order could not be sustained as the quantum addition had been deleted by the Tribunal in the assessee's own case. Consequently, the ITAT quashed the penalty notice and allowed the ground of cross-objections in favor of the assessee. Conclusion: The ITAT dismissed the Revenue's appeal and allowed the assessee's cross-objection. The penalty of Rs.4,85,51,154/- levied under Section 271(1)(c) was deleted, and the notice issued under Section 274 read with Section 271(1)(c) was declared invalid due to non-specification of the relevant charge. The order was pronounced in the open court on 30th September 2022.
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