HOTEL SAURAB,DEHRADUN vs. DCIT CENTRAL CIRCLE, DEHRADUN

आदेश / O R D E R

PER C. N. PRASAD, J. M.

“1. That on the facts and circumstances of the appellant's case the learned CIT (A) grossly erred in confirming the penalty imposed on the appellant by the learned AO under section 271(1)(c) of the IT Act, 1961 amounting to Rs.55,250/-.

2. That on the facts and circumstances of the appellant's case the learned CIT (A) as also the learned AO before him grossly erred in not appreciating that imposition of penalty under section 271(1)(c) of the Act is not automatic to the confirmation of the addition, whether in part or in full, in the quantum appeal.

the assessee challenged the imposition of penalty on the ground that the notice did not spell out specific change/default before levying penalty under section 271(1)(c) of the Act. In other words, the assessee contends that the penalty order is bad in law as the penalty proceedings were initiated and penalty was levied without specifying the exact limb of Section 271(1)(c) of the Act.

4. We have perused the penalty notice dated 28.02.2013 issued u/s 274 read with section 271(1)(c) of the IT Act which is placed on record before us and find that the said notice was issued mechanically stating that assessee has concealed particulars of income or furnished inaccurate particulars of such income. In other words, the notice was issued for both the limbs without strike off irrelevant limb and specifying the charge for which the notice was issued. It can be seen from the notice issued u/s 274 read with section 271(1)(c) of the Act, Assessing Officer did not strike off irrelevant limb in the notice specifying the charge for which notice was issued.

5. We observe that an identical issue came up before the Hon’ble Bombay High Court (full bench at Goa) in the case of Mr. Mohd. Farhan A. Shaikh vs. ACIT [434 ITR (1)] and the Hon’ble High Court held as under: "Question No.l: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(l)(c), does a mere defect in the notice—not striking off the irrelevant matter—vitiate the penalty proceedings?

It does. The primary burden ties on the Revenue. In 181. 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(l)(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. More particularly, a penal provision, even with civil 182. consequences, must be construed strictly. And ambiguity, if any, must be resolved in the affected assessee's favour. Therefore, we answer the first question to the effect 183. that Goa Dourado Promotions and other cases have adopted an approach more in consonance with the statutory scheme. That means we must hold that Kaushaiya does not lay down the correct proposition of law. Question No.2: Has Kaushaiya failed to discuss the aspect of 'prejudice? Indeed, Kaushaiya did discuss the aspect of 184. prejudice. As we have already noted, Kaushaiya noted that the assessment orders already contained the reasons why penalty should be initiated. So, the assessee, stresses Kaushaiya, "fully knew in detail the exact charge of the Revenue against him". For Kaushaiya, the statutory notice suffered from neither non-application of mind nor any prejudice. According to it, "the so-called ambiguous wording in the notice [has not] impaired or prejudiced the right of the assessee to a reasonable opportunity of being heard". It went onto observe that for sustaining the piea of natural justice on the ground of absence of opportunity, "it has to be established that prejudice is caused to the 4 concerned person by the procedure followed". Kaushalya doses the discussion by observing 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 ", No doubt, there can exist a case where vagueness and 185. 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. That said, regarding the other assessment year, it 186. reasons that the assessment order, containing the reasons or justification, avoids prejudice to the assessee. That is where, we reckon, the reasoning suffers. Kaushalya's insistence that the previous proceedings supply justification and cure the defect in penalty proceedings has not met our acceptance. Question No. 3: What is the effect of the Supreme Court's decision in Dilip N. Shroff on the issue of non-application of mind when the irrelevant portions of the printed notices are not struck off ? In DUip N. Shroff, for the Supreme Court, it is of 187. "some significance that in the standard Pro-forma used by the assessing officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done". Then, Dilip 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. We may, in this context, respectfully observe that a 188. 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-appiication of mind. And, therefore, the infraction of a mandatory procedure leading to penal consequences assumes or implies prejudice.

Tax Appeals before the Division Bench concerned for further adjudication."

by the assessee on merits are not gone into as the adjudication of these grounds become only academic at this stage.

11. In the result, appeal of the assessee is allowed. Order pronounced in the open court on : 16/10/2023.