2025 (2) TMI 604 - AT - Income Tax

Validity of notice issued u/s. 274 r.w.s 271 in mechanical manner Nin specification of clear charge - HELD THAT - A perusal of notice shows that the same is omnibus notice in a preprinted performa. Though the AO has tick marked in the notice however it is not clearly emanating from the notice as to whether penalty u/s. 271(1)(c) is levied on the charge of concealment of particulars of income or furnishing inaccurate particulars of income or on both limbs of section 271(1)(c). This makes the notice vague and defective. Perusal of the assessment order reveals that the AO while recording satisfaction for levy of penalty u/s. 271(1)(c) has failed to mention the charge i.e. whether satisfaction for levy of penalty u/s. 271(1)(c) of the Act is recorded for concealment of particulars of income or furnishing inaccurate particulars or concealment of particulars of income and furnishing inaccurate particulars . Thus no charge as specified u/s. 271(1)(c) has been invoked by the AO while recording satisfaction. Penalty is liable to be deleted on the ground of ambiguity in recording of satisfaction. Ambiguity in mind of the AO regarding charge on which penalty is to be levied u/s. 271(1)(c)of the Act is reflected in notice as well. AO has not struck off irrelevant matter in the notice issued in pre printed performa. As decided in the case of Mohd. Farhan A. Shaikh 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB) where omnibus notice has been issued and irrelevant matter in the notice has not been struck off the notices is defective. No penalty can be levied on such defective notice. Thus non striking off irrelevant matter by the AO has rendered the notice defective hence penalty proceedings are vitiated. Decided in favour of assessee.

Summary

The issues presented and considered in the judgment are as follows:1. Whether the penalty under section 271(1)(c) of the Income Tax Act, 1961 was validly imposed on the assessee for the assessment years 2008-09 to 2011-12.2. Whether the notice issued by the Assessing Officer under section 274 r.w.s. 271 of the Act was defective and rendered the penalty proceedings vitiated.Issue-wise detailed analysis:Issue 1: Validity of penalty under section 271(1)(c) of the Income Tax Act- Relevant legal framework and precedents: Section 271(1)(c) of the Income Tax Act provides for the imposition of penalty for concealment of income or furnishing inaccurate particulars of income.- Court's interpretation and reasoning: The court found that the notice issued by the Assessing Officer was vague and defective as it did not clearly specify the charge for which the penalty was imposed. The ambiguity in the notice and the failure to mention the charge in the assessment order rendered the penalty liable to be deleted.- Key evidence and findings: The notice issued was an omnibus notice in a preprinted format, lacking clarity on the specific charge for the penalty.- Application of law to facts: The court applied the legal principle that penalties cannot be imposed based on defective notices and ambiguity in recording satisfaction for levy of penalties.- Conclusions: The court held that the penalty imposed under section 271(1)(c) of the Act was invalid due to the defective notice and ambiguity in recording satisfaction. Consequently, the impugned order was set aside, and the appeal was allowed.Issue 2: Defectiveness of the notice issued under section 274 r.w.s. 271 of the Act- Relevant legal framework and precedents: The court referred to the Full Bench of the Hon'ble Bombay High Court in the case of Mohd. Farhan A. Shaikh vs. DCIT, which held that defective notices where irrelevant matter has not been struck off render the penalty proceedings vitiated.- Court's interpretation and reasoning: The court found that the notice issued by the Assessing Officer was defective as irrelevant matter was not struck off, making it ambiguous and inadequate to levy penalties.- Key evidence and findings: The court highlighted the failure of the Assessing Officer to specify the charge for the penalty in the notice and the assessment order.- Application of law to facts: The court applied the legal principle that defective notices cannot form the basis for imposing penalties under the Income Tax Act.- Conclusions: The court concluded that the defective notice issued under section 274 r.w.s. 271 of the Act rendered the penalty proceedings vitiated. As a result, the impugned order was set aside, and the appeal was allowed.Significant holdings:- The court held that penalties cannot be imposed based on defective notices and ambiguity in recording satisfaction for the levy of penalties.- The court established the principle that notices must clearly specify the charge for which penalties are imposed to ensure the validity of penalty proceedings.- Final determinations on each issue: The court set aside the impugned order and allowed the appeals for the assessment years 2008-09 to 2011-12.In conclusion, the judgment focused on the validity of the penalty imposed under section 271(1)(c) of the Income Tax Act and the defectiveness of the notice issued by the Assessing Officer. The court found that the penalty proceedings were vitiated due to the defective notice and ambiguity in recording satisfaction, leading to the setting aside of the impugned order and allowing the appeals for all the assessment years in question.