The Lucknow Bench of Income Tax Appellate Tribunal (ITAT) ruled that the show cause notice not specifying the Charge under which penalty is proposed to be levied, is void ab initio.
The revenue has contended that the CIT(A) has erred in law and on facts in deleting the penalty amounting to Rs. 1,00,00,000/- levied u/s 271(1)(c) of the Income Tax Act, 1961 ignoring the fact that the additions made by the AO had been confirmed in the appellate proceedings. The reliance is also placed on the Supreme Court in the case of Union of India Vs Dharmendra Textile Processors and the High court of Madras Order in the case of Sundaram Finance Ltd. Vs Assistant Commissioner of Income Tax Co. where it had been held that mens rea is not an essential element for imposing a penalty for breach of civil obligations or liabilities and that even assuming that there was a defect in the notice, it had caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued under section 274 read with section 271 of the Income Tax Act.
On the other hand, the assessee, M/s Scooters India Ltd. invited the attention of the court to the paper book filed wherein show cause notice for penalty under section 274 read with 271(1)(c) of the Act was placed. It was submitted that from a perusal of this notice, it is crystal clear that the charge is not specific for which penalty is levied under section 271(1)(c) of the Act, whether for concealment of income or for furnishing inaccurate particulars of income.
The coram headed by the Vice President A. D. Jain and Accountant Member, T.S.Kapoor the show cause notice, which has not specified the charge and limb under which the penalty is proposed to be levied, is void ab initio and the consequent penalty imposed on the basis of such notice is, therefore, illegal and bad in law and liable to be deleted.
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