2025 (12) TMI 847 - AT - Income Tax

Appeal dismissed as time-barred; custody plea rejected despite defective penalty notice u/s 271(1)(c) findings

ITAT Indore dismissed the assessee's appeal as time-barred, refusing to condone a delay of 562 days in filing. The assessee's explanation that the delay ... Penalty u/s. 271(1)(c) - mandation of specifying clear charge - whether the assessee has concealed the particulars of his income or he has furnished inaccurate particulars of his income? - HELD THAT:- On perusal of the show-cause notice of AY 2009-10, we find that the same contains both of the charges viz. “concealed the particulars of income” or “furnished inaccurate particulars of income” and AO has not stricken-off any one. The notice of AY 2012-12 does not contain any charge at all. Therefore, the whole proceeding of penalty conducted by the AO is illegal and unsustainable as per the decision of Kulwant Singh Bhatia [2018 (5) TMI 960 - MADHYA PRADESH HIGH COURT] which takes into account the earlier judicial precedents of Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] and SSA’s Emerald Meadows [2015 (11) TMI 1620 - KARNATAKA HIGH COURT] Delay of about 562 days in filing present appeal - As assessee is claiming that such delay had occurred for the reason that the assessee had to go behind the bars. But during hearing when we dug from Ld. AR and raised a query qua the custodial period, AR reported that the period was 21.03.2021 to 29.11.2021. Thus, the custodial period expired on 29.11.2021 whereas the impugned order was passed by CIT(A) on 20.05.2023 and the assessee filed present appeal on 31.01.2025. Thus, there is a huge gap between 29.11.2021 to 31.01.2025 and the support being taken by assessee from being in custody is a futile attempt having no merit. The Ld. DR for revenue is very correct in claiming also that the CIT(A) issued multiple notices of hearing to multiple e-mail ids including one e-mail was of the Ld. AR arguing this appeal. Thus, we find that the assessee has miserably failed to advance sufficient cause for inordinate delay of 562 days in filing present appeal. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether penalty proceedings initiated under section 271(1)(c) for the relevant assessment years were vitiated due to defective and vague notices issued under section 274 not specifying the precise charge of default. 1.2 Whether the inordinate delay of about 562 days in filing the appeal for one assessment year was liable to be condoned on the ground of 'sufficient cause' shown by the assessee. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of penalty under section 271(1)(c) in view of defective notice under section 274 (AYs 2009-10 and 2012-13) Legal framework discussed 2.1 The Court examined the provisions of section 271(1)(c) and the requirement of a notice under section 274 to set in motion valid penalty proceedings. It relied on the binding jurisdictional precedent in the decision of the High Court in 'Kulwant Singh Bhatia', which in turn followed and approved the ratio in 'Manjunatha Cotton & Ginning Factory' and 'SSA's Emerald Meadows', also noting dismissal of the revenue's SLP by the Supreme Court. 2.2 As extracted in the order, 'Manjunatha Cotton & Ginning Factory' held that concealment of income and furnishing inaccurate particulars of income are distinct charges and the Assessing Officer, while issuing a notice, has to clearly indicate whether penalty is proposed for concealment or for furnishing inaccurate particulars. Standard printed pro forma without striking off inapplicable portions leads to an inference of non-application of mind, rendering the notice defective. 2.3 The jurisdictional High Court in 'Kulwant Singh Bhatia' held that a vague show-cause notice under section 274, which does not specify the exact charge, offends principles of natural justice, does not satisfy the requirement of law and renders the resultant penalty unsustainable. Interpretation and reasoning 2.4 The Court noted, on perusal of the show-cause notice for AY 2009-10, that it contained both expressions - 'concealed the particulars of income' and 'furnished inaccurate particulars of income' - and that the Assessing Officer had not struck off any limb. Thus, both possible defaults were retained in a stereo-typed, non-specific manner. 2.5 For AY 2012-13, the Court found that the show-cause notice under section 274 did not specify any charge at all, i.e., it did not indicate whether the penalty proceedings were initiated for concealment of particulars of income or for furnishing inaccurate particulars. 2.6 The Court accepted the assessee's contention that such notices, which do not spell out the specific charge of default, demonstrate that the Assessing Officer himself was not sure of the precise default and therefore fail the statutory and jurisprudential requirement of specificity laid down in 'Kulwant Singh Bhatia', 'Manjunatha Cotton & Ginning Factory' and 'SSA's Emerald Meadows'. 2.7 The revenue argued that the intention and satisfaction of the Assessing Officer were evident from the underlying assessment orders where it was stated that 'penalty proceedings u/s 271(1)(c) are initiated' or that the assessee had 'concealed his income and has furnished inaccurate particulars of his income'. The Court, however, focused on the legal necessity that the notice under section 274 itself must clearly specify the limb invoked, and held that such defect in the notice is fatal to the validity of the penalty proceedings. Conclusions 2.8 The Court held that: (a) The notice for AY 2009-10, retaining both limbs of section 271(1)(c) without striking off the inapplicable part, was vague and invalid. (b) The notice for AY 2012-13, which did not specify any limb/charge at all, was also invalid. 2.9 Following the binding jurisdictional High Court decision and the allied precedents, the Court concluded that the entire penalty proceedings for AYs 2009-10 and 2012-13 were illegal and unsustainable in law. The penalties were quashed at the threshold on the ground of defective notices, without entering into the merits of the additions or the penalty. 2.10 Consequently, the appeals for AYs 2009-10 and 2012-13 were allowed. Issue 2 - Condonation of delay of about 562 days in filing appeal (AY 2010-11) Legal framework discussed 2.11 The Court proceeded on the settled principle that an appeal filed beyond the prescribed period can be entertained only if the appellant demonstrates 'sufficient cause' for the delay. The focus of the discussion was factual sufficiency of the cause shown in the condonation application/affidavit. Interpretation and reasoning 2.12 It was noted that the impugned first appellate order for AY 2010-11 was passed on 20.05.2023, whereas the appeal before the Tribunal was filed on 31.01.2025, involving a delay of about 562 days. The assessee attributed the delay primarily to (i) being behind bars for about one and a half years on account of legal complications in real estate business, (ii) financial stress, and (iii) staff leaving the job resulting in mismanagement of affairs and compliances. 2.13 When specifically queried by the Bench, the assessee's representative admitted that the custodial period was from 21.03.2021 to 29.11.2021. The Court observed that this period ended well before the date of the CIT(A)'s order (20.05.2023) and long before the appeal was ultimately filed (31.01.2025), leaving a substantial unexplained gap from 29.11.2021 to 31.01.2025. 2.14 The Court also considered the revenue's submission, supported by a tabular record of notices, that the CIT(A) had issued multiple notices of hearing dated 29.12.2020, 18.04.2023 and 11.05.2023 to several e-mail addresses, including the e-mail of the assessee's authorised representative who argued before the Tribunal. There was either no response or only an adjournment request without further compliance. This showed that the assessee was aware of the proceedings and had opportunities to participate but failed to do so. 2.15 On these facts, the Court held that the assessee's reliance on the earlier custodial period to justify a much later and prolonged delay was a 'futile attempt having no merit', and that the explanation did not reasonably cover, nor adequately justify, the inordinate delay of 562 days. Conclusions 2.16 The Court found that the assessee had 'miserably failed' to show 'sufficient cause' for the very inordinate delay in filing the appeal, and therefore the request for condonation of delay was rejected. 2.17 As a result, the appeal for AY 2010-11 was dismissed in limine as time-barred.