Vague Section 271AAB Penalty Notice Invalid: Madras High Court

PCIT Vs R.Elangovan (Madras High Court)

Summary: The Madras High Court dismissed the Revenue’s tax case appeals and upheld the ITAT Chennai’s order vacating penalty imposed under Section 271AAB of the Income Tax Act, 1961 for AY 2013-14. The Revenue had approached the High Court under Section 260A against the Tribunal’s common order dated 05.04.2018 in ITA No.1199/Chny/2017 and C.O.No.75/Chny/2017. The principal issue was whether the Tribunal was justified in vacating the penalty on the ground that the notice issued under Section 274 read with Section 271AAB was defective.

The assessee had not filed the return by the due date for AY 2013-14, during which search and seizure operations were conducted. Regular assessment under Section 143(3) was completed on 13.08.2014, recording that penalty proceedings under Section 271AAB would be separately initiated. The assessee objected to the penalty notice as vague because it did not identify the particular limb of Section 271AAB under which the Assessing Officer proposed to proceed. The AO rejected the objection and imposed penalty at 30% under Section 271AAB(1)(c) by order dated 03.02.2016. The CIT(A), while considering the merits, held that penalty should have been restricted to 10%. On further proceedings, the Tribunal dismissed the Revenue’s appeal and allowed the assessee’s cross-objection challenging the validity of the notice.