Assam Hire Purchase Company Pvt. Ltd. Vs DCIT (ITAT Delhi)
Penalty Notice Must Name the Exact Charge: Ambiguous Choice Between Two Limbs Vitiates Proceedings u/s 271(1)(c) & 271AAB
The Delhi Bench of the ITAT has held that the AO must clearly identify the exact statutory limb under which penalty is proposed. A notice which leaves the assessee guessing whether the charge is concealment of income or furnishing inaccurate particulars, or whether penalty u/s 271AAB(1A) is proposed under clause (a) or clause (b), is fundamentally defective. On this basis, the Tribunal quashed penalties imposed under both section 271(1)(c) & section 271AAB.
The consolidated order dealt with four appeals of Assam Hire Purchase Company Pvt. Ltd. Two appeals related to disallowance of salary expenditure, while the remaining appeals concerned penalties arising under sections 271(1)(c) and 271AAB.
A search and seizure action was conducted against the assessee on 20-09-2023. During the search proceedings, one Mr. Mark Ranjan Tucker allegedly stated that he had not provided any services to companies associated with Mr. Deepak Choudhury, who controlled the assessee-company.
Based upon this statement and the surrounding material, the AO examined salary payments made to Ms. Yasmin Paul, who was stated to be working as a financial analyst. For AY 2022-23, salary expenditure of ₹3,60,000 was treated as bogus and disallowed. A similar disallowance of ₹3,00,000 was made for AY 2023-24.
