The case of Atul Anand, New Delhi, against the Income Tax Officer, Ward – 32(4), New Delhi, pertains to the assessment year 2014-15. The appeal was filed on June 23, 2021, under case number ITA 778/DEL/2021. The final tribunal order was pronounced on September 19, 2022.
The appellant, Atul Anand, filed his return of income for the assessment year 2014-15 on November 3, 2014, declaring an income of Rs.4,35,890/-. The case was selected for scrutiny assessment through the Computer Aided Scrutiny Selection (CASS). Notice under Section 143(2) of the Income Tax Act, 1961, was issued and served upon the assessee. The assessment was framed under Section 143(3) of the Act on December 19, 2016, determining the total income at Rs.10,38,750/- by making a disallowance of Rs.6,02,852/-. On account of the aforesaid disallowances, the Assessing Officer levied a penalty of Rs.66,834/- under Section 271(1)(c) of the Act on March 28, 2019.
Aggrieved by the penalty order of the Assessing Officer, the assessee carried the matter before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, who upheld the penalty vide order dated June 8, 2021. The appellant then filed an appeal before the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘A’, challenging the order.
The key legal principles in this case revolved around the provisions of Section 271(1)(c) of the Income-tax Act. The primary contention was whether the penalty imposed by the Assessing Officer was justified, given that the notice issued under Section 274 read with Section 271(1)(c) did not specify whether the penalty was for concealment of income or for furnishing inaccurate particulars of income.
The counsel for the assessee, Shri KVS Gupta, argued that the Assessing Officer’s notice was vague as it did not specify the exact charge against the assessee. He pointed to the notice issued on December 19, 2016, which mentioned both concealment of income and furnishing of inaccurate particulars of income. He relied on the decision of the Hon’ble Delhi High Court in the case of PCIT vs. Sahara India Life Insurance Co. Ltd. (2021) 432 ITR 84, which held that a penalty notice must specify the exact charge against the assessee to be valid.
The tribunal observed that the Assessing Officer had issued a notice that did not clearly specify whether the penalty proceedings were initiated for concealment of particulars of income or for furnishing inaccurate particulars of income. The tribunal noted that the Hon’ble Delhi High Court in the case of PCIT vs. Sahara India Life Insurance Co. Ltd. (2021) 432 ITR 84 had held that a penalty notice would be invalid if it did not specify the limb under which the penalty proceedings were initiated.
The relevant portion of the Hon’ble High Court’s findings in the Sahara India Life Insurance Co. Ltd. case was cited, where it was observed that the notice must specify the charge to be valid. The tribunal found that the notice issued to Atul Anand suffered from the same defect, making the penalty order invalid.
The tribunal held that the penalty under Section 271(1)(c) was not justified as the notice issued by the Assessing Officer was vague and did not specify the exact charge against the assessee. The tribunal set aside the penalty levied by the Assessing Officer and confirmed by the Commissioner of Income Tax (Appeals). Thus, the appeal of the assessee was allowed.
The detailed judgment highlights the importance of clarity in penalty notices and adherence to procedural requirements to ensure fairness in tax proceedings. The decision serves as a significant reference for similar cases involving penalties under Section 271(1)(c) of the Income-tax Act.
Order pronounced in the open court on September 19, 2022.
Signed by:
Anil Chaturvedi, Accountant Member
Narender Kumar Choudhary, Judicial Member
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