Melekandy Puthalath Farook Vs ACIT (ITAT Chennai)
ITAT Chennai held that notice u/s 274 r.w.s.270A of the Act was not a valid notice for the reason that the AO did not specify the satisfaction as to whether assessee had either ‘under reported the income or ‘misreported the income’. Thus, imposition of penalty not justified.
Facts- The assessee sold certain property situated at Kottivakkam for Rs.172 Lacs. The property was purchased on 20-05-2004 for Rs.23 Lacs. However, Long Term Capital Gains (LTCG) was not offered to tax. The Ld. AO computed LTCG of Rs.112.06 Lacs and framed the assessment. Consequently, in the assessment order, Ld. AO initiated penalty u/s 270A for misreporting of income.
The imposition of penalty was confirmed by CIT(A). Being aggrieved, the present appeal is filed.
Conclusion- Held that notice u/s 274 r.w.s.270A of the Act was not a valid notice for the reason that the AO did not specify the satisfaction as to whether assessee had either ‘under reported the income or ‘misreported the income’. In the absence of proper notice, AO could not impose penalty since it was clear violation of principles of natural justice. Issuing a vague notice without specifying the exact charge under which limb the proposed penalty proceedings was being initiated, would vitiate the entire proceedings because the assessee was not given an opportunity to explain its case on specific charge. Therefore, the penalty levied on the basis of invalid or vague notice was held to be void-ab-initio. Reliance was placed on various judicial decisions to support the conclusion.
