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Facts
The assessee filed an appeal against the CIT(A)'s order for assessment year 2007-08, challenging a penalty levied under Section 271(1)(c) of the Income Tax Act. The penalty was imposed following an addition of Rs.3,20,34,757/- for advances written off during the assessment proceedings. The core argument of the assessee revolved around the invalidity of the penalty notices issued by the Assessing Officer.
Held
The Tribunal held that both penalty notices issued to the assessee were defective and invalid. The first notice was a pre-printed proforma failing to strike off irrelevant clauses, making it ambiguous, while the second notice did not specify the limb of Section 271(1)(c) under which the penalty was to be levied, rendering it vague. Citing High Court precedents, the Tribunal concluded that such defective notices vitiate penalty proceedings.
Key Issues
Whether penalty proceedings initiated under Section 271(1)(c) of the Income Tax Act are valid when the penalty notices issued are ambiguous or vague due to non-striking of irrelevant clauses or non-specification of the limb of the section.
Sections Cited
271(1)(c), 274
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “B”, DELHI
(A.Y. 2007-08) Del Monte Foods P. Ltd., Bharti Crescent 1, Nelson Mandela Road, Vasant Kunj, Phase II, New Delhi 110070 ...... अपीलाथ�/Appellant PAN: AAACF-8488-N बनाम Vs. Assistant Commissioner of Income Tax, ..... �ितवादी/Respondent Circle 9(1), CR Building, New Delhi 110002 अपीलाथ� �ारा/ Appellant by : Shri Anil Bhalla, Chartered Accountant �ितवादी�ारा/Respondent by : Shri Vivek Kumar Upadhyay, Sr. DR सुनवाई क� ितिथ/ Date of hearing : 18/11/2024 घोषणा क� ितिथ/ Date of pronouncement : : 18/11/2024 आदेश/ORDER
PER VIKAS AWASTHY, JM:
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as 'the CIT(A)') dated 27.02.2024, for assessment year 2007-08.
Shri Anil Bhalla, appearing on behalf of the assessee submits that during the course of assessment proceedings the Assessing Officer (AO) had made addition on account of Advances written off amounting to Rs.3,20,34,757/- and had initiated penalty proceedings u/s. 271(1)(c) of the Income Tax Act, 1961(hereinafter referred to as 'the Act’) for furnishing inaccurate particulars of income. Notice u/s. 274 r.w.s 271 of the Act dated 31.12.2009 was served on the assessee (copy at page 78 of paper book). The notice was in preprinted performa. The irrelevant clauses in the notice were not struck off; hence, the notice mentioned both limbs of section 271(1)(c) of the Act i.e. “concealed the particulars of income or furnished inaccurate particulars of such income”. Non-striking off irrelevant clause in the penalty notice makes the notice ambiguous and invalid. He further pointed that another penalty notice dated 07.06.2019 was served on the assessee, the same is at page 79 of the paper book. In the subsequent notice, there was no mention of any limb of section 271(1)(c) of the Act, for which penalty is being levied. Therefore, the second notice is also ambiguous and invalid.
Shri Vivek Kumar Upadhyay, representing the department vehemently defended the impugned order and prayed for dismissing appeal of the assessee. He submitted that in the assessment order itself the AO had specified the definite charge for levy of penalty u/s. 271(1)(c) of the Act and the penalty has been levied on the same charge vide order dated 30.07.2019.
Both sides heard, orders of the authorities below examined. The assessee is in appeal against confirming of penalty levied u/s. 271(1)(c) of the Act. The short submission of Authorized Representative (AR) of the assessee is that the notice issued u/s. 274 r.w.s 271 of the Act dated 31.12.2009 at page 78 of the paper book and subsequent notice for levy of penalty u/s. 271(1)(c) of the Act dated 07.06.2019 at page 79 of the paper book are defective, hence, invalid. No penalty can be levied on the basis of invalid notices.
We have examined the notice dated 31.12.2009 and notice dated 07.06.201., An examination of the first notice reveal that it is in a preprinted performa, wherein both limbs of section 271(1)(c) of the Act have been mentioned. The Assessing Officer has not struck off irrelevant clauses in the preprinted performa. The omnibus notice is vague. The subsequent notice dated 07.06.2019 is equally ambiguous as the AO has not mentioned any of the limbs of section 271(1)(c) of the Act in the notice for which the penalty is to be levied. Non mentioning of charge for which penalty is to be levied makes the notice as much defective as non striking of irrelevant clauses in the notice. Both make the notice ambiguous and vague. Hence, the proceedings arising from defective notice are vitiated.
The Hon’ble Jurisdictional High Court in the case of PCIT vs. Sahara India Life Insurance Company Ltd. 108 taxmann.com 597 (Delhi) following the decision rendered in the case of CIT vs. Manjunatha Cotton & Ginning Factory 359 ITR 565 deleted penalty where the AO failed to clearly specify the limb of section 271(1)(c) of the Act for levy of penalty in the notice.
The Full Bench of Hon’ble Bombay High Court in the case of Mohd. Farhan A Shaikh vs. DCIT 125 taxmann.com 253 has held that where assessment order records satisfaction for imposing penalty on one or other or both grounds mentioned in section 271(1)(c) of the Act, a defect in notice in not striking of irrelevant matter would vitiate penalty proceedings. An omnibus notice suffers from the vice of vagueness.