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2023 (4) TMI 677 - AT - Income TaxPenalty u/s 271(1)(c) - disallowances u/s 14A read with Rule 8D - HELD THAT - As copy of penalty notice makes it apparent that the AO had failed to distinguish and inform the Assessee as to it the notice was issued for concealment of income or furnishing inaccurate particulars and a proforma in a mechanical manner the notice was issued. The judgment relied by Assessee in the case of Ganga Iron Steel Trading Co. 2021 (12) TMI 1094 - BOMBAY HIGH COURT reiterates the settled provision of law that if notice is vague then the penalty proceedings initiated on that basis were vitiate and for that purpose Hon ble High court relied its full bench judgment in Mohd. Farhan A Shaikh 2021 (3) TMI 608 - BOMBAY HIGH COURT Thus the penalty proceedings are void ab initio. Accordingly, grounds raised by the Assessee are sustained. Decided in favour of assessee.
Issues:
Appeal against penalty order u/s 271(1)(c) of the Income Tax Act, 1961 - Validity of penalty proceedings - Notice for penalty initiation - Concealment of income or furnishing inaccurate particulars - Legal heir representation in the case. Analysis: The appeal was filed against the penalty order u/s 271(1)(c) of the Income Tax Act, 1961, arising from an assessment order making disallowances u/s 14A of the Act. The penalty was imposed by the Ld. AO, which was upheld by the Ld. CIT(A). The Assessee challenged the penalty on various grounds, including the validity of the penalty proceedings due to an invalid notice. The Assessee's counsel argued that the notice did not specify the reason for initiating penalty proceedings, citing a judgment by the Bombay High Court to support the contention that such vague notices vitiate penalty proceedings. The Ld. DR, however, argued that the penalty was imposed for furnishing inaccurate particulars, as indicated in the penalty order. Upon review, it was observed that the penalty notice failed to clearly specify whether it was issued for concealment of income or furnishing inaccurate particulars, rendering the penalty proceedings void ab initio. The judgment cited by the Assessee's counsel supported this view, emphasizing that vague notices invalidate penalty proceedings. The Hon'ble High Court's full bench judgment further reinforced this position. Consequently, the grounds raised by the Assessee were upheld, leading to the setting aside of the penalty order dated 28.06.2018. Furthermore, during the hearing, an application was submitted on behalf of the Assessee, informing about the Assessee's demise and requesting representation by the legal heir, who was the grandson of the Assessee. The death certificate and amended form 36 were provided as part of the record. The Tribunal considered this representation and proceeded with the case accordingly. In conclusion, the appeal was allowed, and the impugned penalty order was set aside. The judgment highlighted the importance of a clear and specific notice in penalty proceedings to ensure their validity and compliance with legal requirements. Order pronounced in the open court on 21/02/2023.
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