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Income Tax Appellate Tribunal, DELHI BENCH : E : DELHI
Before: SHRI C.M. GARG & SHRI M. BALAGANESH
ORDER
PER M. BALAGANESH, AM:
This appeal in for AY 2015-16 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.10255/19-20 dated 10.12.2021 against the order u/s 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 27.06.2019 passed by the ld. Assessing Officer, Circle-2, Udaipur (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 instant case.
We have heard the rival submissions and perused the material available on record. At the outset, the ld. AR before us placed on record the copy of penalty notice issued u/s 274 r.w.s. 271(1)(c) the Act dated 10.12.2018, wherein the ld. AO had not struck off the relevant portion duly mentioning the specific offence committed by the assessee as to whether it has concealed the particulars of income or furnished inaccurate particulars of income. A specific ground to this effect is also raised by the assessee before us. In our considered opinion, when the penalty proceedings are sought to be initiated by the Revenue u/s 271(1)(c) of the Act, the specific ground which forms the foundation thereof have to be mentioned in clear and unambiguous terms. This is very much required in order to ensure that the assessee would have proper opportunity to meet the charges leveled by the ld. AO and put forth its defence. The penalty proceedings are penal in nature and, hence, the charge of offence should be specific, unequivocal and unambiguous. It is expected that the Revenue should either mention whether the assessee herein had concealed its particulars of income or furnished inaccurate particulars of income or committed both the offences. That is why in the show cause-notice prescribed for the penalty, these columns are specifically mentioned and the ld. AO is duly expected to strike off the irrelevant portion thereon. When the same is not done by the ld. AO in the show-cause notice, the said notice becomes defective and the entire penalty proceedings gets vitiated. This issue is no longer res integra in view of the Full Bench decision of the Hon’ble Bombay High Court in the case of Mohd. Farhan A. Shaikh vs. DCIT, reported in 280 Taxman 334. The relevant portion of this decision is reproduced hereunder:-
“184. Indeed, Smt. Kaushalya case (supra) did discuss the aspect of prejudice. As we have already noted, Kaushalya noted that the assessment orders already contained the reasons why penalty should be initiated. So, the assessee, stresses Kaushalya, "fully knew in detail the exact charge of the Revenue against him". For Kaushalya, the statutory notice suffered from neither non-application of mind nor any prejudice. According to it, "the so- called ambiguous wording in the notice [has not] impaired or prejudiced the right of the assessee to a reasonable opportunity of being heard". It went onto observe that for sustaining the plea of natural justice on the ground of absence of opportunity, "it has to be established that prejudice is caused to the concerned person by the procedure followed". Smt. Kaushalya case (supra) closes the discussion by observing that the notice issuing "is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done".
No doubt, there can exist a case where vagueness and ambiguity in the notice can demonstrate non-application of mind by the authority and/or ultimate prejudice to the right of opportunity of hearing contemplated under section 274. So asserts Smt. Kaushalya case (supra) .In fact, for one assessment year, it set aside the penalty proceedings on the grounds of non- application of mind and prejudice.
That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or justification, avoids prejudice to the assessee. That is where, we reckon, the reasoning suffers. Kaushalya's insistence that the previous proceedings supply justification and cure the defect in penalty proceedings has not met our acceptance. 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 3 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 statute 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.”
Respectfully following the same, we direct the ld. AO to delete the penalty. Since the relief is granted to the assessee on this technical ground, the other grounds raised by the assessee on merits are not adjudicated and they are left open.