The Delhi bench of the Income Tax Appellate Tribunal ( ITAT) has nullified a penalty under Section 271(1)(c) of the Income Tax Act, 1961 stating that the Notice issued in a stereotyped manner without applying mind is bad in law.
The counsel for the assessee Ved Jain strongly asserted that the notices issued under Section 274 read with 271(1)(c) of the Income Tax Act, 1961 in the current case are ambiguous.
The counsel for the assessee these notices do not specify any particular aspect of the penalty, leading to the argument that the penalty is not justified. The Assessee, in substantiating this standpoint, also cited several judgments from both the Honorable Supreme Court and High Courts.
The counsel for the revenue Jeetender Chand backed the decisions made by the lower authorities. The counsel for the revenue contended that the contested order is devoid of any distortions, impropriety, or illegality, and therefore, requires no external intervention.
The Assessing Officer (AO) has taken the initiative to impose a penalty under section 271(1)(c)of the Income Tax Act, 1961, citing the provision related to the submission of inaccurate income particulars. Subsequently, notices were issued under Section 274 read with section 271(1)(c) of the Income Tax Act, 1961, alleging concealment of income particulars or the submission of inaccurate income details. Notably, these notices did not specify any particular limb of the provision. Ultimately, through a penalty order dated March 30, 2019, the penalty was imposed specifically for furnishing inaccurate particulars of income.
The two member bench of the tribunal comprising Shamim Yahaya (Accountant member) and N. K. Chaudhary (Judicial member) granted a favorable verdict on the appeal filed by the Assessee.
The bench deemed the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961, as legally flawed. The key contention was the failure to specify the particular limb of Section 271(1)(c) under which the penalty proceedings were initiated – whether for concealing particulars of income or furnishing inaccurate particulars of income.
The bench concluded that the Assessing Officer issued notices under section 274 read with Section 271(1)(c)of the Income Tax Act, 1961 without specifying the relevant limb for initiating the penalty proceedings, it appears evident that the notices were issued in a standardized manner without due consideration. This approach, being legally flawed, renders the notices insufficient to validate the imposition of a penalty under Section 271(1)(c) of the Income Tax Act, 1961. In light of these circumstances, the court aligned with the view, upheld by various courts, including the Supreme Court, that under such conditions, the penalty was not applicable.
In the result, the appeal filed by the Assessee stands allowed.
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