TaxTMI 
TaxTMI 
2023 (12) TMI 764
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.... "1. (a) The penalty order passed under section 271(1)(c) of the Act is invalid, bad in law and without jurisdiction as it suffers from infirmity and against the principles of natural justice. (b) The Ld. CIT (A) failed to appreciate that the action of ld. Assessing Officer in initiating penalty proceedings u/s. 271(1)(c) without assigning any specific charge is invalid and bad in law. 2. (a) The Id. CIT (A) erred in facts and law in sustaining the penalty of Rs. 14,19,766/- levied u/s. 271(1)(c) of the Act on the premise of furnishing inaccurate particulars of income without appreciating that the appellant has fully and truly disclosed the fact of unsold inventory as at the end of the year and the ld. Assessing Office....
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.... 181. It does. The primary burden ties on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(1)(c), read with section 274 of IT Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed ....
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....rving that the notice issuing "is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done ", 185. No doubt, there can exist a case where vagueness and ambiguity in the notice can demonstrate non-application of mind by the authority and/or ultimate prejudice to the right of opportunity of hearing contemplated under section 274. So asserts Kaushalya. In fact, for one assessment year, it set aside the penalty proceedings on the grounds of non-application of mind and prejudice. 186. That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or justification, avoids prejudice to the ....
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....ation of mind. And, therefore, the infraction of a mandatory procedure leading to penal consequences assumes or implies prejudice. 189. In Sudhir Kumar Singh, the Supreme Court has encapsulated the principles of prejudice. One of the principles is that "where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, "except in the case of a mandatory provision of law which is conceived not only in individual interest but also in the public interest". 190. Here, section 271(1)(c) is one such provision. With calamitous, albeit commercial, consequences, the provision i....
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....e penalty proceedings only through statutory notice and an omnibus notice suffers from the vice of vagueness. 7. In the case of PCIT Vs. Sahara India Life Insurance Co. Ltd. (supra) the Hon'ble jurisdictional High Court held as under:- " The respondent had challenged the upholding of the penalty imposed under section 271(1)(c) of the Act, which was accepted by the Income Tax Appellate Tribunal. It followed the decision of the Karnataka High Court in CIT Vs. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Karn.) and observed that the notice issued by the Assessing Officer would be bad in law if it did not specify in which limb of section 271(1)(c) the penalty proceedings had been initiated under, i.e. whether for concea....