ATUL KUMAR BANSAL,DELHI vs. DCIT, CIRCLE-17(1), NEW DELHI

These appeals are filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-30, New Delhi, [hereinafter referred to CIT (Appeals)] dated 10.05.2019 in sustaining the penalty under Section 271(1)(c) of the Income Tax Act, 1961 (the Act) for assessment years 2000-01 to 2003-04.

The ld. Counsel for the assessee, at the outset, submits that the initiation and levy of penalty under Section 271(1)(c) of the Act is bad in law as there is no specific charge mentioned in the notice issued under Section 274 r.w.s. 271(1)(c) of the Act as to whether the notice was issued for concealment of income or for furnishing inaccurate particulars of income. The ld. Counsel for the assessee placing reliance on the decision of the Hon’ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565 (Karn.) and the decision of the Hon’ble Supreme Court in the case of CIT Vs. SSA’s Emerald Meadows (2016) 73 taxmann.com 248 (SC) submits that since there is no specific charge mentioned in the notice the initiation and levy of penalty under Section 271(1)(c ) of the Act is bad in law.

The ld. DR supported the orders of the authorities below.

Heard rival submissions. On perusal of the order of the ld. CIT (Appeals) it is noticed that the contention of the assessee that the notices issued did not specify the exact nature of default whether the same was for concealment of income or for furnishing inaccurate particulars of income has been accepted by the ld. CIT (Appeals) as this position is factually correct. However, ld. CIT (Appeals) sustained the penalty on the ground that the assessee accepted that he has charged some commission on the transactions provided by the assessee.

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:-

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.

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 Kaushaiya does not lay down the correct proposition of law. Question No.2: Has Kaushaiya failed to discuss the aspect of 'prejudice? 184. Indeed, Kaushaiya did discuss the aspect of 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 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 ", 185. No doubt, there can exist a case where vagueness and ambiguity in the notice can demonstrate non-application of mind by the I.T.A. Nos. 5838 TO 5841/Del/2019

As a result, we hold that Dilip N. Shroff 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."

As could be seen from the above the Hon'ble Bombay High Court (Full Bench at Goa) in the case of Mr. Mohd. Farhan A. Shaikh v. ACIT [(2021) 434 ITR 1 (Bom)] while dealing with the issue of non-strike off of the irrelevant part in the notice issued u/s.271(l)(c) of the Act, held that assessee must be informed of the grounds of the penalty proceedings only through statutory notice and an omnibus notice suffers from the vice of vagueness.

Ratio of this full bench decision of the Hon'ble Bombay High Court (Goa) squarely applies to the facts of the assessee's case as the notice u/s. 274 r.w.s. 271(1)(c) of the Act was issued without striking off the irrelevant portion of the limb and failed to intimate the assessee the relevant limb and charge for which the notices were issued. Thus, respectfully following the said decision we hold that the penalty order passed u/s. 271(1)(c) of the Act by the Assessing Officer is bad in law and accordingly the penalty order passed u/s. 271(1)(c) of the Act for Assessment Years 2000-01 to 2003-04 is quashed. As we have decided the preliminary and legal ground in favour of the assessee by quashing the penalty order the other grounds raised by the assessee on merits TO 5841/Del/2019 are not gone into as the adjudication of these grounds become only academic at this stage.

In the result, appeals of the assessee are allowed.