2021 (7) TMI 214 - AT - Income Tax

Tribunal remits tax issues for fresh review, deletes penalty under section 271(1)(c) due to defective notice

The Tribunal remitted the issues of taxability of notional income and calculation of net export incentives back to the Assessing Officer for fresh ... Penalty u/s 271(1)(c) - defective notice u/s 274 - HELD THAT:- We note that there is no any definite charge/ accusation on the assessee, whether initiation of penalty proceeding is on account of ‘concealment of income’ or on account of ‘furnishing inaccurate particulars of income’. We note that in the case of Mohd. Farhan A. Shaikh,[2021 (3) TMI 608 - BOMBAY HIGH COURT] held that penalty notice under section 271(1) (c ) of the Act must clearly specify charges against assessee. The notice in printed form without deleting inapplicable portions by assessing officer would invalidate the penalty proceedings and penalty imposed by the assessing officer under section 271(1) (c ) of the Act would not sustain. - Decided in favour of assessee. Issues Involved:1. Admission of additional grounds of appeal.2. Taxability of notional income from DEPB credits, DFRC receipts, and other export incentives.3. Calculation of net export incentives for deduction under section 80IC.4. Imposition of penalty under section 271(1)(c) of the Income Tax Act.Issue-wise Detailed Analysis:1. Admission of Additional Grounds of Appeal:The assessee contended that the Commissioner of Income Tax (Appeals) erred in not admitting the additional ground of appeal raised during the appellate proceedings. The Tribunal observed that the issue was previously adjudicated in favor of the assessee by the Coordinate Bench of ITAT Ahmedabad for earlier assessment years. Consequently, the Tribunal found no reason to deviate from the established view and decided to remit the issue back to the Assessing Officer for necessary verification and adjudication afresh as per law.2. Taxability of Notional Income from DEPB Credits, DFRC Receipts, and Other Export Incentives:The assessee argued that notional income by way of DEPB credits, DFRC receipts, or other export incentives credited in the profit and loss account should not be considered as income liable for tax during the year, referencing the Supreme Court's decision in CIT vs. Excel Industries Ltd. The Tribunal noted that the issue had been previously adjudicated in favor of the assessee by the Coordinate Bench of ITAT Ahmedabad. The Tribunal saw no reason to take a different view and remitted the issue back to the Assessing Officer for verification and fresh adjudication.3. Calculation of Net Export Incentives for Deduction under Section 80IC:The assessee contended that only net export incentives (not gross) should be considered as profits eligible for the purpose of granting deduction under section 80IC of the Act. The Tribunal referred to the earlier decision by the Coordinate Bench, which supported the assessee's view. Consequently, the Tribunal remitted the issue back to the Assessing Officer for fresh adjudication, directing the assessee to produce all relevant details in the consequential proceedings.4. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act:The assessee challenged the imposition of penalty under section 271(1)(c), arguing that the penalty notice did not specify the charge of either 'concealment of income' or 'furnishing inaccurate particulars of income.' The Tribunal noted that the Bombay High Court in Mohd. Farhan A. Shaikh held that a penalty notice must clearly specify charges against the assessee. The Tribunal found that the penalty notice in this case was vague and did not meet the necessary legal standards. Therefore, following the jurisdictional High Court's precedent, the Tribunal deleted the penalty imposed by the Assessing Officer.Conclusion:The Tribunal allowed the appeal for statistical purposes regarding the taxability of notional income and calculation of net export incentives, remitting the issues back to the Assessing Officer for fresh adjudication. The penalty appeal was allowed, and the penalty under section 271(1)(c) was deleted due to the defective penalty notice.