Kushal Karyashala (P) Ltd vs. ACIT Circle-14(2) – ITA 6125/DEL/2019

Case Overview

This case involves an appeal by Kushal Karyashala (P) Ltd against the order of the CIT(A)-5, New Delhi, which confirmed the penalty levied by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961. The primary issue in this appeal was the validity of the notice issued under Section 274 related to the penalty under Section 271(1)(c).

Background of the Case

The appellant, Kushal Karyashala (P) Ltd, faced a penalty imposed by the AO for alleged concealment of income or furnishing inaccurate particulars of income. However, the notice issued did not specify the exact charge under Section 271(1)(c), which led to the dispute.

Legal Proceedings and Tribunal’s Decision

The Tribunal noted that the notice issued under Section 274 read with Section 271(1)(c) was ambiguous and did not clearly specify whether the penalty was for concealment of particulars of income or for furnishing inaccurate particulars of income. Citing the jurisdictional High Court’s decision in similar cases and following the precedents set by the Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory and subsequent cases, the Tribunal held that such ambiguity renders the penalty notice defective and invalid.

Ruling of the Tribunal

The Tribunal directed the AO to delete the penalty levied under Section 271(1)(c), thereby allowing the appeal of Kushal Karyashala (P) Ltd. The decision emphasizes the importance of clarity in statutory notices and reinforces the taxpayer’s right to a fair procedure.

Implications of the Tribunal’s Decision

This ruling is significant as it protects taxpayers from penalties imposed based on defective notices, ensuring that tax authorities adhere strictly to procedural requirements laid down by law. It serves as a precedent for similar cases, providing relief to taxpayers facing penalties due to procedural errors in notices.

Conclusion

The ITAT’s decision in the case of Kushal Karyashala (P) Ltd vs. ACIT highlights the critical role of precise and clear communication from tax authorities when levying penalties and the judiciary’s role in upholding the principles of natural justice and procedural fairness.

Kushal Karyashala (P) Ltd vs. ACIT Circle-14(2) – ITA 6125/DEL/2019