Notice issued u/s 271 must Record the specific ground to which it initiated: ITAT [Read Order]

The Amritsar bench of the Income Tax Appellate Tribunal (ITAT) consists of Dr M L Meena, AM and Shri Anikesh Banerjee, JM has held that unambiguous statement in notice can strike off Penalty imposed u/s 271 of the Income Tax Act,1961.

The appellant alleged that the CIT(A) had erred in confirming a penalty of Rs.1,74,933/- on the addition of Rs. 5,20,000/- treated as deemed dividend u/s 2(22)(e) of the Income Tax Act, 1961.It was observed that Sh. Prem Pal Gandhi, who is the managing director of M/s. Walia Trades Limited has more than ten per cent shareholding and had a debit balance of Rs.520000/- It was contended against the applicability of Sec 2(22)(e) that the advance was given for the personal needs of the director and the AO treated the advance amount as deemed dividend and taxed in his hands.

The appellant failed to provide any authentic proof in support of his contention and the AO held the assessee guilty of furnishing inaccurate particulars of income. AO levied a penalty under section 271(l)(c) of the Act amounting to Rs. 1,74,933/- which is confirmed by the CIT(A).

The appellant argued that the AO has not mentioned under which limbs of section 27 1(1)(c) of the Act, whether for concealment of income or furnishing of inaccurate particulars, the penalty was initiated. Further challenged that notice issued under section 274 read with section 271 of the Act, does not mention the limb for which it is initiated.

It was observed that the assessee had objected to the issuance of the notice and contended there was no basis for issuance of the notice under Section 271(1)(c) of the Act, both limbs in the said provision do not get attracted. 

The Tribunal observed that the notice must be precise in the interest of fairness and justice and must not be ambiguous. In light of the case of “Mohd. Farhan A. Shaikh Vs. DCIT”, the Coram deleted the penalty levied by the AO and allowed the appeal.

To Read the full text of the Order CLICK HERE

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