2021 (12) TMI 945 - HC - Income Tax

High Court Upholds Tribunal's Decision Canceling Penalty Under Income Tax Act

Principal Commissioner Of Income Tax, Central-II, Kolkata Versus Parmanand Agarwal

Principal Commissioner Of Income Tax, Central-II, Kolkata Versus Parmanand Agarwal - TMI Issues:1. Challenge to order cancelling penalty under Section 271(1)(c) of the Income Tax Act, 1961.2. Validity of notice under Section 274 for penalty imposition.Issue 1: Challenge to Penalty Cancellation:The High Court considered the appeal filed by the revenue challenging the order of the Income Tax Appellate Tribunal cancelling the penalty under Section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2007-08. The revenue contended that the assessee did not avail the opportunity to appear before the Appellate Authority, and the penalty was imposed without questioning the validity of the show-cause notice. However, the Court held that the Tribunal had jurisdiction to consider the issue raised by the assessee for the first time regarding the defective notice. The Court emphasized that the Tribunal is the final forum to decide factual issues and that the assessee, being an individual, should not be barred from raising jurisdictional concerns. The Court noted that the show-cause notice was defective as irrelevant portions were not struck off, prejudicing the assessee from presenting an effective objection. The Court referred to a decision of the High Court of Karnataka to support its findings and concluded that there was no error in the Tribunal's decision to cancel the penalty.Issue 2: Validity of Notice for Penalty Imposition:The Court examined whether the notice under Section 274 for penalty imposition was defective, as raised by the assessee. The revenue argued that the notice was valid as the relevant entry was indicated with a 'tick mark.' However, the Court found that the defect pointed out by the assessee regarding the notice was a jurisdictional issue. The Court held that the assessee had the right to raise such a contention before the Tribunal, even if it was raised for the first time, as the Tribunal is the final authority on factual matters. The Court distinguished previous decisions of other High Courts that refused to entertain similar grounds, noting that those cases involved large corporate entities with legal teams, unlike the individual assessee in the present case. The Court upheld the Tribunal's decision, emphasizing that the assessee should not be prevented from raising jurisdictional issues and that the Tribunal's decision-making process was sound.In conclusion, the High Court dismissed the revenue's appeal and answered the substantial questions of law against the revenue, affirming the Tribunal's decision to cancel the penalty under Section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2007-08.