SRI MUNISUVRATA AGRI INTERNATIONAL LIMITED,KOLKATA vs. DCIT, CIRCLE 8, , KOLKATA

The facts of the case in brief are that the assessment was framed u/s 147/143(3) of the Income-tax Act, 1961 (In short, 'the AO') vide order dated 19.03.2014, assessing income of Rs.97,13,360/- as against the originally assessed income of Rs.83,76,370/- u/s 143(3) of the Act. The AO issued penalty notice u/s 271(1)(c) of the Act on

In the appeal, the Ld. CIT(A) confirmed the order of AO.

The Ld. AR contended before us that the penalty notice issued by AO on 19.09.2014u/s 271(1)(c) of the Act contains a fatal flaw and deficiency which is incurable. The Ld. AR vehemently submitted that for the said notice issued by AO mentioned that assessee has concealed the particulars of income or furnished inaccurate particulars of such income, thereby mentioning both the charges for levying penalty. Thus, the Ld. AR submitted that the notice was issued in a mechanical manner without application of mind as the notice did not specify one of the two limbs on which penalty was proposed to be levied, thereby denying the assessee the opportunity to respond correctly to the charge on which the penalty was to be imposed. The Ld. AR submitted that the said penalty notice is invalid in the eyes of law and so is the consequent penalty order passed by the AO. The Ld. AR in defense of his arguments relied on the judgements of Hon'ble Supreme Courts and High Courts in cases of (i) CIT vs. SSA's Emerald Meadows (SC), (2016) 73 taxmann.com 248 (SC), (ii) CIT vs. Shri Samson Perinchery, (2017) 392 ITR 4 (Bombay) and (iii) PCIT (Central) vs. Golden Peace Hotels and Resorts (P.) Ltd., (2021) 124 taxmann.com 249 (SC), wherein the similar issue has been decided in favour of the assessee. The Ld. AR

Per contra, the Ld. DR submitted that, mere non-mentioning of one of the two charges in the notice should not result in quashing the notice or the order passed u/s 271(1)(c) of the Act. The Ld. CIT-DR prayed that if at all any defect is there, the same may directed to be cured by referred to the matter to AO for issuing correct notice and passing the penalty order accordingly.

After hearing the rival contentions of the parties and perusing the materials available on record including the penalty notice, we find that undisputedly the notice has been issued by the AO u/s 274/271(1)(c) of the Act dated 19.09.2014, which is placed at page 4 of the paper book. On perusal of the same, we find that the AO initiated penalty proceedings for both the charges i.e., the concealment of income and/or furnishing inaccurate particulars of income. Thus, both the charges were mentioned in the said notice. In our opinion, the notice has been issued without application of mind and in a mechanical manner as the same was issued in a standard format. In our view therefore, the penalty imposed based on the said invalid notice is also invalid as correct charge on which the penalty was proposed to be levied was not mentioned. The Hon’ble jurisdictional High Court in the case of KPC Medical College and Hospital vs. PCIT(Central) (2025) 173 taxmann.com 581 (Calcutta)has held that penalty imposed based on the defective notice is bad in law and has to be quashed. The relevant findings of the Hon'ble High Court are extracted below:

Similarly, the Hon'ble Apex Court in the case of CIT(LTU) vs. SBI, (2024)169 taxmann.com 305 (SC) has decided the issue in favour of the assessee by deleting penalty levied u/s 274 r.w.s. 271(1)(c) of the Act, observing as under:

Since the facts of the assessee's case are materially similar as decided by the Hon'ble Apex Court in the case of CIT(LTU) vs. SBI (supra)and Hon'ble High Court in KPC Medical College and Hospital vs. PCIT (supra), consequently, respectfully following the ratio laid down by the Hon'ble Courts, we quash the penalty notice as well as the consequent penalty order passed by the AO u/s 271(1)(c) of the Act.

In the result, the appeal of the assessee is allowed.