2025 (2) TMI 977 - AT - Income Tax

ITAT cancels penalty orders under Section 271(1)(c) for defective notices under Section 274

The ITAT Ranchi set aside penalty orders u/s 271(1)(c) due to defective notices u/s 274. The assessee had disclosed undisclosed income during statement ... Penalty u/s 271(1)(c) - allegation of defective notice u/s 274 -assessee offered undisclosed income in the statement recorded u/s 132(4) of the Act and paid the due taxes while filing return in response to notice u/s 153A - HELD THAT:- Similar issue has already been dealt with by this Bench in its recent decision in the case of Raj Kumar Agrawal [2024 (8) TMI 1531 - ITAT RANCHI] wherein as contested penalty order u/s 271(1) (c) on alleged defective notice issued u/s 274. The Bench after taking note of the facts of the case and proposition of law as emerging from cited decisions above cancelled all the penalty orders. As in the penalty notice issued u/s 274 r.e.s.271(1)(c) of the Act, the inapplicable words were not struck off, the levy of penalty therefore is vitiated and is held bad in law. Decoded in favour of assessee. The issues presented and considered in the judgment are as follows:1. Whether the initiation of penalty under section 271(1)(c) of the Income Tax Act was valid.2. Whether the notice issued for the penalty proceedings was defective and rendered the penalty order null and void.3. Whether the penalty for concealment of income was justified when the return income was accepted without modification.Issue-wise detailed analysis:The Appellate Tribunal considered the grounds of appeal raised by the assessee challenging the penalty imposed under section 271(1)(c) of the Income Tax Act. The Tribunal noted that the delay in filing the appeal was only one day and thus condoned the delay. The Tribunal examined the contentions of the assessee regarding the defective notice issued for the penalty proceedings. The assessee argued that the notice did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars, rendering it invalid. The Tribunal referred to relevant case laws, including a recent decision by the same Bench, where penalties were canceled due to similar notice defects.The Tribunal highlighted the importance of a clear and unambiguous notice specifying the charge for which the penalty is imposed. Citing precedents, the Tribunal emphasized that the failure to strike off inapplicable portions of the notice vitiates the penalty order. The Tribunal also reiterated the principle that penalties cannot be levied in a routine manner and must adhere to the principles of natural justice.Significant holdings:The Tribunal held that the defective notice issued for the penalty proceedings rendered the penalty order null and void. Relying on previous decisions and legal principles, the Tribunal directed the Assessing Officer to delete the penalty imposed on the assessee. The Tribunal emphasized the necessity for clear and specific notices in penalty proceedings to ensure fairness and adherence to legal requirements.In conclusion, the Tribunal allowed the appeals of the assessee, directing the deletion of the penalties imposed for the relevant assessment years. The Tribunal maintained consistency in its approach by condoning the delay in filing the appeals and granting relief to the assessee based on the defective nature of the penalty notice.This judgment underscores the significance of procedural fairness and adherence to legal requirements in penalty proceedings under the Income Tax Act. It establishes the principle that a defective notice can invalidate a penalty order, emphasizing the importance of clear and unambiguous communication in such matters.