This article provides a comprehensive analysis of the Income Tax Appellate Tribunal’s decision for ITA No. 307/DEL/2019, involving Mr. Sanjeev Kumar Khatri of New Delhi, and the Income Tax Officer (ITO), Ward-2(3), Faridabad.
The appeal concerns the assessment year 2007-08. Mr. Sanjeev Kumar Khatri contested the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961. The case was filed on January 17, 2019, and the final tribunal order was pronounced on June 4, 2019.
The primary issue in this case was the validity of the penalty proceedings initiated by the Assessing Officer (AO). The appellant argued that the penalty notice was defective and invalid, as it did not specify under which limb of section 271(1)(c) the penalty was being levied – whether for concealment of income or for furnishing inaccurate particulars of income.
The appellant, represented by Advocates Shri Somil Agarwal and Ms. Monika Ghai, contended that the penalty notice issued on March 30/31, 2015, was defective. The notice mentioned, “Have concealed the particulars of your income or furnished inaccurate particulars of such income under section 271(1)(c).” This ambiguity led to the argument that the notice was invalid as it did not clearly specify the charge.
The appellant cited several ITAT Delhi Bench orders to support the argument:
The Revenue, represented by Shri S.L. Anuragi, Sr. DR, argued that the failure of the AO to strike off the irrelevant part of the notice was not a valid ground for deleting the penalty. The respondent relied on the ITAT Chennai Bench’s order reported in TS-289-ITAT-2019-CHNY.
The Tribunal, led by Judicial Member Shri Bhavnesh Saini, found that the show cause notice issued by the AO was indeed defective. The notice failed to specify whether the penalty was for concealment of particulars of income or for furnishing inaccurate particulars of income. This ambiguity rendered the entire penalty proceedings invalid.
The Tribunal referenced several judicial precedents to support its decision:
The Tribunal concluded that due to the defective nature of the show cause notice, the entire penalty proceedings were vitiated. Consequently, no penalty was leviable against Mr. Sanjeev Kumar Khatri. The Tribunal set aside the orders of the lower authorities and cancelled the penalty.
This case highlights the importance of clear and specific notices in penalty proceedings under the Income Tax Act. It underscores the principle that procedural defects in penalty notices can render the entire penalty proceedings invalid.
The decision in ITA 307/DEL/2019 serves as a significant precedent for taxpayers and tax practitioners. It emphasizes the necessity for the tax authorities to issue clear and unambiguous penalty notices. This ensures that taxpayers are adequately informed of the charges against them, upholding the principles of natural justice.
In summary, the Tribunal’s order in favor of Mr. Sanjeev Kumar Khatri reaffirms the judicial stance on the invalidity of ambiguous penalty notices, providing a valuable reference for future cases involving similar issues.
Penalty Cancellation Case: ITA 307/DEL/2019 – Sanjeev Kumar Khatri vs ITO
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