Penalty under Section 270A requires specific charges; vague notices lead to penalty deletion for AY 2017-20

ITAT DELHI held that the penalty under section 270A for both under-reporting and misreporting could not be sustained where the show cause notice only referred to under-reporting. The tribunal emphasized that penalty proceedings are distinct from assessment proceedings and the notice must specify the exact offense. Since the assessee was not given an opportunity to respond to allegations of misreporting, the penalty under section 270A for AY 2017-18 was deleted. Similarly, penalty under section 271AAB for AYs 2018-19 and 2019-20 was also deleted due to lack of specific charges in the penalty notice. Appeals of the assessee were allowed on these technical grounds.

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Issues Involved:
1. Validity of penalty notices u/s 270A for A.Y. 2017-18.
2. Validity of penalty notices u/s 271AAB for A.Y. 2018-19 and 2019-20.

Summary:

1. Validity of Penalty Notices u/s 270A for A.Y. 2017-18:
The assessee challenged the penalty notices issued u/s 270A, arguing that they were vague and failed to specify the exact charge, whether for "under-reported income" or "mis-reporting of income." The Tribunal noted that the penalty notice dated 02/06/2021 only referred to "under-reported income," but the penalty was levied for "mis-reporting of income." The Tribunal cited several judicial precedents, including the Hon'ble Jurisdictional High Court in Schneider Electric South East Asia (HQ) Pte Ltd vs. ACIT and Prem Brothers Infrastructure LLP v. NFAC, which held that a defective penalty notice is fatal to the penalty proceedings. The Tribunal concluded that the penalty notice was vague and did not meet the requirements of law, thus directing the deletion of the penalty levied u/s 270A for A.Y. 2017-18.

2. Validity of Penalty Notices u/s 271AAB for A.Y. 2018-19 and 2019-20:
The assessee argued that the penalty notices issued u/s 271AAB were vague and did not specify the exact clause under which the penalty was being levied. The Tribunal observed that the penalty notices did not depict the charge against the assessee as to under which clause (a), (b), or (c) of Section 271AAB (1) or Clause (a) or (b) of 271AAB(1A) of the Act penalty is leviable. The Tribunal cited several judicial precedents, including the Jaipur Bench of the Tribunal in Sri. Mahaveer Prasad Agarwal Vs. The DCIT and the Indore Bench in Shri Ashok Bhatia vs. DCIT, which held that a vague penalty notice is invalid. The Tribunal concluded that the penalty notices were vague and did not meet the legal requirements, thus directing the deletion of the penalties imposed u/s 271AAB for A.Y. 2018-19 and 2019-20.

Conclusion:
The Tribunal allowed the appeals filed by the assessee on the technical ground of defective penalty notices for all the assessment years involved, without adjudicating the merits of the penalties.

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