MODEL SALES AGENCY PVT LTD,MUMBAI vs. INCOME TAX OFFICER, 5(2)(3), , MUMBAI

Authorised Representative for the Appellant invited our attention to the penalty notice, dated 31/03/2015, issued under Section 274 read with Section 271(1)(c) of the Act and submitted that the levy of penalty under Section 271(1)(c) of the Act cannot be sustained in view of the judgment of Full Bench of the Hon’ble Bombay High Court in the case of Mohd. Farhan A Shaikh Vs. DCIT, Central Circle-1, Belgaum: 434 ITR 1 (Bombay), as the aforesaid penalty notice has been issued without deleting or striking off inapplicable part. While the Ld. Departmental Representative relied upon the Assessment Order, dated 31/03/2015 and the Penalty Order, dated 29/03/2019 to support the stand of the Revenue, the Learned Departmental Representative fairly acknowledged the fact that inapplicable portion has not been deleted or struck off in the penalty notice, dated 31/03/2015, issued under Section 274 read with Section 271(1)(c) of the Act.

We have perused the record, considered the rival submissions and examined the legal position. The full Bench of the Hon’ble Bombay (Assessment Year: 2012-13) High Court in the case Mohd. Farhan A Shaikh Vs. DCIT (supra) has held that a mere defect in the notice - not striking off the irrelevant matter, would vitiate the penalty proceedings. The relevant extract of the aforesaid judgment reads as under: “Answers: Question No. 1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(1)(c), does a mere defect in the notice—not striking off the irrelevant matter—vitiate the penalty proceedings? 181. It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the Appellant. But that translates into action only through the statutory notice under section 271(1)(c), read with section 274 of IT Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the Appellant must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness.” (Emphasis supplied) A perusal of the penalty notice, dated 31/03/2015, issued under 8. Section 274 read with Section 271(1)(c) of the Act would show that it in an omnibus show-cause notice issued without deleting or striking off the inapplicable part. Thus, the statutory notice issued to the Appellant does not inform the Appellant about the charge against the Appellant – whether penalty under Section 271(1)(c) of the Act is sought to be levied for concealment of particulars of income or furnishing inaccurate particulars of income. Similarly, in paragraph 4.1 of the Assessment Order, dated 31/03/2015, passed under Section 143(3) of the Act it has been stated that ‘this is a fit case for levy of penalty within the meaning of provisions under Section 271(1)(c) of the Act for concealment and also for furnishing of inaccurate particulars of income by the Appellant. Accordingly, the (Assessment Year: 2012-13) penalty proceedings under Section 271(1)(c) of the Act is separately initiated’. Thus, there is no clarity whether the penalty proceedings were initiated for concealment of particulars of income or furnishing inaccurate particulars of income.