ACIT Circle-7(1), New Delhi vs DLF Homes Kokapet Pvt Ltd: Defective Penalty Notice for AY 2011-12

ACIT Circle-7(1), New Delhi vs DLF Homes Kokapet Pvt Ltd: Defective Penalty Notice for AY 2011-12

Case Number: ITA 5706/DEL/2019

Appellant: ACIT, Circle-7(1), New Delhi

Respondent: DLF Homes Kokapet Pvt Ltd, New Delhi

Assessment Year: 2011-12

Case Filed On: 2019-06-28

Order Type: Final Tribunal Order

Date of Order: 2022-11-15

Pronounced On: 2022-11-15

Background

The case involves the ACIT, Circle-7(1), New Delhi, as the appellant, and DLF Homes Kokapet Pvt Ltd, New Delhi, as the respondent. The issue revolves around a defective penalty notice issued by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2011-12.

Reason for Filing the Case

The appellant, ACIT, Circle-7(1), New Delhi, filed the case challenging the order of the Commissioner of Income Tax (Appeals)-3, New Delhi [‘CIT(A)’], which deleted the penalty of Rs.1,39,36,395/- levied by the AO. The penalty was imposed on the grounds of furnishing inaccurate particulars of income and concealment of income. However, the penalty notice was found to be defective as it did not specify the charge under which the penalty was levied.

Tribunal Proceedings

On 15th November 2022, the tribunal, comprising SHRI SHAMIM YAHYA, Accountant Member, and SHRI YOGESH KUMAR US, Judicial Member, heard the case.

The appellant’s representatives, Shri R.S. Singhvi, CA, and Shri Satyajeet Goel, CA, presented their arguments. The respondent was represented by Shri Yogesh Kumar Nayyar, Sr. DR.

Arguments Presented

The appellant contended that the CIT(A) erred in deleting the penalty levied under Section 271(1)(c) of the Act. The AO had treated the interest expenditure of Rs.4,19,54,977/- as capital in nature and added it back to the income of the assessee. The penalty was imposed based on this addition.

The respondent argued that:

• The penalty notice issued was defective as it did not specify whether the charge was for concealment of income or furnishing inaccurate particulars of income.
• The AO did not strike off one of the limbs in the penalty notice, leading to ambiguity and vagueness in the notice.
• The penalty order also did not specify the charge on which the penalty was levied, leading to further confusion.
• The assessee had suspended the capitalization of interest as per Accounting Standard (AS 16) due to a government project being suspended, and hence, no addition was required to be made.

Tribunal’s Decision

The tribunal considered the rival submissions and the material placed on record. The tribunal noted that the AO did not specify the charge under which the penalty notice was issued, making it defective. The tribunal referenced several judicial precedents, including decisions by the Hon’ble Karnataka High Court and the Hon’ble Supreme Court, which supported the respondent’s position.

The tribunal highlighted the importance of specifying the charge in the penalty notice to avoid ambiguity and vagueness. The tribunal emphasized that the AO must clearly state whether the penalty is for concealment of income or furnishing inaccurate particulars of income.

Conclusion

The tribunal upheld the CIT(A)’s decision to delete the penalty levied by the AO under Section 271(1)(c) for the assessment year 2011-12. The tribunal emphasized the importance of issuing a clear and specific penalty notice to ensure fairness and justice in the penalty proceedings.

The final result was a significant step towards ensuring that penalty notices are issued with due diligence and adherence to procedural requirements, preventing any ambiguity or vagueness.

Order pronounced on: 15/11/2022

Signatories:

SHRI SHAMIM YAHYA, Accountant Member

SHRI YOGESH KUMAR US, Judicial Member

Dated: 15/11/2022

Copy forwarded to:

• Appellant
• Respondent
• CIT
• CIT(A)-3, New Delhi
• DR: ITAT

ASSISTANT REGISTRAR

ITAT NEW DELHI

ACIT Circle-7(1), New Delhi vs DLF Homes Kokapet Pvt Ltd: Defective Penalty Notice for AY 2011-12