PCIT 27 Vs Late Gordhandas S. Garodia Through L/h Shri Mahesh G Garodia (Bombay High Court)
The Bombay High Court dismissed the Revenue’s appeal challenging the ITAT’s deletion of penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961. The Revenue contended that the penalty notice was valid because penalty had been levied on both grounds mentioned in Section 271(1)(c), and therefore there was no requirement to strike off any irrelevant portion of the notice.
Read SC Judgment in this case: SC Declines Interference With Penalty Deletion Over Ambiguous Section 271(1)(c) Notice
The Court referred to the Full Bench decision in Mohd. Farhan A. Shaikh Vs. Deputy Commissioner of Income Tax, Central Circle 1, Belgaum, which held that ambiguous notices cannot form the foundation for imposing penalty. The Court found that, on examining the show cause notice in the present case, it was not clear whether the penalty was proposed for concealment, disclosure of incorrect particulars, or both. Therefore, the defect identified by the Full Bench equally applied to the notice in this case.
Since the ITAT had followed the Full Bench decision of the Bombay High Court, the Court held that the proposed question could not be regarded as a substantial question of law. The appeal was accordingly dismissed without any order as to costs.
Cases Discussed
- Mohd. Farhan A. Shaikh Vs. Deputy Commissioner of Income Tax, Central Circle 1, Belgaum (Bombay High Court), [2021] 125 taxmann.com 253 (Bombay)
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Heard learned counsel for the parties.
2. Gupta proposes the following question, which according to him, constitutes a substantial question of law:-
B. Whether on the facts and circumstances of the case and in law, the Hon’ble ITAT is correct in deleting the penalty u/s 271(1)(c) of the Income Tax Act, 1961 on technical ground by holding that penalty notice was not valid as the irrelevant portion was not struck off, without considering that the penalty was levied on both the grounds mentioned in section 271(1)(c) of the Act and therefore it was not possible to strike off one limb in the penalty notice?
3. Mr. Gupta submits that in this case the impugned penalty was levied based upon both the reasons referred to in the show cause notice and therefore there was no question of striking out any irrelevant portions as was the case before the Full Bench in the case of Mohd. Farhan A. Shaikh Vs. Deputy Commissioner of Income Tax, Central Circle 1, Belgaum [2021] 125 taxmann.com 253 (Bombay).
4. The ratio of the Full Bench in the case of Farhan A. Shaikh (supra) was that ambiguous notices cannot be the foundation of imposition of any penalty. In this case, on the perusal of the show cause notice, it is not at all clear whether penalty was proposed to be imposed based on concealment, disclosure of incorrect particulars or both. Therefore, the vice pointed out by the Full Bench, equally applies to the show cause notice which was the foundation of imposition of the impugned penalty. The attempt to distinguish the decision of the Full Bench should therefore fail.
5. Since the Tribunal has followed the decision of the Full Bench of this Court, we do not think question of law as proposed above could be regarded as substantial question of law.
6. Since this Appeal does not involve any substantial question of law, we dismiss the same without any costs order.
