2022 (10) TMI 412 - AT - Income Tax

Penalty under Section 271AAB quashed due to invalid show-cause notice lacking specific clause identification

Mahaveer Prasad Agarwal Versus Deputy Commissioner of Income-Tax

ITAT Jaipur allowed the assessee's appeal against penalty levied under section 271AAB. The tribunal held that the show-cause notice issued under section ... Penalty levied u/s 271AAB - Necessity to mention specific charge or limb as specified in clauses (a), (b) or (c) of section 271AAB under which the penalty proceeding - HELD THAT:- As evident from the show-cause notice issued under section 274 read with section 271AAB that the Assessing Officer was not clear as to on what precise charge the appellant was asked to show cause, whether the assessee shall pay by way of penalty under clauses (a), (b) or (c) of section 271AAB. The Assessing Officer has just mentioned 'deliberately concealed the true income'. Assessing Officer without mentioning specific default of the assessee in terms of clauses (a), (b) or (c) of section 271AAB of the Act, the show-cause notice issued in routine manner cannot be considered a valid notice in the eyes of law and accordingly the levy of penalty against the assessee is held to be void ab initio. Appeal of assessee allowed. Issues Involved:1. Validity of the order passed by the Assessing Officer.2. Sustaining penalty under section 271AAB of the Income-tax Act.3. Recording observations contrary to law.4. Ignoring the explanation and judicial decisions referred by the appellant.5. Raising additional or alternative grounds.6. Vagueness of the show-cause notice under section 274 read with section 271AAB(1).Detailed Analysis:1. Validity of the Order Passed by the Assessing Officer:The assessee contested the validity of the order passed by the Assessing Officer, which was upheld by the Commissioner of Income-tax (Appeals). The tribunal did not provide a separate detailed discussion on this issue, indicating that the primary focus was on the penalty under section 271AAB.2. Sustaining Penalty Under Section 271AAB of the Income-tax Act:The core issue revolved around the penalty of Rs. 87,300 under section 271AAB of the Act. The assessee argued that the penalty was imposed without specifying the exact clause under section 271AAB(1) (a), (b), or (c), which have different conditions for imposing penalties. The tribunal observed that the Assessing Officer did not mention the specific charge or rate of penalty in the show-cause notice, making it vague and unclear. The tribunal emphasized that the imposition of penalty under section 271AAB is discretionary and not mandatory, requiring a clear and specific charge. Citing the case of Padam Chand Pungliya, the tribunal held that the penalty could not be imposed without a clear specification of the default and the corresponding clause under section 271AAB.3. Recording Observations Contrary to Law:The assessee contended that the observations recorded by the Commissioner of Income-tax (Appeals) were contrary to the provisions of the law and judicial precedents. The tribunal found merit in this argument, particularly focusing on the lack of specificity in the penalty notice, which was contrary to established legal principles requiring clear charges.4. Ignoring the Explanation and Judicial Decisions Referred by the Appellant:The tribunal noted that the Commissioner of Income-tax (Appeals) did not adequately consider the explanations and judicial decisions presented by the appellant. The assessee had provided a detailed explanation for the availability of cash and had paid the tax and interest suo motu. The tribunal emphasized the need for a thorough consideration of the appellant's explanations and judicial precedents, which was lacking in the Commissioner's order.5. Raising Additional or Alternative Grounds:The tribunal allowed the assessee to raise additional grounds, particularly the argument regarding the vagueness of the show-cause notice under section 274 read with section 271AAB. This additional ground was crucial in the tribunal's decision to quash the penalty.6. Vagueness of the Show-Cause Notice Under Section 274 Read with Section 271AAB(1):The tribunal found that the show-cause notice issued under section 274 read with section 271AAB was vague and did not specify the exact clause under which the penalty was initiated. The notice merely stated 'deliberately concealed the true income' without specifying whether it was under clause (a), (b), or (c) of section 271AAB. This lack of specificity rendered the notice invalid, leading the tribunal to quash the penalty.Conclusion:The tribunal quashed the penalty order, emphasizing that the show-cause notice was vague and did not specify the exact charge under section 271AAB. The tribunal highlighted the discretionary nature of penalty imposition under section 271AAB and the need for clear and specific charges. The appeal of the assessee was allowed, and the order of the Commissioner of Income-tax (Appeals) sustaining the penalty was quashed.Order Pronounced:The order was pronounced in the open court on June 2, 2022.