2024 (11) TMI 164 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - defective notice as it did not clearly specify the grounds for the penalty - additions/disallowances on account of set off of losses and disallowance u/s. 37 (including disallowance of donation) - HELD THAT - A perusal of the same reveals that the notice is issued in a pre printed performa, without striking off irrelevant clauses in the notice. It is an omnibus notice. As decided in the case of PCIT vs. Sahara India Life Insurance Company Ltd. 2019 (8) TMI 409 - DELHI HIGH COURT following the decision rendered in the case of CIT vs. Manjunatha Cotton Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT deleted penalty where the AO failed to clearly specify the limb of section 271(1)(c) of the Act for levy of penalty in the notice. As in the case of Mohd. Farhan A Shaikh 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB) has held that where assessment order records satisfaction for imposing penalty on one or other or both grounds mentioned in section 271(1)(c) of the Act, a defect in notice in not striking of irrelevant matter would vitiate penalty proceedings. An omnibus notice suffers from the vice of vagueness. Assessee appeal allowed.

Summary

The ITAT Delhi allowed the appeal by the assessee against the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The penalty was deemed invalid due to a defective notice that did not clearly specify the grounds for the penalty, following precedents set by the Delhi High Court and the Bombay High Court. The appeal was allowed, and the penalty was deleted.