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Facts
The assessee appealed against a penalty of Rs. 1,66,48,513/- levied under section 271(1)(c) for AY 2009-10. The core contention was that the penalty notice issued under section 274 read with section 271 was defective, as it was an omnibus notice that did not specifically strike out the irrelevant charge, thereby failing to inform the assessee of the precise ground for penalty.
Held
Following precedents from the Delhi and Bombay High Courts, the Tribunal held that an omnibus notice under section 274 read with section 271(1)(c), which does not specify the charge, is fundamentally flawed and renders the penalty proceedings void. Consequently, the Tribunal set aside the penalty imposed by the lower authorities and directed its deletion.
Key Issues
The key issue was the validity of a penalty notice issued under section 274 read with section 271(1)(c) of the Income-tax Act, 1961, when it fails to specifically state the charge, thereby becoming an omnibus notice.
Sections Cited
Section 271(1)(c) of the Income-tax Act, 1961, Section 274 of the Income-tax Act, 1961
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘B’ : NEW DELHI
Before: SHRI SHAMIM YAHYA & SHRI CHALLA NAGENDRA PRASAD
PER SHAMIM YAHYA, ACCOUNTANT MEMBER :
This appeal by the assessee is directed against the order of the ld. CIT (Appeals)/National Faceless Appeal Centre (NFAC) dated 16.08.2023 for the assessment year 2009-10 confirming the penalty under section 271(1)(c) of the Income-tax Act, 1961 (for short ‘the Act’) amounting to Rs.1,66,48,513/-.
Although assessee has raised various grounds, at the outset, ld. Counsel of the assessee contended that the notice issued under section 274 read with section 271 of the Act is a defective one. The charge has not been specified in the notice, hence referring to various decisions including that of Hon’ble Bombay High Court in the case of Mr. Mohd. Farhan A. Shaikh vs. ACIT 434 ITR 1 (Bom)(FB), ld. Counsel for the assessee pleaded that the penalty order is liable to be quashed.
Upon hearing both the parties and perusing the records, we note that the penalty notice contains the following charge :-
We note that in the above notice, the charge has not been specified and it is an omnibus notice. In such circumstances, Hon’ble jurisdictional High Court in the case of PCIT vs. Sahara India Life Insurance Co. Ltd. 432 ITR 84 (Del.) has held that the penalty order passed is liable to be quashed on account of this defect which is fatal. We further note that Full Bench of Hon’ble Bombay High Court in the case of Mr. Mohd. Farhan A. Shaikh vs. ACIT (supra) has held that no specification of charge in the penalty notice leads to same becoming void and penalty on that count is to be deleted. Hon’ble Court held as under :- “Head Note only :
S.271(1)(c) : Penalty – Concealment –Non-striking off of the irrelevant part while issuing notice under section 271(1)(c) of the Income-tax Act, - Order is bad in law – Assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness.”
Respectfully following the precedent as above, we set aside the orders of authorities below and decide the issue in favour of the assessee. Accordingly, we direct to delete the penalty.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on this 7th day of March, 2024.