BEER SINGH BISHT,PAURI vs. THE INCOME TAX OFFICER, WARD-1(4)(3), KOTHDWAR

The only issue to be decided in this appeal is as to whether the NFAC was justified in confirming the levy of penalty u/s 271(1)(c ) of the Income Tax Act, 1961 [hereinafter referred to as the ‘Act’] in the facts and circumstances of the instant case.

We have heard the rival submissions and perused the materials available on record. The assessee is a retired teacher from Education Department of Uttarakhand. Based on the AIR information, the case of the assessee was reopened for assessment year 2014-15 by issuing notice under section 148 of the Act on 05.09.2017. In compliance to the said notice, the assessee filed return of income declaring total income of Rs.3,98,680/-on 23.10.2017. The assessment was completed under section 143(3) read with section 147 of the Act on 24.12.2018, making addition in respect of cash deposits made in the bank account in the sum of Rs.21,00,000/-. On first appeal, learned CIT(A) considering peak credit of the cash deposits, worked out the addition at Rs.15,45,000/- as against Rs.21,00,000/- made by the Assessing Officer. The assessee accepted this order by not preferring any appeal. Consequently, learned Assessing Officer levied penalty under section 271(1)(c) of the Act.

At the outset, we find that the assessee had challenged the validity of levy of penalty on the basis of defective show-cause notice issued by learned Assessing Officer. We have gone through the show-cause notice issued for initiating penalty proceedings under section 274 read with section 271(1)(c) of the Act dated 24.12.2018, wherein, the learned AO had not specified the specific offence committed by the assessee, i.e. whether the assessee has concealed his particulars of income or furnished inaccurate particulars of his income. The irrelevant portion had not been struck off by learned Assessing Officer in the said show-cause notice.

In the quantum assessment order, we find that learned Assessing Officer while framing addition had stated that the penalty proceedings under section 271(1)(c) of the Act were initiated for furnishing inaccurate particulars of income thereby concealing the income. This goes to prove that learned AO intended that the assessee had committed both the offences under section 271(1)(c) of the Act. However, while levying the penalty under section 271(1)(c) of the Act, learned Assessing Officer had merely stated that the assessee has furnished inaccurate particulars of income. This divergent behavior of learned Assessing Officer itself does not get acceptance in the eyes of law. This all the more mandates the learned Assessing Officer to mention clearly the specific offence committed by the assessee in the show-cause notice issued to the assessee. Non-mentioning of the specific offence in the said show- cause issued for initiating penalty makes the said notice defective.

That said, regarding the other assessment year, it 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 Case (supra) on the issue of non-application of mind when the irrelevant portions of the printed notices are not struck off ? 187 In Dilip N. Shroff case (supra), for the Supreme Court, it is of "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 case (supra), 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 Case (supra) 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. 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 is mandatory and brooks no trifling with or dilution. For a further precedential prop, we may refer to Rajesh Kumar v. CIT [2007] 27 SCC 181, in which the Apex Court has quoted with approval its earlier judgment in State of Orissa v. Dr. Binapani Dei AIR 1967 SC 1269. According to it, when by reason of action on the part of a statutory authority, civil or evil consequences ensue, principles of natural justice must be followed. In such an event, although no express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue Article 14 of the Constitution.

As a result, we hold that Dilip N. Shroff Case (supra) treats omnibus show- cause notices as betraying non-application of mind and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that generic notice. Conclusion: We have, thus, answered the reference as required by us; so we direct the Registry to place these two Tax Appeals before the Division Bench concerned for further adjudication.”

In view of the above, we have no hesitation to cancel the levy of penalty. Accordingly, grounds raised by the assessee are allowed.

In the result, appeal of the assessee is allowed.