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

IN THE INCOME TAX APPELLATE TRIBUNAL, DEHRADUN CIRCUIT BENCH: DEHRADUN BEFORE,SHRI SAKTIJIT DEY, VICE PRESIDENT AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA No.42/DDN/2021 (Assessment Year: 2014-15) Sh. Beer Singh Bisht, Income Tax Officer, Nainidanda, Near Block Ward-1(4)(3), Office, District-Pauri, Vs Kothdwar Uttrakhand

PAN – ADZPB5408P (Appellant) (Respondent)

Appellant By Sh. S.K. Ahuja, Advocate Smt. Sweta Ahuja, Advocate Respondent by Sh. A.S. Rana, Sr. DR Date of Hearing 19.06.2023 Date of Pronouncement 23.06.2023 ORDER This is an appeal against order dated 05.11.2021 passed by

National Faceless Appeal Centre (NFAC), Delhi, pertaining to

assessment year 2014-15.

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.

ITA No.42/DDN/2021 AY: 2014-15 3. 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.

validity of levy of penalty on the basis of defective show-cause notice

issued by learned Assessing Officer. We have gone through the

ITA No.42/DDN/2021 AY: 2014-15 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.

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

ITA No.42/DDN/2021 AY: 2014-15

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.

We find that the Full Bench of the Hon’ble Bombay High Court in

the case of Mohd. Farhan A Shaikh vs DCIT reported in 280

Taxman 334 (Bom) dated 11/03/2021 had held that where the

notice does not specify the specific offence committed by the

assessee, then the entire penalty proceedings gets vitiated in view of

defective show cause notice. The relevant operative portion of the

said decision is reproduced hereunder:- “184. Indeed, Smt. Kaushalya case (supra) did discuss the aspect of prejudice. As we have already noted, Kaushalya noted that the assessment orders already contained the reasons why penalty should be initiated. So, the assessee, stresses Kaushalya, "fully knew in detail the exact charge of the Revenue against him". For Kaushalya, 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 plea of natural justice on the ground of absence of opportunity, "it has to be established that prejudice is caused to the concerned person by the procedure followed". Smt. Kaushalya case (supra) closes 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". 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 Smt. Kaushalya case (supra) .In fact, for one assessment year, it set aside the penalty proceedings on the grounds of non-application of mind and prejudice.

ITA No.42/DDN/2021 AY: 2014-15 186. 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

ITA No.42/DDN/2021 AY: 2014-15 contravenes the principles of natural justice, it may also be held ultra vires Article 14 of the Constitution. 191. 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.” 6. In view of the above, we have no hesitation to cancel the levy

of penalty. Accordingly, grounds raised by the assessee are allowed.

Order pronounced in Open Court on 23rd June, 2023

Sd/- Sd/- (SAKTIJIT DEY) (M. BALAGANESH) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 23/06/2023 RK/Sr.PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI (Dehradun Circuit Bench, Dehradun)