Case Law Details
I.G. International Pvt Ltd Vs ACIT (ITAT Mumbai)
The case of I.G. International Pvt Ltd Vs ACIT, brought before ITAT Mumbai, delves into a pivotal aspect of penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961. The contention revolves around the issuance of an unambiguous notice by the Assessing Officer, focusing on whether the notice was defective, thereby vitiating subsequent penalty proceedings.
Representing the assessee, Shri Ashok Mehta argued that the notice under section 274 read with section 271(1)(c) of the Act was defective as it cited both limbs of section 271(1)(c) without striking off the irrelevant clause. To back his argument, he referred to the decision of the Bombay High Court in the case of Mohd. Farhan A. Shaikh vs. ACIT.
In contrast, the Departmental Representative, Shri V.S.Mahajan, defended the impugned order, maintaining that the assessee had erroneously claimed a deduction under section 35D, hence the penalty under section 271(1)(c) was justified.
Upon review, ITAT Mumbai found that the Assessing Officer demonstrated ambiguity while issuing the notice, failing to specify whether the penalty was for “concealment of particulars of income” or “furnishing inaccurate particulars of income”. The tribunal, referring to the precedent of Mohd. Farhan A. Shaikh vs. ACIT, held that the ambiguity of the charge was sufficient to vitiate the penalty proceedings.
The verdict of ITAT Mumbai in the I.G. International Pvt Ltd Vs ACIT case emphasizes the necessity for clear and unambiguous notices in penalty proceedings under section 271(1)(c) of the Income Tax Act. This ruling serves as a significant reminder for Assessing Officers to specify charges without ambiguity to ensure valid penalty proceedings.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-47, Mumbai [in short ‘the CIT(A)’] dated 14/11/2022 for the Assessment Year 2015-16 confirming penalty u/s. 271(1)(c) of the Income Tax Act, 1961 [in short ‘the Act’].
2. Shri Ashok Mehta appearing on behalf of the assessee submitted that the notice dated 31/05/2018 issued u/s. 274 r.w.s. 271(1)(c) of the Act is defective, as both the limbs of section 271(1)(c) of the Act are mentioned therein. The Assessing Officer has not struck off the irrelevant clause in the said notice. To support his contention he placed reliance on the decision of Hon’ble Bombay High Court in the case of Mohd. Farhan A. Shaikh vs. ACIT, 434 ITR 1(Bom-FB).
3. Per contra, Shri V.S.Mahajan representing the Department vehemently defended the impugned order. The ld. Departmental Representative submitted that assessee had wrongly claimed deduction u/s. 35D of the Act, therefore, penalty u/s. 271(1)(c) of the Act was levied by the Assessing Officer.
4. Both sides heard. Orders of authorities below examined. A perusal of the assessment order dated 26/12/2017 would show that the Assessing Officer has recorded satisfaction for levy of penalty u/s. 271(1)(c) of the Act on the ground of “furnishing inaccurate particulars of income”. Thereafter, the Assessing Officer issued notice u/s. 274 r.w.s. 271(1)(c) of the Act, wherein both the limbs of section 271(1)(c) of the Act are invoked i.e. “ concealed particulars of income or furnished inaccurate particulars of income”. Both the limbs are mentioned with conjunction ‘or’. This clearly indicate that , there was an ambiguity in the mind of Assessing Officer while issuing notice as to under which limb notice has to be issued. The Assessing Officer vide order dated 30/06/2018 levied penalty u/s. 271(1)(c) of the Act. A perusal of said order reveals that the Assessing Officer while levying penalty started with the charge of concealment of particulars of income ( Para- 2 of order u/s. 271(1)(c) of the Act ) and finally levied penalty for furnishing inaccurate particulars of income ( Para-5 of the penalty order). Thus, vagueness regarding the charge for which penalty is to be levied continued to be there in the mind of Assessing Officer right through from recording of satisfaction to levy of penalty. In penal proceedings there is no scope of vagueness. The assessee against whom penalty proceedings are initiated has to be made aware in absolute terms the charges for which the penalty proceedings are initiated. The notice vide which charges for levy of penalty are communicated to the assessee should be unambiguous.
5. The Full Bench of Hon’ble Bombay High Court in the case of Mohd. Farhan A. Shaikh vs. DCIT (supra) has held that mere defect in the notice would vitiate penalty proceedings. In the instant case, vagueness of charge is not only confined to the notice, even in the order passed u/s. 271(1)(c) of the Act vagueness is reflected writ large. Thus, in facts of the case and in light of the decision of Hon’ble Jurisdictional High Court we hold that the notice issued u/s. 274 r.w.s. 271(1)(c) of the Act is defective. Consequently, the subsequent proceedings arising therefrom are vitiated.
6. In the result, impugned order is set-aside and appeal of the assessee is allowed.
Order pronounced in the open court on Tuesday the 30th day of May, 2023.
