Ritu Multitrade Services Pvt. Ltd. Vs ITO (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT) Mumbai addressed an appeal filed by an assessee against an order of the Ld. CIT(A) which had confirmed a penalty imposed by the Assessing Officer under Section 271(1)(c) of the Income-tax Act, 1961. The assessee contested the penalty of Rs. 10,46,312, arguing that the Ld. Commissioner of Income Tax (Appeals) had erred in upholding it without properly considering the facts of the case. The assessee also raised an additional legal ground, challenging the validity of the penalty notice itself.
The ITAT admitted this additional ground, which focused on a procedural defect in the show-cause notice issued under Section 274 read with Section 271(1)(c). The assessee’s counsel argued that the Assessing Officer had failed to strike off the inapplicable portions of the notice, resulting in an ambiguous and defective notice. This, according to the assessee, rendered the penalty invalid, citing the decision of the Bombay High Court in Mohd. Farhan A. Shaikh Vs. DCIT. In that case, the High Court had established that a penalty notice must clearly specify the charge against the assessee. The Revenue countered by relying on another Bombay High Court decision, Veena Estate (P) Ltd. Vs. CIT, which suggested that a defect in the notice would only invalidate the penalty if it caused demonstrable prejudice to the assessee. However, the assessee’s counsel distinguished the Veena Estate case, arguing that its facts were unique and not applicable to the general principle.
