Case Law Details
DCIT, Central Circle Vs Sai Sugam Enterprises (ITAT Mumbai)
Introduction: The Income Tax Appellate Tribunal (ITAT) Mumbai has recently given a significant ruling in the case of DCIT, Central Circle Vs Sai Sugam Enterprises. The tribunal has highlighted the need for precision in penalty notices, particularly those issued under section 274 of the Income Tax Act. According to the tribunal, if such notices do not specify the exact charge against the assessee, they are invalid and cannot sustain a penalty.
Issue of the Penalty Notice: The revenue department challenged an order from the Commissioner of Income Tax (Appeals) which stated that the penalty notice issued under section 274 read with section 271(1)(c) was invalid. The notice, according to the CIT(A), did not specify the fault or charge against the assessee, rendering the assessee unable to adequately defend itself.
Precedents Cited: The CIT(A) relied on a Full Bench decision of the Hon’ble Jurisdictional High Court in the case of Mohd. Farhan A. Shaikh, which upheld the need for penalty notices to specify the fault or charge against the assessee. Failure to do so would vitiate the penalty itself.
The ITAT’s Concurring Opinion: The ITAT Mumbai concurred with the CIT(A)’s findings, stating that the penalty notice was defective and hence, bad in law. It reinforced the argument by citing judgments such as that of CIT vs Manjunatha Cotton and Ginning Factory, where the Hon’ble Karnataka High Court made a similar ruling. The Supreme Court also dismissed the Department’s SLP against this decision, lending it further credibility.
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