TaxTMI 
TaxTMI 
2025 (9) TMI 707
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....y was not specified in the notice u/s 274 r.w.s. 271(1) (c) as the inapplicable limb of charge was not struck off by the A.O., whereas the fact is that the penalty u/s 271(1)(c) was initiated in the original assessment order for furnishing inaccurate particulars of income on some issues. 2 On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in deleting the penalty u/s 271(1)(c) on the ground that the inapplicable limb of charge for the penalty was not struck off by the A.O. in the notice u/s 274 r.w.s 271(1)(c), whereas the fact is that no limb of charge Le. neither furnishing inaccurate particulars of income nor concealment of income, was inapplicable as per the satisfaction recorded by the A.O. under section 271(1)(c) in the assessment order, which was duly served on the assessee making it aware of the charges of penalty. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty u/s 271(1)(c) on the ground that the charge was not specified in the notice u/s 274 r.w.s. 271(1)(c), whereas the fact is that the charge of furnishing inaccurate particulars of income was clearly mentioned....
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....naccurate particulars of income. So accordingly, the said notice is invalid. Considering the fact of the case, the Ld.AR informed that related to addition of bad debt amount to Rs. 4,21,55,018/- is duly deleted by the order of the co-ordinate bench of ITAT, Mumbai bearing ITA No.1873/Mum/2018, date of order 08/10/2021. So only the disallowance of depreciation on BSE card Rs. 10,03,320/- is sustained for addition. But mere disallowance for expenses cannot be the point of penalty which is duly covered by the order of the Hon'ble Apex Court in CIT vs Reliance Petroproducts (P) Ltd 322 ITR 158 (SC). The Ld. CIT(A) in alleged appeal order had respectfully referred the catena of judgements where the Hon'ble High Courts have taken view against the revenue related issuance of the defective notice. The relevant paragraphs of the alleged appeal order are reproduced as below:- "6. DECISION: 6.1. I have carefully considered the submissions and contentions of the appellant and have also gone through the assessment order, notice by which the impugned penalty proceedings were initiated and also the impugned penalty order, it is seen that the AD had discussed the issues relating ....
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.... reasonable cause failed to comply with a notice under Section 22(4)/23(2) of the Indian Income-tax Ac, 1922 or under Section 142(1) / 143(2) of the Income-tax Act, 1961. No. ________________dated_________________. You are hereby requested to appear before me at 11.30 A.M. on 10.01.2012 and show cause why an order imposing a penalty on you should not be made under Section 271 (1) (c) of the Income-tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative, you may show cause in writing on or before the said date which will be considered before any such order is made under Section 271(1)(c). Sd/- (AMIT KUMAR SINGH) Asstt. Commissioner of income-tax Cent. Cir. 40, Mumbai." (Seal) 6.3 It can be seen from the above that there is no mention at all about the charge of either furnishing of inaccurate particulars of income or concealment of the particulars of income, in the notice dated 27/12/2011 issued by the AO u/s. 274 read with Section 271 of the Act for initiating the penalty proceedings u/s. 271(1)(c) of the Act. The notice refers only to the failures to f....
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....ional High Court was referred an issue, that is, mere failure to tick mark the applicable grounds' in the notice issued under Section 271 of the Income Tax Act, 1961 (IT Act) vitiate the entire penalty proceedings. To this, it was held that a penal provision even with civil consequences, must be construed strictly and ambiguity, if any, must be resolved in the affected assessee's favour. The matter referred to the Hon'ble Full Bench as noted in the said order is as below: 5. While placing the matter before the Hon'ble the Chief Justice for issue-resolution by a larger Bench, the learned Division Bench has framed this question for reference: "[In] the assessment order or the order made under sections 143(3) and 153C of the IT Act, [when] the Assessing Officer has clearly recorded satisfaction for the imposition of penalty on one or the other, or both grounds mentioned in Section 271(1)(c), (would) a mere defect in the notice of not stinking out the relevant words [...] vitiate the penalty proceedings? 6. Besides, the Division Bench has also desired the larger Bench to consider two more aspects: (a) "the impact of non-discussion on the aspec....
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....herwise, 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 of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness. 182. More particularly, a penal provision, even with civil consequences, must be construed strictly. And ambiguity, if any, must be resolved in the affected assessee's favour. 183. Therefore, we answer the first question to the effect that Goa Dourado Promotions and other cases have adopted an approach more in consonance with the statutory scheme. That means we must hold that Kaushalya does not lay down the correct proposition of law.....
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....N. Shroff, on facts, has felt that the assessing officer himself was not sure whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. 188. We may, in this context, respectfully observe that a contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must be precise. It should give no room for ambiguity. Therefore, Dilip N. Shroff disapproves of the routine, ritualistic practice of issuing omnibus show-cause notices. That practice certainly betrays non application 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.....
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.... learned Assessing Officer under a notice issued under section 271(1)(c) of the Act without striking off of the relevant limb under which the penalty is proposed is no longer res integra, and the Hon'ble jurisdictional High Court in the case of Pr. CIT v. Sahara India Life Insurance Co. Ltd. [2019] 108 taxmann.com 597/2021) 432 (TR 84 (Delhi), while noticing the addition of the Hon'ble Karnataka High Court in CIT v Manjunatha Cotton & Ginning Factory (2013) 35 taxmarin.com 250/218 Taxman 423/359 ITR 565 dealt with this issue. 10. In the case of Manjunatha Cotton & Ginning Factory (supra). Vide paragraph 60, the Hon'ble Karnataka High Court has held as follows:- "60, Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for ei....
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....as it did not specify which limb of section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of Commissioner of Income Tax V. Manjunatha Cotton And Ginning Factory (2013) 359 ITR 565. In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court. The appeal is accordingly dismissed." 6.11 I find that this very issue has recently been considered by the Hon'ble Delhi ITAT as well in the case of ACIL Ltd. Vs ACIT, [2022] 137 taxmann.com 339 (Delhi -Trib.), wherein it was held as follows: "9. We have gone through the record in the light of the submissions made on either side. From the orders under challenge, it is very clear that the main grievance of the assessee is that the levy of penalty on the basis of notice which is vague and illegal cannot be sustained. Such a ques....
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....alty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable." In CIT v. SSA's Emerald Meadows [2016] 73 taxmann.com 241 the Hon'ble Karnataka High Court Considered the question of law as to, - "Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case?" And the Hon'able High Court ruled answered the same in favour of the assessee observing that: "The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with section 271(1)(c) o....
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....dows (2016) 73 taxmann.com 241 (Kar), the appeal against which was dismissed by the Supreme Court of India in SLP No. 11485 of 2016 by order dated 5th August, 2016. 22. On this issue again this court is unable to find any error having been committed by the ITAT." 12. It is, therefore, clear that for the AO to assume jurisdiction u/s 271(1)(c), proper notice is necessary and the defect in notice u/s 274 of the Act vitiates the assumption of jurisdiction by the learned Assessing Officer to levy any penalty. In this case, facts stated supra clearly establish that the notice issued under section 274 read with 271 of the Act is defective and, therefore, we find it difficult to hold that the learned AO rightly assumed jurisdiction to passed the order levying the penalty. As a consequence of our findings above, we direct the assessing officer to delete the penalty in question." 6.12 This issue has further been considered by the Hon'ble Jurisdictional High Court in another recent decision in the case of [2022] 135 taxmann.com 244 (Bombay) Ganga Iron & Steel Trading Co. vs CIT, wherein the penalty was directed to be deleted placing reliance on the decision of ....
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....me would vitiate such notice" 10. We find that the law as laid down by the Full Bench applies on all fours to the facts of the present case as in the show cause notice dated 12-2-2008, the Assistant Commissioner of Income-tax is not clear as to whether there was concealment of particulars of income or that the Assessee had furnished inaccurate particulars of income. We therefore find that issuance of such show cause notice without specifying as to whether the Assessee had concealed particulars of his income or had furnished inaccurate particulars of the same has resulted in vitiating the show cause notice." (emphasis added) 6.13 It would be seen from the above decisions that where the charge is not properly set out in the notice u/s 274, that is, both the limbs stand therein without striking off of the inapplicable limb, but the penalty has been levied for one of the two, such a penalty order gets vitiated. However, in the present case, the situation is even worse, as the notice does not mention either of the charges/limbs. Accordingly, respectfully following the judgment of the Full Bench of the Hon'ble jurisdictional High Court and other decisions r....