The Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ) recently quashed a pre-drafted penalty notice that included both concealed and inaccurately furnished income particulars.
The appellant, in this case, contested an addition of Rs. 1,00,15,634 due to purported bogus purchases. The assessing officer imposed a penalty under § 271(1)(c) based on the CIT (A)’s confirmation of part of the addition. However, the CIT (A) had reduced the addition significantly, citing estimations. The appellant argued that penalties cannot be imposed based solely on estimations according to established legal principles.
The department countered, claiming the appellant engaged in fraudulent transactions, unable to substantiate the purchases’ authenticity. While the CIT(A) limited the addition to 12.5%, the Assessing Officer penalized the confirmed addition.
The tribunal bench emphasized that the notice’s predrafted format failed to strike out irrelevant clauses, mentioning both limbs of Section 271(1)(c) concerning concealed and inaccurately furnished income particulars.
The bench, comprising Vikas Awasthy (Judicial Member) and S. Rifaur Rahman (Accountant Member), noted that when the Assessing Officer indicates satisfaction for imposing penalties based on Section 271(1)(c) of the Act, failure to strike out irrelevant portions renders the notice defective. This defect would compromise the penalty proceedings.
Consequently, the tribunal deemed the notice defective and invalidated the penalty under Section 271(1)(c) on these grounds.
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