The ITAT, Mumbai, in Rekha Bhupendra Dalal v. DCIT, held that non-striking off of the irrelevant clause in the notice would amount to non-application of mind and therefore, quashed the penalty proceedings initiated against the assessee.
The Assessing Officer, after completion of re-assessment proceedings, initiated penalty proceedings for furnishing the inaccurate particular income. The AO issued a notice on standard Performa without striking out the relevant clause. Thus, the notice refers to both the limbs of section 271(1)(c) of the Act for concealment of particulars of income as well as furnishing inaccurate particulars of income, the non-striking of the irrelevant limb of the said notice does not convey to the assessee as to which of the two charges, it has to respond. The assessee contended that non-striking of relevant clause shows a non-application of mind by AO and therefore, the proceedings are liable to be quashed.
The bench noticed the decision of the ITAT in Meherjee Cassinath holdings Pvt. Ltd. v/s ACIT wherein it was held that “quasi-criminal proceedings u/s 271(1)(c) of the Act ought to comply with the principles of natural justice, and in the present case, considering the observations of the Assessing Officer in the assessment order alongside his action of non-striking off of the irrelevant clause in the notice shows that the charge being made against the assessee qua Sec. 271(1)(c) of the Act is not firm and, therefore, the proceedings suffer from non-compliance with principles of natural justice inasmuch as the Assessing Officer is himself unsure and assessee is not made aware as to which of the two limbs of Sec. 271(1)(c) of the Act he has to respond.”
Based on the above decision, the bench held that the AO failed to crystallize the charge on which the penalty was proposed u/s 271(1)(c) of the Act, which has to be met out by the assessee. Accordingly, the penalty order was quashed.
Read the full text of the Order below.
