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2024 (6) TMI 871 - ITAT VISAKHAPATNAMPenalty u/s. 271(1)(c) - validity of notice issued - addition made towards unexplained investment U/s. 69 - HELD THAT - As per the provisions of section 271(1)(c) of the Act, it is mandatory to mention the reason in the notice as to whether the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. As carefully gone through the notice issued U/s. 274 r.w.s 271(1)(c), we find that this is not the case of non-striking off of the relevant limb in the penalty notice issued to the assessee. This is the case where the Ld. AO has not even mentioned the reason as to why they are invoking the penalty provisions. It is a settled law that a defect in the notice vitiates the entire proceedings. Therefore. we are of the considered view that since there is no proper notice stating whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income , we have no hesitation to come to a conclusion that since the notice itself is not valid, the penalty order passed on the basis of such invalid notice is void ab initio. Assessee appeal allowed. Issues involved:
The judgment involves issues related to the estimation of income from Indian Made Foreign Liquor (IMFL) business, addition of unexplained investment u/s 69 of the Income Tax Act, 1961, and the validity of the penalty notice issued u/s 271(1)(c) of the Act. Estimation of Income from IMFL Business: The assessee, engaged in the business of IMFL, filed a return of income admitting total income. The assessment by the Ld. AO estimated the income from the business and made additions u/s 69 of the Act. The Ld. CIT(A) directed re-computation of income based on purchase price of stock put to sale. The Tribunal considered the facts and directed the Ld. AO to re-compute income @ 5% of purchase price of stock, net of deductions. Addition of Unexplained Investment u/s 69: The Ld. AO made an addition towards unexplained investment u/s 69 of the Act, which the Ld. CIT(A) upheld. The penalty notice u/s 274 r.w.s 271(1)(c) was issued, and the Ld. AO levied a penalty. The assessee appealed against the penalty order, arguing against the justification of the penalty. The Tribunal reviewed the case and found the penalty notice invalid due to the absence of a specific charge mentioned, leading to the penalty order being declared void ab initio. Validity of Penalty Notice: The Ld. AR contended that the penalty notice was invalid as it did not specify the charge for the proposed penalty. The Ld. DR argued that the nature of the charge was clear from the assessee's reply and the notice was not rendered invalid. The Tribunal observed that under section 271(1)(c) of the Act, it is mandatory to mention the reason for the penalty in the notice. As the notice lacked this essential information, the Tribunal deemed it invalid, leading to the penalty order being declared void ab initio.
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