2021 (1) TMI 879 - AT - Income Tax

Tribunal emphasizes clear notice in penalty proceedings, defects not curable under the Act.

The Tribunal upheld the cancellation of the penalty under section 271(1)(c) for A.Y. 2010-11, emphasizing that the defect in the show-cause notice was ... Rectification of mistake - Penalty levied u/s.271(1)(c) - Defective notice - error which had occurred in the order of the Tribunal in respect of the action of the Tribunal deleting the penalty levied u/s.271(1)(c) of the Act on the ground that the penalty show-cause notice had not struck off the irrelevant portion and the Assessing Officer had not specifically mentioned the offence committed by the assessee as to whether it had concealed the particulars of income or had furnished inaccurate particulars of income - HELD THAT:- Show-cause notice issued u/s.274 r.w.s. 271(1)(c) of the Act clearly stipulates that the Assessing Officer is supposed to strike off the irrelevant portion and specify Whether the assessee has concealed the particulars of income or Whether the assessee has furnished inaccurate particulars of income or Whether the assessee has concealed particulars of income and furnished inaccurate particulars of income. Merely because the show-cause notice had mentioned that assessee had concealed its particulars in bold letters that alone would not suffice the requirements. The assessee cannot be expected to know or understand the mind of the Assessing Officer that the Assessing Officer is expecting reply from the assessee only on the aspect of assessee concealing particulars of income. Assessee on the safe side had given his entire submissions dated 31/08/2013 defending that it had neither concealed particulars of income nor furnished inaccurate particulars of income. This does not tantamount to mere participation in the penalty proceedings by accepting to the mistake committed by the Assessing Officer and the said mistake does not get cured u/s 292B of the Act. Miscellaneous Application of the Revenue is dismissed. Issues:Recall of order deleting penalty under section 271(1)(c) for A.Y. 2010-11 based on error in the show-cause notice.Analysis:The Appellate Tribunal ITAT Mumbai addressed the issue of recalling the order deleting the penalty under section 271(1)(c) for A.Y. 2010-11 due to an error in the show-cause notice. The Revenue sought to recall the order on the grounds that the Assessing Officer had not struck off the irrelevant portion in the notice, but had highlighted the offense of concealing income in bold letters. The Revenue argued that this action sufficed as the Assessing Officer had intimated the offense to the assessee, who participated in the penalty proceedings and replied to the notice. The Revenue cited a High Court decision to support its stance that the defect in the notice was curable under Section 292B of the Act. However, the Assessee contended that the Tribunal had canceled the penalty both on merits and legal grounds, highlighting that there was no tax evasion and the penalty was canceled due to the non-striking of the relevant portion in the notice. The Assessee pointed out that a similar case involving the Assessee's sister concern had resulted in the dismissal of the Revenue's miscellaneous application on identical grounds.The Tribunal examined the arguments and found that the defect in the penalty show-cause notice was jurisdictional and not curable under Section 292B of the Act. The notice under section 274 r.w.s. 271(1)(c) mandates the Assessing Officer to strike off the irrelevant portion and specify whether the assessee concealed income, furnished inaccurate particulars, or both. Merely highlighting one offense in bold letters did not meet the legal requirements. The Tribunal emphasized that the Assessee could not be expected to infer the Assessing Officer's expectations and had responded to both charges in good faith. The Tribunal referred to a previous case involving the Assessee's sister concern where a similar issue was adjudicated, leading to the dismissal of the Revenue's application. Consequently, the Tribunal dismissed the Revenue's Miscellaneous Application, upholding the cancellation of the penalty due to the defective notice.In conclusion, the Tribunal's decision reaffirmed that the defect in the show-cause notice was jurisdictional and not curable under the Act. The Tribunal emphasized the necessity of specifying the offense clearly in the notice to enable the assessee to respond appropriately. By dismissing the Revenue's Miscellaneous Application, the Tribunal upheld its previous decision to cancel the penalty, reinforcing the importance of procedural compliance in penalty proceedings.