MR. PARASMAL JAIN,CHENNAI vs. ACIT, CENTRAL CIRCLE-3(1), CHENNAI

Brief Facts of the case: The appellant is an individual engaged in the business of trading. For the assessment year 2013-14, the appellant filed his valid return of income admitting a total income of Rs.1,11,88,410/- and tax paid u/s 140A of Rs.32,62,118/-. The appellant received notice under Income Tax Act 1961 and thereafter assessment was made by the assessing officer as filed with the return of income u/s.153A and thereafter the penalty proceedings were initiated under section 271(1)(c) of the Income Tax Act.

Aggrieved Assessee filed appeals before the Ld.CIT(A). The Ld.CIT(A) vide its order dated 05.08.2019 dismissed both appeals of the Assessee in limine as there was delay of 158 days. He also on merits confirmed the orders of AO on penalties.

Now, the aggrieved Assessee is in appeal for both years before this ITAT, Chennai.

The ld.AR pointed out G.No.3 of the appeals which is as under:

Per contra, ld.DR supported the penalty orders and impugned orders.

We have carefully considered the rival submissions, perused the material available on record and the judicial precedents relied upon by the ld. AR. The grievance of the assessee in Ground No.3 is that the penalty proceedings initiated u/s 271(1)(c) of the Act are vitiated in law since the notice issued u/s 274 r.w.s. 271(1)(c) dated 31.03.2016 does not specify the exact charge, i.e., whether the penalty is proposed for concealment of particulars of income or for furnishing of inaccurate particulars of income. It is the contention of the ld. AR that the Assessing Officer has failed to strike off the irrelevant portion in the statutory notice, thereby rendering the notice vague and invalid.

On perusal of the penalty notice issued u/s 274 r.w.s. 271(1)(c) dated 31.03.2016 of the Act, we find merit in the submission of the ld. AR that the Assessing Officer has not struck off the inappropriate words in the notice. The notice is in a standard printed format and does not make it clear as to which limb of section 271(1)(c) of the Act has been invoked. It is well settled law that the assessee must be made aware of the exact charge for which penalty proceedings are initiated, so as to enable him to respond effectively. The Hon’ble Karnataka High Court in the case of CIT v. Manjunatha Cotton & Ginning Factory (359 ITR 565) has categorically held that issuance of a notice without specifying the limb under which penalty is (AY 2012-13, 2013-24) MANI SRIDHAR(Vs.) CIT (A) initiated amounts to violation of principles of natural justice and such penalty proceedings cannot be sustained. The said decision has been affirmed by the Hon’ble Supreme Court in CIT v. SSA’s Emerald Meadows (242 Taxman 180), wherein the Special Leave Petition filed by the Revenue was dismissed. Further, various coordinate benches of the Tribunal have consistently followed the above ratio and have held that failure on the part of the Assessing Officer to strike off the irrelevant portion in the notice u/s 274 vitiates the penalty proceedings, irrespective of the merits of the additions made in the assessment.

In the present case, though the ld. DR has supported the orders of the lower authorities, he could not controvert the factual position that the notice issued u/s 274 r.w.s. 271(1)(c) is defective and vague. Respectfully following the binding judicial precedents cited supra, we hold that the penalty notice issued in the present case is invalid in law and, consequently, the penalty levied u/s 271(1)(c) of the Act cannot be sustained. Accordingly, the penalty imposed by the Assessing Officer and confirmed by the learned Commissioner of Income Tax (Appeals) is hereby deleted. Ground No.3 raised by the assessee is allowed.