Penalty under section 271(1)(b) unsustainable where assessment is set aside and the show cause notice fails to identify statutory notices.

Determination concerns whether a penalty for non compliance with statutory notices survives when the underlying assessment is set aside and whether a show cause notice is valid if it does not identify specific notices alleged to have been ignored. The note states the penalty cannot be sustained where the assessment has been quashed and remitted for de novo assessment because the foundation for penalty proceedings is removed. It also states that a show cause notice which fails to specify the particular statutory notices denies the taxpayer a fair opportunity to respond and is therefore defective; consequence: penalty deleted.

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Issues: (i) Whether the penalty under section 271(1)(b) of the Income-tax Act, 1961 can be sustained when the underlying assessment has been set aside and restored to the assessing officer for de novo assessment; (ii) Whether the show-cause notice seeking penalty under section 271(1)(b) was legally valid when it failed to specify the particular notices under section 142(1) alleged to have been not complied with.

Issue (i): Whether the penalty under section 271(1)(b) survives where the assessment has been set aside and remitted for de novo assessment.

Analysis: The Tribunal examined the connection between the assessment order and the consequential penalty proceedings. The assessment order for the relevant year was set aside by the first appellate authority with directions for de novo assessment, thereby removing the foundation on which the penalty proceedings had been initiated and levied.

Conclusion: The penalty under section 271(1)(b) does not survive when the underlying assessment has been set aside and remitted for de novo assessment; conclusion is in favour of the assessee.

Issue (ii): Whether the show-cause notice dated 30.03.2024 was legally tenable despite not specifying the particular notices under section 142(1) alleged to have been not complied with.

Analysis: The Tribunal found that the show-cause notice merely referred to non-compliance with "the following notices" without identifying them. The absence of specific details prevented the assessee from knowing which notices were alleged to have been ignored and deprived the assessee of a proper opportunity to explain non-compliance, thereby affecting principles of natural justice and the validity of the penalty proceedings.

Conclusion: The show-cause notice was legally defective for failure to specify the notices relied upon; conclusion is in favour of the assessee.

Final Conclusion: The Tribunal allowed the appeal and deleted the penalty of Rs. 30,000 imposed under section 271(1)(b) of the Income-tax Act, 1961, holding the penalty unsustainable both because the assessment was set aside for de novo consideration and because the show-cause notice was deficient in specifying the notices alleged to have been not complied with.

Ratio Decidendi: A penalty under section 271(1)(b) of the Income-tax Act, 1961 cannot be upheld where the assessment on which it is founded has been set aside and where the show-cause notice does not identify the specific statutory notices alleged to have been not complied with, thereby denying the assessee a fair opportunity to respond.

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