2024 (9) TMI 351 - AT - Income Tax

Penalty Under Sec 271(1)(c) Quashed: ITAT Delhi Cites Procedural Lapses in Assessing Officer's Notice.

The ITAT Delhi allowed the appeal, setting aside the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961, due to procedural lapses in the ... Levy of penalty u/s 271(1)( c) - Defective notice u/s 274 - non striking of irrelevant part - whether non-striking off of the irrelevant portion in the penalty notice by not specifically mentioning the offence committed by the assessee, would become fatal to the penalty proceedings? - HELD THAT:- This issue is no longer res integra in view in the case of Mohd. Farhan A Shaikh vs DCIT [2021 (3) TMI 608 - BOMBAY HIGH COURT (LB)] In the instant case, on perusal of the penalty notice placed on record, it is evident that the ld. AO had not struck off the irrelevant portion thereon mentioning the specific offence committed by the assessee. The ratio laid down in the aforesaid decision of Hon’ble High Court squarely applies to the facts of the instant case before us. Similar view was taken by the Hon’ble Jurisdictional High Court in the case of PCIT Vs. Sahara India Life Insurance Co. Ltd [2019 (8) TMI 409 - DELHI HIGH COURT] - We direct the ld. AO to delete the penalty levied u/s 271(1)(c) - Appeal of the assessee is allowed. Issues:1. Justification of confirming penalty u/s 271(1)(c) of the Act by the CIT(A).Analysis:The appeal before the ITAT Delhi arose from the order of the Commissioner of Income Tax (Appeals) for the assessment year 2015-16 against the order of assessment passed by the Assessing Officer under section 143(3) of the Income-tax Act, 1961. The main issue to be decided was whether the CIT(A) was justified in confirming the levy of penalty under section 271(1)(c) of the Act. The appellant argued that the penalty notice issued by the Assessing Officer did not specifically mention the offense committed by the assessee, which was in violation of the principles laid down in the Full Bench Decision of the Bombay High Court in the case of Mohd. Farhan A Shaikh vs DCIT. The ITAT noted that the penalty notice indeed did not strike off the irrelevant portion regarding the offense committed by the assessee, as required by law.The ITAT referred to the principles established in the case of Dilip N. Shroff and Sudhir Kumar Singh, emphasizing the importance of precision and fairness in penalty proceedings. It was highlighted that non-application of mind in issuing omnibus show-cause notices betrays procedural lapses and can lead to prejudice. The ITAT concluded that the failure to strike off the irrelevant portion in the penalty notice by the Assessing Officer was fatal to the penalty proceedings, as per the judicial precedents cited. The ITAT relied on the decision of the Jurisdictional High Court in the case of PCIT Vs. Sahara India Life Insurance Co. Ltd and directed the Assessing Officer to delete the penalty levied under section 271(1)(c) of the Act.In light of the above analysis, the ITAT allowed the appeal of the assessee, setting aside the penalty imposed under section 271(1)(c) of the Act. The ITAT's decision was based on the violation of procedural requirements in issuing the penalty notice and the established legal principles emphasizing precision and fairness in penalty proceedings. The ITAT's ruling was in line with the judicial precedents cited, including the decisions of the Bombay High Court and the Jurisdictional High Court, ensuring compliance with the principles of natural justice and upholding the rights of the assessee in penalty matters.