Baidya Nath Dey Vs ITO (ITAT Kolkata)
The appeal by Baidya Nath Dey to the Income Tax Appellate Tribunal (ITAT), Kolkata, challenged the confirmation of a penalty of Rs.7,38,000/- imposed under Section 271(1)(c) of the Income-tax Act, 1961, for the Assessment Year 2011-12. The penalty was originally levied by the Assessing Officer (AO) following an assessment order dated 14.12.2018 and was subsequently affirmed by the National Faceless Appeal Centre (NFAC)/Ld. CIT(A). The sole argument pressed by the assessee was that the entire penalty proceeding and the resulting order were invalid because the initial notice issued under Section 274 read with Section 271(1)(c) was fundamentally defective. The assessee’s counsel argued that the AO had failed to strike off the irrelevant limb (either ‘concealment of income’ or ‘furnishing of inaccurate particulars’) in the standard penalty notice, indicating a lack of application of mind and failure to specify the precise charge against the assessee.
The ITAT, after examining the penalty notice, confirmed that the AO had indeed failed to identify the specific charge by not striking out the irrelevant limb. The Tribunal held that such an omission rendered the notice invalid in the eyes of the law, as it failed to inform the assessee clearly whether the penalty was for concealing income or for furnishing inaccurate particulars, a defect that goes to the root of the matter. The ITAT relied on the binding precedent of the Hon’ble Calcutta High Court in the case of KPC Medical College and Hospital v. PCIT, where a similar defect in the show cause notice led the court to invalidate the penalty proceedings. Following this judicial authority, the ITAT concluded that the penalty order passed by the AO, being a consequence of an invalid foundational notice, could not be sustained. Accordingly, the Tribunal allowed the assessee’s appeal and directed that the penalty imposed under Section 271(1)(c) be quashed.
