Loading judgment…
Facts
The assessee filed an appeal against a penalty order passed under section 271(1)(c) of the Income-tax Act, 1961, for AY 2013-14, which was confirmed by the CIT(A). The penalty notice issued by the Assessing Officer under section 274 read with section 271(1)(c) did not strike off the inapplicable portion, thus failing to specify whether the assessee had concealed particulars of income or furnished inaccurate particulars.
Held
Following judicial precedents, particularly the Full Bench decision of the Bombay High Court in Mohd. Farhan A Shaikh vs DCIT and the Supreme Court's decision in Dilip N. Shroff Case, the Tribunal held that an omnibus show-cause notice, which does not delete or strike off inapplicable parts, indicates non-application of mind and is fatal to the penalty proceedings. Therefore, the Tribunal directed the deletion of the penalty levied under section 271(1)(c) of the Act.
Key Issues
Whether a penalty levied under section 271(1)(c) can be sustained if the show-cause notice fails to specify the exact charge (concealment of income or furnishing inaccurate particulars) by not striking off the irrelevant portions.
Sections Cited
271(1)(c), 274
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
Before: SHRI M. BALAGANESH & SHRI ANUBHAV SHARMA
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in AY 2013-14, arises out of the order of the Commissioner of Income Tax (Appeals)-26, New Delhi [hereinafter referred to as „ld. CIT(A)‟, in short] in Appeal No. 10019/19- 20 dated 19.07.2022 against the penalty order passed u/s 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 31.03.2019 by the Assessing Officer, ACIT, Central Circle-14, New Delhi (hereinafter referred to as „ld. AO‟).
The only effective issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the levy of penalty u/s 271(1)( c ) of the Act in the facts and circumstances of the case.
We have heard the rival submissions and perused the materials available on record. At the outset the ld.AR placed on record the copy of penalty show cause notice u/s 274 read with section 271(1)(c ) of the Act wherein, we find that the ld. AO had not struck off the inappropriate portion as to whether the assessee had concealed the particulars of income or 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. 188. 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.”
In the instant case, on perusal of the penalty notice placed on record, 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 Court squarely applies to the facts of the instant case before us. Similar