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Facts
The appeal (ITA No. 2759/Del/2024 for AY 2007-08) and cross-objection were filed against an order by NFAC confirming a penalty under Section 271(1)(c) of the Income-tax Act. The core issue in the assessee's cross-objection was the validity of the penalty when the Assessing Officer (AO) failed to strike off the inappropriate limb in the penalty notice, thus not specifying the exact charge.
Held
The Tribunal ruled that the AO's failure to strike off the irrelevant portion in the penalty notice, thereby not specifying whether the penalty was for concealment or furnishing inaccurate particulars, was a fatal flaw. Citing various High Court and Supreme Court precedents, the Tribunal concluded that this indicated non-application of mind and an infraction of mandatory procedure. Consequently, the penalty levied under Section 271(1)(c) was ordered to be deleted.
Key Issues
Whether a penalty under Section 271(1)(c) of the Income Tax Act can be imposed if the Assessing Officer fails to specify the exact charge by not striking off the inapplicable portion in the penalty notice.
Sections Cited
271(1)(c), 274
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Income Tax Appellate Tribunal, DELHI BENCH “H”: NEW DELHI
Before: SHRI M. BALAGANESH & SHRI VIMAL KUMAR
(Assessment Year: 2007-08) ACIT, Vs. Tata Teleservices ltd, 124, 10th Floor, Jeevan Bharati Delhi Tower-I, Connaught Circus, Connaught Place, Delhi (Appellant) (Respondent) PAN:AAACT2438A CO No. 82/Del/2024 (In (Assessment Year: 2007-08) Tata Teleservices ltd, Vs. ACIT, 124, 10th Floor, Jeevan Delhi Bharati Tower-I, Connaught Circus, Connaught Place, Delhi (Appellant) (Respondent) PAN:AAACT2438A Assessee by : Ms. Ananya Kapoor, Adv Shri Divyanshu Singla, CA Shri Prateek Chauhan, CA Revenue by: Shri Rajesh Kumar, CIT DR Date of Hearing 09/10/2024 Date of pronouncement 11/10/2024 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in AY 2007-08, arises out of the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as „ld. NFAC‟, in short] in Appeal No. ITBA/NFAC/S/250/2023-24/1063789663(1) dated 31.03.2024 against the order of assessment passed u/s 271(1)(C) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 30.03.2018 by the Assessing Officer, ACIT, Circle-25(1), Delhi (hereinafter referred to as „ld. AO‟).
The only issue to be decided in the cross objection of the assessee is as to whether the concealment penalty could be levied u/s 271(1)(c ) of the Act when the ld. AO in the penalty notice had not struck off the inappropriate portion as to whether the assessee had concealed the particulars of income or furnished inaccurate particulars of income.
We have heard the rival submissions and perused the materials available on record. We find that the ld. AR placed on record the show cause notice issued for penalty u/s 274 read with section 271(1)(c ) of the Act dated 24.12.2009 wherein it is very clear that the ld. AO had not specifically mentioned the offence committed by the assessee by striking off the irrelevant portion i.e. whether the assessee had concealed his particulars of income or had furnished inaccurate particulars of income. Now the short question that arises is whether non- striking off of the irrelevant portion in the penalty notice by not specifically mentioning the offence committed by the assessee, would become fatal to the penalty proceedings ? This issue is no longer res integra in view of the Full Bench Decision of Hon‟ble Bombay High Court in the case of Mohd. Farhan A Shaikh vs DCIT reported in 434 ITR 1 (Bom)(FB) dated 11.3.2021. The relevant operative portion of the said judgement is reproduced hereunder:-
“Question No. 3: What is the effect of the Supreme Court's decision in Dilip N. Shroff Case (supra) on the issue of non-application of mind when the irrelevant portions of the printed notices are not struck off ? 187 In Dilip N. Shroff case (supra), for the Supreme Court, it is of "some significance that in the standard Pro-forma used by the assessing officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done". Then, Dilip N. Shroff case (supra), on facts, has felt that the assessing officer himself was not sure whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars.
We may, in this context, respectfully observe that a contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must be precise. It should give no room for ambiguity. Therefore, Dilip N. Shroff Case (supra) disapproves of the routine, ritualistic practice of issuing omnibus show-cause notices. That practice certainly betrays non- application of mind. And, therefore, the infraction of a mandatory procedure leading to penal consequences assumes or implies prejudice.
In Sudhir Kumar Singh, the Supreme Court has encapsulated the principles of prejudice. One of the principles is that "where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, "except in the case of a mandatory provision of law which is conceived not only in individual interest but also in the public interest".
Here, section 271(1)(c) is one such provision. With calamitous, albeit commercial, consequences, the provision is mandatory and brooks no trifling with or dilution. For a further precedential prop, we may refer to Rajesh Kumar v. CIT [2007] 27 SCC 181, in which the Apex Court has quoted with approval its earlier judgment in State of Orissa v. Dr. Binapani Dei AIR 1967 SC 1269. According to it, when by reason of action on the part of a statutory authority, civil or evil consequences ensue, principles of natural justice must be followed. In such an event, although no express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue contravenes the principles of natural justice, it may also be held ultra vires Article 14 of the Constitution.
As a result, we hold that Dilip N. Shroff Case (supra) treats omnibus show- cause notices as betraying non-application of mind and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that generic notice. Conclusion: We have, thus, answered the reference as required by us; so we direct the Registry to place these two Tax Appeals before the Division Bench concerned for further adjudication.”
Similar view was taken by the Hon‟ble Jurisdictional High Court in the case of PCIT vs Sahara India Life Insurance Co. Ltd reported in 432 ITR 84(Del) wherein it was held as under:-
“21. The Respondent had challenged the upholding of the penalty imposed under section 271(1) (c) of the Act, which was accepted by the ITAT. It followed the decision of the Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory [2013] 35 taxmann.com 250/218 Taxman 423/359 ITR 565 and observed that the notice issued by the AO would be bad in law if it did not specify which limb of section 271(1)(c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. The Karnataka High Court had followed the above judgment in the subsequent order in CIT v. SSA's Emerald Meadows [2016] 73 taxmann.com 241, the appeal against which was dismissed by the Supreme Court of India in SLP No. 11485 of 2016 by order dated 5th August, 2016.
On this issue again this Court is unable to find any error having been committed by the ITAT. No substantial question of law arises.
The appeals are accordingly dismissed.”
In the instant case, on perusal of the penalty notice placed on record dated 24.12.2009, it is evident that the ld. AO had not struck off the irrelevant portion thereon mentioning the specific offence committed by the assessee. The ratio laid down in the aforesaid decision of Hon‟ble High Courts squarely applies to the facts of the instant case before us. Hence we direct the ld. AO to delete the penalty levied u/s 271(1)(c ) of the Act . Accordingly, the Grounds raised by the assessee in its cross objection are allowed.
In view of the aforesaid decision in cross objection of the assessee, the grounds raised by the revenue in its main appeal becomes academic in nature.
In the result, the appeal of the revenue is dismissed and cross objection of the assessee is allowed.
Order pronounced in the open court on 11/10/2024.