2024 (1) TMI 310 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice - one of the limbs of penalty was not marked meaning thereby that the penalty notice has been issued in a standard format - HELD THAT - We find that the notice was issued in a standard format, i.e. by mentioning both the limbs of penalty. In other words, it has been mentioned that the assessee has furnished inaccurate particulars of income, which is not correct position of law. In our opinion, AO has to issue the show-cause notice by mentioning the correct limb on the penalty was propose d to be levied, which is lacking in this case and thus the assessee was deprived from replying to the show-cause notice thereby violating the principle of natural justice. Accordingly, we hold that the order passed by the ld. AO is not sustainable in law and is quashed. Appeal of the assessee is allowed.

Summary

Issues involved:
The legal issue raised is regarding the validity of the penalty order passed under section 271(1)(c) of the Income Tax Act, 1961, where the relevant limb for imposing penalty was not indicated in the show-cause notice.

Summary:

Issue 1: Validity of Penalty Order
The assessee appealed against the penalty order passed under section 271(1)(c) of the Income Tax Act, 1961, which was upheld by the ld. CIT(Appeals) without indicating the relevant limb for imposing the penalty in the show-cause notice. The assessee argued that the penalty was imposed on an addition that was later deleted, and the notice was issued in a standard format without specifying the correct charge. The ld. Assessing Officer's failure to mention the correct limb deprived the assessee of responding, violating the principle of natural justice. The Tribunal held that the notice was deficient as it did not specify the correct limb for penalty imposition, leading to the quashing of the penalty order.

Conclusion:
The Tribunal found the penalty order unsustainable in law due to the deficient show-cause notice, thereby allowing the appeal of the assessee.