ITAT Quashes Pre-Drafted Performa Penalty Notice Containing Both Concealed And Inaccurate Particulars Of Income

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has quashed a pre-drafted penalty notice containing both concealed particulars of income and furnished inaccurate particulars of income.

The bench of Vikas Awasthy (Judicial Member) and S. Rifaur Rahman (Accountant Member) has observed that where the Assessing Officer clearly records satisfaction for imposing penalty on one or both grounds mentioned in Section 271(1)(c) of the Act, non-striking of irrelevant matter would render the notice defective, and such defective notice would vitiate the penalty proceedings.

The appellant/assessee submitted that the assessing officer made an addition of Rs. 1,00,15,634 on account of bogus purchases. The assessing officer added 100% of unproved purchases and initiated penalty proceedings. The assessee brought the issue up in appeal before the CIT (A). The CIT (A) on estimations restricted the addition to 12.5% of the alleged bogus purchases. The Assessing Officer levied a penalty under § 271(1)(c) of the Act in respect of the addition confirmed by the CIT (A). The assessee filed an appeal before CIT(A) against the order levying penalty. The CIT (A), without appreciating the facts and legal position, confirmed the penalty.

The assessee contended that the assessing officer had made additions merely based on estimations, which were reduced by the CIT (A). It is a settled legal principle that no penalty can be levied on addition based on estimations.

The department contended that the assessee had indulged in bogus transactions. The assessee was not able to prove the genuineness of the purchases; hence, the assessing officer made an addition of 100% of such purchases. The CIT(A) restricted the addition to 12.5%, and the Assessing Officer levied a penalty on the addition confirmed by the CIT(A).

The ITAT noted that a perusal of the notice reveals that it is in a predrafted Performa and mentions both limbs of Section 271(1)(c) of the Act as “have concealed the particulars of your income or...furnished inaccurate particulars of such income.” The assessing officer has not struck off irrelevant clauses in the notice.

The tribunal held that since both limbs, i.e., “concealed particulars of income and furnished inaccurate particulars of income,” are recorded in the notice, the notice is defective. The penalty levied under Section 271(1)(c) is liable to be deleted on the ground of defective notice.

Counsel For Appellant: Rajesh Bhende

Counsel For Respondent: Rajeshwari Menon

Case Title: Jatin Enterprises Versus ACIT

Case No.: ITA NO.3885/MUM/2023(A.Y.2009-10)

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