SHRI RAJKUMAR NAIR ,MUMBAI vs. INCOME TAX OFFICER CIRCLE26(2) (5), MUMBAI, MUMBAI

The Appellant has raised the following grounds of appeal:

―1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned AO in not mentioning in the penalty show cause notice as to whether the proceedings are initiated on the ground of concealment of income or on account of furnishing inaccurate particulars of income. The Appellant prays that the impugned penalty order is bad in law and should be quashed.

Before us, the Ld. Authorized Representative of the Appellant submitted that the issue raised in Ground No. 2 in the present appeal is covered in favour of the Appellant by the full bench judgment of the Hon‘ble Bombay High Court in the case of Mohd. Farhan A Shaikh Vs. DCIT, Central Circle-1, Belgaum reported in 434 ITR 1 (Bombay), as the penalty notice, dated 16.03.2015, has Assessment Year: 2009-10 been issued without deleting or striking off inapplicable part. Thus, the Appellant has not been informed whether penalty proceedings were initiated for furnishing inaccurate particulars of income or for concealment of income. In response the Ld. Departmental Representative relied upon the assessment order, dated 16.03.2015 and the penalty order, dated 28.09.2015.

We note that in the case Mohd. Farhan A Shaikh Vs. DCIT (supra) the full Bench of the Hon‘ble Bombay High Court has held that a 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 assessee. 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 assessee 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) 6. A perusal of the penalty notice, dated 16.03.2015, issued under Section 274 read with 271 of the Act would show that it in an omnibus show cause notice issued without deleting or striking off the inapplicable part. Thus, the statutory notice does not provide the ground on which the penalty proceeding has been initiated – 3

Thus, the penalty proceedings stand vitiated on account of defect in the penalty notice, dated 16.03.2015, issued under Section 274 read with Section 271 of the Act. Accordingly, penalty order, dated 28.09.2015, passed under Section 271(1)(c) of the Act is set aside as being invalid and without jurisdiction. Therefore, in view of the full bench judgment of the Hon'ble jurisdictional High Court in case of Mohammed Farhan A Shaikh vs DCIT (supra), Ground No. 2 raised by the Appellant is allowed.

Since, we have decided the Ground No. 2 as above, the need to adjudicate Ground No. 1 does not arise and the same is disposed off as being infructuous.

In the result, appeal filed by the Appellant is allowed.