D.C.I.T Vs. M/s. Pennzoil Quaker State India Ltd. (ITAT Mumbai)
On a perusal of the notice issued u/s. 271(1)(c) of the Act for initiation of proceedings we find that the Assessing Officer did not strike off and specify the charge/limb for which he is proposing to initiate penalty proceedings. However, in the Assessment Order, Assessing Officer records that the penalty proceedings are initiated for furnishing inaccurate particulars of income.
Action of the Assessing Officer in non-striking off relevant clause in the notice shows that the charge being made against the assessee is not firm therefore proceedings suffer from non-compliance with principles of natural justice in as much as the Assessing Officer himself is not sure of the charge and the assessee is not made aware as to which of the two limbs of section u/s. 271(1 )(c) of the Act he has to respond.
The notice issued by the Assessing Officer u/s 274 r.w.s. 271(1)(c) of the Act is untenable as it suffers from the vice of non-application of mind.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
1. These two appeals are filed by the Revenue and assessee against order of the Learned Commissioner of Income Tax (Appeals)-2, Mumbai dated 28.03.2013 for the Assessment Year 2007-08 in deleting the penalty levied on Transfer pricing adjustment of ₹.77,50,450/- and in sustaining the penalty on the addition of ₹.96,39,000/- made on account of change in method of accounting on valuation of inventories.
2. At the outset the Ld. Counsel for the assessee submits that initiation of penalty proceedings u/s. 271 (1)(c) of the Act is improper. Ld. Counsel for the assessee submits that the Assessing Officer is not clear as to the charge for which the penalty is initiated i.e. either concealment of income or furnishing inaccurate particulars. Ld. Counsel for the assessee further referring to notice issued u/s.274 r.w.s. 271(1 )(c) of the Act submits that the Assessing Officer did not specify the charge for which the penalty proceedings were initiated, but penalty was levied for furnishing inaccurate particulars of income in the penalty order. Ld. Counsel for the assessee submits that the notice has been issued without specifying the charge for which the penalty is initiated as there is no striking off of the limb in the notice and therefore the initiation itself is improper and not valid.
3. Ld. Counsel for the assessee submitted various propositions as under:
(I) The levy of penalty is illegal, void, bad in law, vitiated by non-application of mind and is without jurisdiction as the penalty notice issued by the AO does not strike off the relevant portion thereof.
(II) No penalty can be levied as there was a full and complete disclosure by the assessee. The respondent had made full and complete disclosure and in this regard reliance is placed on various
(i) Tax Audit Report – Refer Para 11(b), Page No. 27 of the Paper Book
(ii) Signed Financials – Refer Schedule 21(c) of Notes to Accounts, Page No. 18 of the Paper Book.
(iii) Signed Financials- Schedule 17(c) of financials – refer Page No. 13 of the Paper Book.
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