Defective show cause notice: penalty deleted where taxpayer relied on consultant and promptly corrected returns and paid tax.

The article addresses deletion of a penalty imposed under section 270A(9) for under-reporting where the show cause notice failed to identify which clause (a-f) applied and the taxpayer demonstrated bona fide reliance on a tax consultant, prompt voluntary correction by filing a revised return, and payment of tax and interest accepted by the AO. The analysis concludes that the procedural defect in the notice and the factual matrix of innocent reliance and immediate rectification justify deletion of the penalty and allowance of the appeal.

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Issues: Whether the penalty of Rs.1,15,938/- imposed under section 270A(9) of the Income-tax Act, 1961 for under-reporting as a consequence of misreporting is sustainable where the show-cause notice did not specify the particular clause (a to f) of section 270A(9) and the assessee contends bona fide reliance on a tax consultant and made corrected disclosure and tax payment.

Analysis: The Tribunal examined whether the statutory requirement of specifying the applicable clause(s) of sub-section (9) of section 270A was complied with in the show-cause notice and whether the facts demonstrated bona fide reliance and voluntary correction by the assessee. The Tribunal noted the procedural defect that the notice to show-cause failed to identify the specific clause from clause (a) to (f) of section 270A(9). The Tribunal also reviewed factual findings that the assessee, a salaried employee from a technical background, had engaged a tax consultant who fraudulently claimed excess deductions, that the assessee was unaware of the incorrect claims, that the assessee filed a correct revised return and paid tax and interest promptly upon discovering the fraud, and that the Assessing Officer accepted the revised return. The Tribunal found persuasive precedent from coordinate benches that deletion of penalty is warranted where the AO fails to identify the specific clause of section 270A(9) in the show-cause notice and where similar factual circumstances of bona fide reliance and prompt correction exist.

Conclusion: The penalty of Rs.1,15,938/- imposed under section 270A(9) of the Income-tax Act, 1961 is deleted and the assessee's appeal is allowed.

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