Appeal Against Penalty Order for Non-Specification of Charge – Vansh Industries Ltd vs ACIT Circle-26(1), New Delhi

Case Summary: Vansh Industries Ltd vs ACIT Circle-26(1), New Delhi

Case Number: ITA 6051/DEL/2019
Appellant: Vansh Industries Ltd., New Delhi
Respondent: Assistant Commissioner of Income Tax (ACIT), Circle-26(1), New Delhi
Assessment Year: 2012-13
Case Filed On: 15th July 2019
Order Type: Final Tribunal Order
Date of Order: 11th April 2023
Pronounced On: 11th April 2023

Introduction

The case of Vansh Industries Ltd vs ACIT Circle-26(1), New Delhi, revolves around an appeal filed by the appellant challenging the penalty levied under section 271(1)(c) of the Income Tax Act, 1961. The penalty was imposed due to the alleged concealment of income or furnishing of inaccurate particulars of income for the assessment year 2012-13. The primary contention in the appeal was the non-specification of the exact charge in the penalty notice, which the appellant argued rendered the penalty proceedings invalid.

Background of the Case

Vansh Industries Ltd, a company based in New Delhi, filed its income tax return for the assessment year 2012-13. During the assessment, the Assessing Officer (AO) identified discrepancies and disallowed certain expenses amounting to Rs. 5,26,469/-. As a result, the AO initiated penalty proceedings under section 271(1)(c) of the Income Tax Act, alleging that the company had either concealed its income or furnished inaccurate particulars of income.

Following the assessment order, a penalty notice was issued to Vansh Industries Ltd. However, the notice did not specify the exact charge—whether the penalty was being levied for concealment of income or for furnishing inaccurate particulars. This ambiguity became the focal point of the appeal filed by Vansh Industries Ltd before the Commissioner of Income Tax (Appeals)-9, New Delhi.

Appeal Before the Commissioner (Appeals)

Vansh Industries Ltd contested the penalty order before the Commissioner of Income Tax (Appeals)-9, New Delhi, arguing that the penalty notice was defective due to the non-specification of the exact charge under section 271(1)(c). The appellant’s legal team, led by Dr. Rakesh Gupta, Advocate, argued that the failure to strike off the irrelevant portion of the penalty notice rendered the entire penalty proceedings invalid.

Despite these arguments, the Commissioner (Appeals) upheld the penalty imposed by the AO. The Commissioner dismissed the appeal, leading Vansh Industries Ltd to approach the Income Tax Appellate Tribunal (ITAT) for further relief.

Proceedings Before the ITAT

The appeal was registered as ITA No. 6051/DEL/2019 and was heard by the Delhi Bench “H” of the Income Tax Appellate Tribunal, presided over by Shri G. S. Pannu, President, and Shri Challa Nagendra Prasad, Judicial Member. The hearing took place on 17th February 2023, with the final order pronounced on 11th April 2023.

The appellant was represented by a legal team consisting of Dr. Rakesh Gupta, Shri Somil Agarwal, and Shri Deepesh Garg, while the respondent was represented by Shri Anuj Garg, Senior Departmental Representative (DR). The primary argument presented by the appellant’s counsel was that the penalty proceedings were initiated without specifying the exact limb of section 271(1)(c) under which the penalty was being levied—whether for concealment of income or for furnishing inaccurate particulars.

Tribunal’s Decision

After considering the arguments from both sides, the ITAT reviewed the penalty notice issued to Vansh Industries Ltd. The Tribunal observed that the notice was issued in a stereotyped manner without specifying the relevant limb of section 271(1)(c). The Tribunal noted that the AO had not struck off the irrelevant portion of the notice, which left the appellant uncertain about the charge being levied against them.

The Tribunal referred to several judicial precedents, including the judgment of the Hon’ble Bombay High Court (Full Bench at Goa) in the case of Mohd. Farhan A. Shaikh vs. ACIT [(2021) 434 ITR 1 (Bom)], where it was held that a penalty notice issued without specifying the charge suffers from the vice of vagueness and is bad in law. The Tribunal also cited the decision of the Hon’ble Delhi High Court in PCIT vs. Sahara India Life Insurance Co. Ltd., where a similar view was upheld.

Based on these observations and judicial precedents, the ITAT held that the penalty order passed by the AO under section 271(1)(c) was invalid due to the defective notice. The Tribunal quashed the penalty order, thereby allowing the appeal filed by Vansh Industries Ltd.

Conclusion

The appeal filed by Vansh Industries Ltd against the penalty order for the assessment year 2012-13 was allowed by the ITAT, with the penalty order being quashed due to the non-specification of the exact charge in the penalty notice. This case underscores the importance of clear and precise communication in tax proceedings, particularly when it comes to imposing penalties under section 271(1)(c) of the Income Tax Act.

The Tribunal’s decision in this case highlights the need for Assessing Officers to exercise due diligence when issuing penalty notices, ensuring that the relevant charge is clearly specified. This case also serves as a reminder to taxpayers of their right to challenge penalty orders that are procedurally flawed or legally unsound.

Order Pronounced in Open Court: 11th April 2023

Judicial Members: Shri G. S. Pannu and Shri Challa Nagendra Prasad

Assistant Registrar: ITAT, New Delhi

Appeal Against Penalty Order for Non-Specification of Charge – Vansh Industries Ltd vs ACIT Circle-26(1), New Delhi