SHRI RACHHPAL SINGH SON OF SHRI TARLOK SINGH,FEROZEPUR vs. INCOME TAX OFFICER WARD 3 (1), FEROZEPUR

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ITA 166/ASR/2020Status: DisposedITAT Amritsar28 February 2023AY 2013-145 pages
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What did the Tribunal hold?

The Tribunal held that the penalty order was illegal and bad in law due to the defective notice issued by the AO. The notice failed to specify whether the penalty was for concealment of income or furnishing inaccurate particulars, and also erroneously mentioned Section 271(1)(b).

What were the facts?

The assessee's appeal against a penalty levied under Section 271(1)(c) was dismissed by the CIT(A). The assessee contended that the Assessing Officer (AO) issued a defective notice under Section 274 r.w.s. 271(1)(c), failing to specify the limb of the section for penalty initiation and incorrectly mentioning Section 271(1)(b).

What were the issues?

Whether a penalty levied under Section 271(1)(c) is valid when the notice issued under Section 274 is defective and does not specify the limb of the section for penalty initiation.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274,Section 271(1)(b)

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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR

Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE

Hearing: 21.02.2023Pronounced: 28.02.2023

The present appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), Bathinda dated 26.08.2020 in respect of Assessment Year 2013-14.

Rachhpal Singh v. ITO 2. At the outset, the ld. counsel for the assessee submitted that the ld.

CIT(A)-1, Jalandhar has dismissed the appeal of the assessee filed against the levy of penalty u/s 271(1)(c) vide order dated 30.03.2018 by passing a non speaking order and ignoring the judgment of Hon’ble Apex Court in Special Leave to Appeal (CC No. 11485/2016) arising out of impugned final judgment and order dated 23.11.2015 in passed by the Hon’ble High Court of Karnataka at Bengaluru in the case of CIT & Anr. v.

M/s SSA’s Emrald Meadows (APB pgs. 4 to 8), that the assessee’s appeal is squarely covered by the judgment of Hon’ble Apex Court because the AO issued a defective notice u/s 274 r.w.s. 271(1)(c) of the Income Tax Act, 1961 for assessment year 2008-09 wherein he did not specify under 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. Ld. counsel for the assessee further submitted that the AO has mentioned in the last line of the notice that this order is made u/s 271(1)(b), there was no application of mind on the part of the AO in initiating and levying penalty u/s 271(1)(b). Photocopy of the notice issued u/s 274 r.w.s. 271(1)(b) of the Act (APG pg. 12) is reproduced as under:

Rachhpal Singh v. ITO 3. The counsel has further placed the reliance on the judgment of Hon’ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory [2013] 359 ITR 565 and the latest judgment of Hon’ble Bombay High Court in the case of Mohammad Farhan Akhtar v. DCIT 43 ITR 1.

4.

The ld. DR stand by the order of the ld. CIT(A), however, he failed to file any submission or citation in rebuttal to the contention raised by the ld. counsel.

5.

Having heard both the sides, perusal of material on record and case law cited before us, it is admitted fact that the AO issued a defective notice u/s 274 r.w.s. 271(1)(c) of the Income Tax Act, 1961 for assessment year under consideration without specifying the limb of the section for initiating the penalty proceedings as evident from the notice as above. It is well settled law by the higher judicial forum that the levy of penalty on the basis of defective notice issued u/s 274 r.w.s. 271(1)(c) of the Income Tax Act is liable to be bad in law. In the instant case, the AO did not specify under 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 Rachhpal Singh v. ITO furnishing inaccurate particulars of income. Further, the AO has mentioned in the notice that such order is made u/s 271(1)(b) of the Act.

6.

Accordingly, we hold that the order of the CIT(A)-1, Jalandhar confirming the levy of penalty u/s 271(1)(c) is illegal and bad in law. Hence, it is liable to be quashed. Accordingly, the penalty levied u/s 271(1)(c) is hereby deleted.

7.

In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 28.02.2023

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