1995 (9) TMI 100 - AT - Income Tax

Tribunal cancels penalty due to incorrect provision, lack of specificity in notice

The Tribunal allowed the appeal, directing the Assessing Officer to cancel the penalty levied under section 273(2)(c) of the Income-tax Act for the ... Assessed Income, Assessing Officer, Assessment Year, Being Heard, Failure To Pay Advance Tax, False Estimate, Natural Justice, Penalty Proceedings Issues:Jurisdiction of Assessing Officer in levying penalty under section 273(2)(c) of the Income-tax Act, 1961; Validity of notice issued by Assessing Officer under section 274/273; Applicability of section 292B of the Act in penalty proceedings.Analysis:The appeal challenges the Assessing Officer's jurisdiction in imposing a penalty under section 273(2)(c) of the Income-tax Act for the assessment year 1983-84. The assessee initially estimated income at Rs. 30,000, later revised to Rs. 40,000, but returned income was Rs. 73,940. The Assessing Officer accepted this under section 143(3) subject to rectification under section 155. Subsequently, a notice for advance tax was issued, and after explanation, a penalty of Rs. 2,745 was imposed under section 273(2)(c). The first appellate authority upheld the penalty, citing a different sub-section of section 273 for short payment of advance tax, invoking section 292B to validate the penalty proceedings.The appellant contends that the penalty proceedings were initiated illegally and void ab initio. The notice issued by the Assessing Officer lacked specificity on the provision/sub-section under which the penalty was imposed. The appellant argued that the penalty was based on section 212(3A), which was omitted from the statute book since 1-6-1978. The first appellate authority's reliance on section 292B was challenged, asserting it does not cover such cases. Case laws were cited to support this argument.The departmental representative supported the lower authorities' orders and cited precedents to argue that incorrect mention of the section or sub-section does not invalidate penalty proceedings, with section 292B providing a remedy for such errors.The Tribunal found that the penalty was imposed under an incorrect provision not applicable to the case. The notice lacked specificity on the penalty provision, mentioning an omitted section 212(3). The Tribunal held that the mistake in mentioning section 273(2)(c) was not a technical error but a jurisdictional flaw, making the proceedings void ab initio. Citing case law, the Tribunal emphasized that section 292B does not cure jurisdictional defects. It further noted the violation of natural justice principles in the penalty proceedings, leading to the cancellation of the penalty.In conclusion, the Tribunal allowed the appeal, directing the Assessing Officer to cancel the penalty levied, emphasizing the jurisdictional and procedural errors in the penalty proceedings.