Keshav Kumar Nachani Vs DCIT (ITAT Indore)
No Limb, No Penalty: Defective 274 Notices Sink Revenue’s Case- Assessee Wins on Defective Notice; Loses One Year on 562-Day Delay
Assessee filed three appeals challenging penalties u/s 271(1)(c) imposed following a search u/s 132 on 25.11.2010. Assessments for AYs 2009-10 & 2010-11 were completed u/s 153A r.w.s. 143(3) & AY 2012-13 u/s 143(3), with additions leading to penalties of Rs.51.46 lakh, Rs.4.54 lakh & Rs.4.94 lakh respectively. Assessee produced copies of show-cause notices u/s 274 placed in the Paper Books. The notices clearly show the AO issuing standard printed formats without striking off irrelevant limbs & , in AY 2012-13, without specifying any charge at all.
Assessee argued that the notices were fatally defective for not specifying whether the penalty was for “concealment” or for “furnishing inaccurate particulars”. Reliance was placed on binding jurisdictional High Court decision in Kulwant Singh Bhatia (MP HC) which, following Manjunatha Cotton & Ginning Factory (Karnataka HC) & SSA’s Emerald Meadows (SC), held that vague notices violate natural justice & invalidate entire penalty proceedings. Tribunal observed that the AO had issued ambiguous notices containing both limbs, showing complete non-application of mind. The notice for AY 2012-13 did not contain any charge at all. Tribunal held the penalty proceedings to be illegal & unsustainable & quashed the penalties for AYs 2009-10 & 2012-13 without going into merits.
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