The Income Tax Appellate Tribunal (ITAT), Delhi Bench has held that notice under section 274 fails to specify the reason for the imposition of penalty and deletes the penalty imposed under section 271(c)(1).
The appellant, Aimil Pharmaceuticals (I) Ltd filed its return declaring income at Nil. The Assessing officer completed the scrutiny assessment under section 143(3) the net book profit of Rs.2,16,10,800/- after allowing set off of brought forward book loss of Rs. 89,26,065/- under Section 115JB of the Act and imposed the penalty of Rs.36,72,755/- against the appellant under section 271(1)(c) of the Act for furnishing of inaccurate particulars of its income.
The appellant challenged the penalty before the Commissioner, which affirmed the penalty imposed by the Assessing Officer. Being aggrieved, the Assessee is in appeal before ITAT. The counsel for the appellant submitted that the AO without recording any satisfaction initiated the penalty proceedings under section 271(1)(c) of the Act and issued the notice under section 274 read with 271(1)(c) of the Act for concealing the particulars of income or furnishing inaccurate particulars of Income, without specifying any particular limb of the penalty and finally imposed the penalty for furnishing inaccurate particulars of income.
The Coram of Mr. N.K. Billaiya, Accountant Member and Mr. N.K. Choudhry, Judicial Member observed that the Apex Court in the case of M/s. SSA’s Emerald Meadows held that “the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income”.
The Tribunal has held that “the Act without specifying the limb under which the penalty proceedings have been initiated and proceeded with, apparently goes to prove that notice, in this case, has been issued in a stereotyped manner without applying mind which is bad in law, hence cannot be considered a valid notice sufficient to impose penalty u/s 271(1)(c) of the Act and therefore we are of the considered view that under these circumstances, the penalty is not leviable as held by the various Court including Apex Court”.
Mr.V.K. Agarwal and Mr. AnujGarg appeared on behalf of the appellant and respondent respectively.
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