2022 (12) TMI 1157 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - Defective notice u/s 274 - non-strike off of the irrelevant part in the notice issued u/s.271(l)(c) - unexplained credits introduced in garb of share application money addition u/s 68 - as argued AO did not specify 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 - HELD THAT - Hon'ble Bombay High Court (Full Bench at Goa) in the case of 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. Ratio of this full bench decision of the Hon'ble Bombay High Court (Goa) squarely applies to the facts of the assessee's case as the notice u/s. 274 r.w.s. 271(l)(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 are of the opinion that, the penalty order passed u/s 271(1)(c) of the Act by the Assessing Officer and the order of the CIT(A) in confirming the penalty order are erroneous. Accordingly, the penalty order passed by the A.O for Assessment Year 2007-08 is hereby quashed. Accordingly, Assessee s Grounds of Appeal are allowed.

Summary

Issues involved:
- Levy of penalty under section 271(1)(c) of the Income Tax Act
- Proper satisfaction by the Assessing Officer for penalty imposition
- Defective notice issued for penalty proceedings

Levy of penalty under section 271(1)(c) of the Income Tax Act:
The appellant challenged the confirmation of a penalty of Rs. 8,87,136 under section 271(1)(c) by the Commissioner of Income Tax (Appeals) for the assessment year 2007-08. The appellant argued that the penalty was imposed based on additions confirmed by the CIT(A) without considering certain aspects. The appellant contended that the Assessing Officer did not establish whether there was concealment or inaccurate particulars of income. The appellant also highlighted that evidence was presented to support investments made through legitimate means, which were not disputed by the Assessing Officer. The Tribunal found merit in the appellant's arguments and quashed the penalty order, citing errors in the penalty imposition process.

Proper satisfaction by the Assessing Officer for penalty imposition:
The Tribunal scrutinized the notice issued by the Assessing Officer under section 271(1)(c) and noted that it did not specify the grounds for penalty imposition clearly, failing to strike off irrelevant limbs. Citing a precedent from the Hon'ble Bombay High Court, the Tribunal emphasized that the assessee must be informed of the penalty grounds precisely through a statutory notice. The Tribunal underscored that a vague notice lacks clarity and violates the principles of natural justice. Relying on legal interpretations, the Tribunal concluded that the penalty order and the confirmation by the CIT(A) were erroneous due to the defective notice issued by the Assessing Officer, leading to the quashing of the penalty.

Defective notice issued for penalty proceedings:
The Tribunal referred to a significant judgment by the Hon'ble Bombay High Court (Full Bench at Goa) regarding the issue of non-striking off irrelevant parts in the notice issued under section 271(1)(c) of the Act. The Tribunal aligned with the court's ruling that an omnibus notice lacking specificity creates vagueness and infringes on the assessee's right to a clear understanding of the penalty grounds. Applying the court's decision to the present case, the Tribunal held that the penalty order and the CIT(A)'s confirmation were flawed due to the deficient notice issued by the Assessing Officer. Consequently, the Tribunal quashed the penalty order for the assessment year 2007-08, allowing the appellant's grounds of appeal.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision in each aspect of the case.