Penalty order void due to incorrect section and charge in notice for penalty imposition.

The Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal regarding a penalty imposed under section 271AAA of the Income-tax Act, 1961 for the assessment year 2011-12. The penalty notice issued under the wrong section and the inclusion of incorrect limbs for penalty imposition under section 271AAA rendered the penalty order void. The Tribunal emphasized the importance of a clear charge in the notice for a valid penalty order, setting aside the penalty order and the impugned decision.

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Issues:
Cross appeals by assessee and revenue regarding penalty imposed under section 271AAA of the Income-tax Act, 1961 for assessment year 2011-12.

Analysis:
1. The factual background involves the assessee being subjected to search, leading to the imposition of penalty under section 271AAA by the Assessing Officer (AO) based on three additions to the income. The ld. CIT(A) partly confirmed the penalty, leading to cross-appeals by both parties before the Tribunal.

2. The legal issue raised by the assessee was regarding the validity of the penalty notice issued under section 274 r.w.s. 271 of the Act, contending that it vitiates the penalty order. Reference was made to relevant judgments, including Ventura Textiles Ltd. vs. CIT and Mohd. Farhan A. Shaikh & Anr. vs. ACIT, emphasizing the importance of a lawful notice setting out the charge for a valid penalty order.

3. The Tribunal highlighted the significance of the penalty notice in setting the charge against the assessee, as per the judgments in Mohd. Farhan A. Shaikh and PCIT vs. Golden Peace Hotels and Resorts. It emphasized that a vague notice under section 274 can vitiate the penalty order, necessitating a clear charge for the penalty to be valid.

4. The notice issued to the assessee was under section 274 r.w.s. 271 of the Act, pertaining to penalty proceedings. However, the penalty imposed was under section 271AAA, which deals with undisclosed income in cases of search initiated after June 2007 but before April 2012. The AO's error in invoking the wrong section and including irrelevant limbs of section 271(1)(c) in the notice rendered the penalty order void.

5. The Tribunal concluded that the penalty notice issued under the wrong section and the inclusion of incorrect limbs for penalty imposition under section 271AAA invalidated the penalty order. Despite the ld. DR's arguments, the reference to section 271 in the notice and the incorrect application of penalty provisions led to setting aside the penalty order and the impugned decision.

6. Due to the decision in favor of the assessee on legal grounds, the Tribunal did not delve into the merits of the penalty imposed or deleted by the ld. CIT(A), deeming them academic. Consequently, the appeal of the assessee was allowed, and that of the Revenue was dismissed, with the penalty order and the impugned decision being set aside.

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