Vague Show Cause Notice: ITAT deletes Penalty u/s 271(1)(b) of Income Tax Act [Read Order]

The Cuttack bench of Income Tax Appellate Tribunal ( ITAT ) recently deleted the penalty imposed under section 271 (1)(b) of Income Tax Act 1961 and held that the show cause notice issued by the assessing officer was  vague .

As per section 271(1)(b) of the Income Tax Act 1961 assessing officer shall impose penalty if the assessee did not comply with the notice issued under section 142(1) of the Income Tax Act 1961.

This appeal was filed by the assesee’s Indu Devi Tibarewal and Siddarthini Nanda against the order passed by the assessing officer on making penalty under section 271(1)(b) of The Income Tax Act 1961 when the writ petition was pending before the high court.

S.K.Sarangi counsel for the assessee submitted that when a search was conducted on the premises of the assessee, He filed a writ petition before the high court. The High Court was pleased to direct that the proceedings be continued in respect of assessment but the final order should not be passed till the disposal of the Writ Petition before the High Court.

Further the assessee counsel contented that show cause notice issued by the Assessing Officer (AO) and in the satisfaction recorded by him in the assessment order for the purpose of initiating the penalty under section 271(1)(b) of the Income Tax Act 1961, the AO has not mentioned on the basis of failure of compliance for which notice, the penalty has been initiated.

S.C.Mohanty, counsel for the revenue contented that the penalty has been levied for the violation to comply with the notice issued on 31.01.2019 as has been mentioned in the penalty order. It was not necessary for the AO to specify each and every violation. Assessing officer has the power to levy a penalty. Moreover the assessment orders in the instant cases of both the assessees have been passed only after the writ petitions have been disposed of.

After considering the contentions of the both parties the division bench of ITAT comprising Arun Khodpia, (Accountant Member) and George Mathan,, (Judicial Member) allowed the appeal filed by the assessee 

The bench further observed that, show cause notice issued under section 142(1) of the income tax act 1961 did not mention in respect of which non-compliance the penalty has been initiated. Due to this show cause notice and the satisfaction recorded by the Assessing officer in all the cases under consideration is vague.

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