Penalty under section 271(1)(c) deleted due to invalid section 274 notice with unstruck irrelevant limb

ITAT Mumbai deleted penalty imposed under section 271(1)(c) after finding the penalty notice under section 274 invalid due to non-striking of irrelevant limb. The tribunal held that failure to strike off irrelevant provisions in the notice creates vagueness and ambiguity, violating mandatory conditions and principles of natural justice. Following Bombay HC precedent in Mohd. Farhan A. Shaikh, the tribunal ruled that assessee must be aware of exact charges to properly defend themselves. The non-specification vitiated entire penalty proceedings, requiring deletion of penalty confirmed by CIT(A).

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Issues involved: Appeal challenging penalty levied under section 271(1)(c) of the Income Tax Act for Assessment Years 2002-03 and 2003-04.

Summary of Judgment:

Issue 1: Penalty under section 271(1)(c) of the Act
- The appeals were filed by both the Revenue and the assessee regarding the penalty levied under section 271(1)(c) of the Act.
- The assessee, a non-resident company, was engaged in managing sporting events and selling commercial rights.
- The Assessing Officer (A.O.) reopened the case due to discrepancies in income disclosure, leading to a penalty of Rs. 35,41,86,182 imposed by the A.O.
- The CIT(A) partly allowed the appeal, but both parties challenged the decision.
- The AR argued that the penalty notice was defective as it did not specify the relevant limb for the penalty.
- The Tribunal admitted the additional ground raised by the assessee based on legal precedents, stating that non-striking of the irrelevant limb in the notice vitiates penalty proceedings.
- Citing legal principles, the Tribunal held that the penalty should be deleted due to the defective notice, as it violated natural justice principles.
- The Tribunal directed the A.O. to delete the penalty, rendering other grounds of appeal moot.
- Consequently, the appeal by the assessee was allowed, and the Revenue's appeal was dismissed.

Separate Judgment:
- In a separate judgment for ITA No. 171/Mum/2008, the appeal filed by the Revenue was dismissed based on similar facts and legal reasoning as in the other appeals.

Conclusion:
- The Tribunal ruled in favor of the assessee, directing the deletion of the penalty due to a defective notice, emphasizing the importance of procedural fairness and natural justice in penalty proceedings.

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