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Facts
The assessee's appeal was against an order dismissing their appeal against a penalty order. The penalty was levied under Section 271(1)(c) of the Income Tax Act for the Assessment Year 2010-2011.
Held
The Tribunal held that the penalty notice was bad in law because it did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars, citing a Full Bench judgment of the Bombay High Court.
Key Issues
Whether a penalty notice under Section 271(1)(c) is invalid if it fails to specify the exact charge (concealment of income or inaccurate particulars).
Sections Cited
271(1)(c), 274, 250
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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
(Assessment Year: 2010-2011) Milind Jagannath Bhole 1st Floor, Pinnachle Business Park, Mahakali Caves Rd, Next to Ahura Center, Andheri East, Mumabi 400093 …………. Appellant [PAN:AAHPB9636J] Income Tax Officer Ward 2(1) Vs Qureshi Mansion, Gokhale Road, Thane, Mumbai 400602 …………. Respondent Appearance For the Appellant/Assessee : Shri Sumit Mantri For the Respondent/Department : Shri R.R. Makwana Date Conclusion of hearing : 10.03.2025 Pronouncement of order : 12.03.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal preferred by the Assessee is directed against the order, dated25/11/2024, passed by the National Faceless Assessment Centre, Delhi, [hereinafter referred to as ‘the CIT(A)’] under Section 250 of the Income Tax Act, 1961[hereinafter referred to as ‘the Act’] whereby the Assessee was proceeded ex- parte and the Ld. CIT(A) had dismissed the appeal against the Penalty Order, dated 27/08/2021, passed under Section 271(1)(c)of the Income Tax Act, 1961 for the Assessment Year 2010-2011.
The Assessee has raised following 11 grounds of appeal
. Ground Assessment Year 2010-11 No. 2 raised by the Assessee reads as under: “Ground 2. On the facts and the circumstances of the case, the Ld. Commissioner of Income Tax (Appeal), NFAC, erred in confirming the notice issued under section 271(1)(c) wherein the LdAssessing Officer had not mentioned whether the notice has been issued towards "Concealment of income" or "for furnishing of inaccurate particulars", thus, the above notice itself is invalid and bad in law further in assessment order also the initiation has been made for both the limbs”.
We have heard both the sides on the above ground and have perused the material on record.
The contention of the Assessee is that the notice issued under Section 271(1)(c) of the Act read with Section 274 of the Act is bad in law and therefore, the said notice and consequent penalty order should be quashed in view of the judgment of Full Bench of the Hon’ble Bombay High Court in the case of Mohd. Farhan A Shaikh Vs. DCIT, Central Circle-1, Belgaum: 434 ITR 1 (Bombay). Per Contra, the Learned Departmental Representative placed reliance upon the penalty order passed by the Assessing Officer and the impugned order passed by the CIT(A).
We have perused the assessment order, dated 25/03/2013, penalty notice dated, 26/03/2013, penalty order, dated 27/08/2021, and the impugned order, dated 25/11/2024,passed by the CIT(A). In the assessment order, the Assessing Officer has recorded satisfaction for initiating penalty proceedings for furnishing inaccurate particulars of income. However, the penalty notice, dated 26/03/2013, does not inform the Assessee about the charge against the Assessee – whether penalty under Section 271(1)(c) of the Act is sought to be levied for concealment of particulars of income or furnishing inaccurate particulars of Assessment Year 2010-11 income. The notice has been issued without deleting or striking off the inapplicable part. The Full Bench of the Hon’ble Bombay High Court in the case Mohammed Farhan A Shaikh Vs DCIT (supra) has held that mere defect in the notice - not striking off the irrelevant matter, would vitiate the penalty proceedings. The relevant extract of the aforesaid judgment reads as under:
“Answers: Question No. 1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(1)(c), does a mere defect in the notice—not striking off the irrelevant matter—vitiate the penalty proceedings?
181.It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the Appellant. But that translates into action only through the statutory notice under section 271(1)(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 Appellant must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness.” (Emphasis supplied)
In view of the aforesaid, we find merit in the contention advance on behalf of the Assessee that penalty levied Section 271(1)(c) of the Act cannot be sustained as per the judgment of the Full Bench decision of the Hon'ble jurisdictional High Court in case of Assessment Year 2010-11 Mohammed Farhan A Shaikh Vs DCIT (supra). Thus, penal proceedings stand vitiated and accordingly, penalty of INR.3,15,625/- levied under Section 271(1)(c) of the Act is deleted. Ground No. 2 raised by the Assessee is allowed and all other grounds raised by the Assessee are dismissed as having been rendered infructuous.
In the result, in terms of paragraph 6 above, the appeal preferred by the Assessee is allowed.
Order pronounced on 12.03.2025.