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Income Tax Appellate Tribunal, MUMBAI BENCH “ E”, MUMBAI
This appeal by the Revenue is directed against the order of Commissioner of Income Tax(Appeals)-2 , Thane [in short 'the CIT(A)’] dated 14/02/2019 for the assessment year 2011-12.
Shri Ashok Patil appearing on behalf of the assessee submitted that the assessee is a Co-operative Bank. During the course of assessment proceedings the Assessing Officer made following additions/disallowances:-
(i) Disallowance of deduction u/s. 36(1)(viia) Rs.31,20,03,362/- (ii) Amortization of premium on Government securities Rs. 2,09,48,000/- (iii) Disallowance of the amount paid under one time Settlement scheme Rs. 12,608/- (iv) Difference in Form 26AS and return of income Rs. 19,525/- Assessing Officer vide order dated 31/03/2017 levied penalty u/s. 271(1)(c) of the Income Tax Act, 1961 [in short ‘ the Act’] on the aforesaid additions /disallowances. Aggrieved against the penalty order, the assessee filed appeal before the CIT(A). The CIT(A) vide impugned order after examining the facts of case deleted the penalty by placing reliance on the decision in the case of CIT vs. Reliance Petro Products Ltd., 322 ITR 158(SC). The ld.Authorized Representative for the assessee submitted that the penalty levied u/s. 271(1)(c) of the Act is also liable to be deleted as the notice issued u/s 274 r.w.s. 271 of the Act is defective. The ld.Authorized Representative for the assessee referred to the notice dated 24/03/2014 at page 63 of the paper book. The ld.Authorized Representative for the assessee pointed that the Assessing Officer while issuing said notice has not struck off irrelevant limb of section 271(1)(c) of the Act in proforma notice. The ld.Authorized Representative of the assessee in support of his contentions placed reliance on the decision of Hon'ble Jurisdictional High Court in the case of Mohd. Farhan A. Shaikh vs. DCIT, 434 ITR 1(Bom).
Per contra, Shri Manoj Sinha representing the Department vehemently defended the penalty order.
Both sides heard, orders of authorities below and the notice dated 24/03/2014 issued u/s. 274 r.w.s. 271 of the Act examined. In appeal filed by the assessee against levy of penalty under section 271(1)(c) of the Act, the CIT(A) has deleted penalty by placing reliance on the order of Tribunasl in assessee’s own case in for assessment year 2008-09 decided on 16/06/2017 and ITA No.5038/Mum/2015 for assessment year 2009-10 decided on 15/11/2017, wherein on identical issues the penalty was deleted for non-striking of irrelevant limb in the notice as well as for the reason that it is not a case of furnishing inaccurate particulars and concealment of income. The Co-ordinate Bench placed reliance on the decision rendered in the case of CIT vs. Reliance Petro Products Ltd. (supra).
The ld.Authorized Representative for the assessee has brought to our notice that in impugned assessment year the notice issued u/s 274 r.w.s. 271 of the Act (at page 63 of the paper book) is defective. We find that the Assessing Officer has issued notice dated 24/03/2014(supra) in a pre-printed proforma, wherein both the limbs of section 271(1)(c) of the Act have been mentioned with conjunction “and/or”. Thus, in the instant case irrelevant charge of section 271(1)(c) of the Act has not been struck off by the Assessing Officer while issuing notice.
The Full Bench of Hon'ble Bombay High Court in the case of Mohd.Farhan A. Shaikh vs. DCIT (supra) has held that the notice issued without striking off irrelevant clause would make the notice ambiguous and hence, defective. Consequently, the entire penalty proceeds arising therefrom would get vitiated. For the sake of completeness the relevant extract of the decision is reproduced herein under:
“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.
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.”
Thus, in the facts of the case and in the light of decision of Hon'ble Bombay High Court (supra), we hold that the notice issued under section 274 r.w.s. 271 of the Act is defective, hence, the subsequent penalty proceedings arising therefrom are vitiated. We find no infirmity in the impugned order.
In the result, appeal by Revenue is dismissed being devoid of any merit.
Order pronounced in the open court on Friday the 1st day of July, 2022.