VITAL INDUSTRIES INDIA PVT. LTD.,CHENNAI vs. ACIT, CORPORATE CIRCLE-III(2), CHENNAI

आयकर अपीलीय अिधकरण, ‘बी’
यायपीठ, चे ई।
IN THE INCOME TAX APPELLATE TRIBUNAL
‘B’ BENCH: CHENNAI

ी एबी टी. वक
, ाियक सद एवं
एवं
एवं
एवं

ी अिमताभ शुा, लेखा सद के सम

BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER

आयकर अपील सं./ITA No.2332/Chny/2024
िनधारण वष/Assessment Year: 2014-15

M/s.Vital Industries India Pvt. Ltd.,
No.172, Luz Church Road,
Mylapore,
Chennai-600 004. v.
The ACIT,
Corporate Circle-III (2),
Chennai.
[PAN: AANCS 5930 K]

(अपीलाथ/Appellant)

(यथ/Respondent)

अपीलाथ क ओर से/ Appellant by :
Mr.G. Srikanth, FCA
यथ क ओर से /Respondent by :
Mr. Vinod D. Mudaliar, JCIT
सुनवाईकतारीख/Date of Hearing
:
27.11.2024
घोषणाकतारीख /Date of Pronouncement
:
08.01.2025

आदेश / O R D E R
PER ABY T. VARKEY, JM:

This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), (hereinafter in short ‘the Ld.CIT(A)’), Chennai-19, dated 02.07.2024 for the Assessment Year
(hereinafter in short ‘AY’) 2014-15 assailing the action of the Ld.CIT(A) confirming the penalty levied u/s.271(1)(c) of the Income Tax Act, 1961
(hereinafter in short ‘the Act’).
2. At the outset, the Ld. Counsel for the assessee submitted that there is a delay of ‘5’ days in filing of this appeal. And since assessee was M/s.Vital Industries India Pvt. Ltd.
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prevented by sufficient cause, the Ld. Counsel for the assessee prayed for condonation of delay, for which, the Ld.DR didn’t raise any objection and hence, we condone the delay of ‘5’ days and proceed to adjudicate the appeal on merits.
3. At the outset, the Ld.AR of the assessee assailed the action of AO levying penalty after issuing an invalid notice.
4. To buttress this legal issue, the Ld.AR drew our attention to the show cause notice dated 26.12.2016 issued by the AO u/s.274
r.w.s.271(1)(c) of the Act copy of which is found placed at Page No.15 of the Paper Book, wherein we note that the AO has not put to notice the assessee about the exact fault on which the penalty is proposed to be levied i.e. whether the assessee had furnished inaccurate particulars of income or have concealed the income. And therefore, according to Ld AR the ibid notice is invalid/bad in law. Therefore, according to him, the Ld.
CIT(A) erred in confirming the penalty u/s.271(1)(c) of the Act, which penalty was erroneously imposed by AO.
5. In respect of the aforesaid legal issue, i.e, first of all having perused the show cause notice (SCN) issued by the AO u/s 271(1)(c) r.w.s. 274 of the Act dated 26.12.2016 for AY 2014-15, we note that fault specified in Section 271(1)(c) of the Act, are simply reproduced i.e. “the assessee have concealed the particulars of his income” or “furnishing inaccurate
M/s.Vital Industries India Pvt. Ltd.
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particulars of such income”, meaning the AO has put to notice the assessee on both the faults, without striking down the inapplicable fault which could have specified which fault AO has found assessee at default i.e. whether he is proposing penalty for the fault of “concealment of particulars of income” or “for furnishing of inaccurate particulars of income”. We note that by not striking down one of fault, the assessee was unable to defend properly the charge/fault, against which, the AO was proposing to levy penalty. In such factual background, the Tribunal has consistently held such notices to be bad in law for not specifying the specific fault for which the assessee being proceeded against for levy of penalty. And such actions of the Tribunal has been upheld by several judgments of the various High Courts including the Hon’ble juri ictional
High Court of Madras in the case of Babuji Jacob v. ITO reported in (2021) 430 ITR 259 (Mad). We also note that the Full bench of the Hon’ble Bombay High Court in the case of Mohd. Farhan A. Shaikh v.
DCIT reported in [2021] 434 ITR 1 (Bombay) dated 11.03.2021 held that the show cause notice issued prior to levy of penalty without specifying the fault/charge against which the assessee is being proceeded, would vitiate the penalty itself. And thus, the Hon’ble High Court upheld the view of the division bench order in the case of PCIT Vs. Goa Dourado
Promotions (P.) Ltd. (Tax Appeal No.18 of 2019, dated 26.11.2019) and held that the contrary view taken by another Division Bench in the case of M/s.Vital Industries India Pvt. Ltd.
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CIT v. Smt. Kaushalya (1995) 216 ITR 660 (Bom) doesn’t lay down the correct proposition of law.
6. As noted earlier, we find that the penalty notice for AY dated
26.12.2016 didn’t explicitly convey to the assessee the specific fault/charge the assessee is being proceeded for levy of penalty.
Resultantly, the show cause notice is found to be defective/invalid, and therefore, it is held to be bad in law. For doing that we also rely on the decision of the Hon’ble Karnataka High Court in the case of CIT v.
Manjunatha Cotton and Ginning Factory reported in (2013) 359 ITR 565
(Kar) and the Department’s SLP against it has been dismissed by the Hon’ble Supreme Court. We also find that Hon’ble Karnataka High Court in the case of CIT Vs. SSA’s Emerald Meadows, reported in (2016) 73
taxmann.com 241 (Kar) endorsed the same view in Manjunatha Cotton and Ginning Factory (supra) and held as under:-
“3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (for short ‘the Act’), to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of CIT Vs. Manjunatha Cotton & Ginning Factory (2013) 359 ITR
565/218 Taxman 423/35 taxmann.com 250(Kar).
4. In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court. The appeal is accordingly dismissed.”
7. Respectfully following the judicial precedents as well as the binding decision of the Hon’ble juri ictional High Court in the case of Babuji
M/s.Vital Industries India Pvt. Ltd.
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Jacob (supra), the Full bench of the Hon’ble Bombay High Court’s in the case of Mohd. Farhan A. Shaikh (supra), we hold the impugned notice issued for AY 2014-15 to be bad in law and consequently, we direct the deletion of the penalty levied in this case.
8. Before parting, as far as the Ld.DR’s contention that there is no requirement of notice before imposing penalty, we note that such a contention has been dealt with by this Tribunal in the case of S.J.Suryah in ITA No.806/Chny/2023 dated 29.05.2024 as under:
17. And the Ld.DR’s contention that no notice was required to be issued against the assessee while initiating penalty cannot be countenanced. Because, the principles of natural justice concerns procedural fairness and ensures a fair decision is reached by an objective decision maker. It should be remembered that by maintaining procedural fairness protects the right of individuals and enhances public confidence in the process.
18. The legal maxims (i) audi alterm partem (the right to be heard) & (ii) memo judex in parte suo (no person shall be a judge in his own cause) are two legal principles which is the core of principles of natural justice.
19. The Hon’ble Supreme Court in the case of M.S.Gill v. The Chief Election
Commission reported in [1978] AIR 851 held as under:
The dichotomy between administrative and quasi-judicial functions vis-à- vis the doctrine of natural justice is presumably obsolescent after A.K.
Kraipak v. UoI reported in 1970 SC ISO which marks the water-shed in the application of natural justice to administrative proceedings. The rules of natural justice are rooted in all legal systems, and are not any 'new theology. They are manifested in the twin principles of nemo and audi.
It has been pointed out that the aim of natural justice is to secure justice, or, to put it negatively to prevent miscarriage of justice.
20. And it is no longer res integra that penalty proceedings and assessment proceedings are distinct; and merely, because addition has been made in the assessment order does not mean that AO has to levy penalty; and since imposing penalty involves civil consequences
(the expression civil consequences encompasses infraction of property/personal rights/civil liberties/material deprivation/pecuniary and non pecuniary damages), therefore, notice need to be given because sec.271(1)(c) of the Act specifically says about two distinct faults
(i) concealment of the particulars of income (ii) furnishing of inaccurate particulars of such income; and therefore, concept of reasonable opportunity
M/s.Vital Industries India Pvt. Ltd.
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guaranteed u/s.274 of the Act would be illusory if specific charge on which penalty is proposed is not given by AO by way of issuing notice; and as noted above, the principles of natural justice is implied and notice need to be given to assessee before levy of penalty; and therefore, notice issued to assessee has to spell out the specific charge/fault which AO proposes to levy, and should not be vague and should not put the assessee guessing as to what is in the mind of the AO viz whether he proposes concealment of particulars of income or furnishing inaccurate particulars of income. Therefore, the contentions of the Ld.DR cannot be accepted and is held to be devoid of merits and therefore rejected. And since the notices issued by AO itself is invalid & legally untenable, consequent penalty itself is null in eyes of law. Therefore, Revenue appeal fails and assessee succeeds and the penalty levied is directed to be deleted.

Order pronounced on the 08th day of January, 2025, in Chennai. (अिमताभ शुा)
(AMITABH SHUKLA)
लेखा सदय/ACCOUNTANT MEMBER (एबी टी. वक
)
(ABY T. VARKEY)
याियक सदय/JUDICIAL MEMBER
चे ई/Chennai,
!दनांक/Dated: 08th January, 2025. TLN, Sr.PS
आदेश क ितिलिप अ$ेिषत/Copy to: