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Facts
The assessment u/s 143(3) for AY 2011-12 was completed, assessing income at ₹18,51,630/-. Subsequently, the Ld. AO initiated penalty proceedings u/s 274 read with 271(1)(c) and imposed a penalty of ₹7,38,000/-, which was affirmed by the Ld. CIT(A).
Held
The Tribunal held that the penalty notice issued u/s 274 read with 271(1)(c) was invalid because the Ld. AO failed to strike off the irrelevant limb or indicate the relevant limb, rendering it mechanical and without application of mind. Relying on a High Court decision, the Tribunal quashed the penalty order.
Key Issues
Whether the penalty order passed u/s 271(1)(c) is valid when the notice issued u/s 274 did not specify the charge (concealment of income or furnishing inaccurate particulars) by striking off irrelevant limbs.
Sections Cited
143(3), 271(1)(c), 274
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 16.01.2025 for the AY 2011-12.
The only issue pressed by the assessee is against the confirmation of penalty by the ld. CIT (A) as imposed by the ld. AO u/s 271(1)(c) of the Act, on the basis of invalid notice issued u/s 274 read with section 271(1)(c) of the Act.
The facts in brief are that the assessment u/s 143(3) of the Income- tax Act, 1961 (the Act) dated 14.12.2018, was framed assessing the income of ₹18,51,630/-. The ld. AO issued notice u/s 274 read with section 271(1)(c) of the Act dated 14.12.2018 initiating the penalty
Now, the assessee has challenged the order of ld. CIT (A) on the ground that since the penalty order was passed in consequence to invalid notice u/s 271(1)(c) of the Act, therefore, all the consequential proceedings/ order are invalid and may be quashed. The ld. AR referred to the notice issued u/s 274 read with section 271(1)(c) of the Act dated 14.12.2018 and submitted that the ld. AO has not struck off the irrelevant limb nor indicated the relevant limb in the penalty notice and therefore, notice itself is issued without application of mind and in standard format which rendered the said notice to be invalid in the eyes of the law. Consequently, the penalty order passed u/s 271(1)(c) of the Act is also invalid and deserves to be quashed.
The ld. DR heavily relied on the orders of the ld. lower authorities.
After hearing the rival contentions and perusing the materials available on record, we find from the perusal of the notice that the ld. AO has not struck off the irrelevant limb of the notice nor indicated the relevant limb. Therefore, the notice has been issued in a mechanical manner and without application of mind which is invalid and goes to the root of the matter. Consequently, the order passed by the ld. AO u/s 271(1)(c) of the Act is also invalid and cannot be sustained. The case of the assessee is squarely covered by the decision of Hon'ble Kolkata High Court decision in the case of KPC Medical College and Hospital v. PCIT [2025] 173 taxmann.com 581 (Cal HC), wherein the Hon'ble court has held that where in the penalty notice issued u/s 274 read with section 271 of the Act none of the relevant columns have been indicated nor the irrelevant limb been
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 29.07.2025.