Vinod Oberoi vs. ITO Ward-54(3), New Delhi: Penalty Notice Challenge – ITA 5779/DEL/2019

Vinod Oberoi vs. ITO Ward-54(3), New Delhi: Penalty Notice Challenge – ITA 5779/DEL/2019

Case Number: ITA 5779/DEL/2019

Appellant: Vinod Oberoi, New Delhi

Respondent: ITO Ward-54(3), New Delhi

Assessment Year: 2015-16

Case Filed on: 2019-07-02

Order Type: Final Tribunal Order

Date of Order: 2022-09-20

Pronounced on: 2022-09-20

Introduction

This case involves the appeal filed by Shri Vinod Oberoi against the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, by the Income Tax Officer, Ward-54(3), New Delhi, for the assessment year 2015-16. The penalty was challenged on the grounds of vagueness and improper specification of the charge in the penalty notice.

Background

Shri Vinod Oberoi filed his return of income for the assessment year 2015-16. During the assessment proceedings, discrepancies were noted, and a penalty notice under Section 271(1)(c) was issued on 12 December 2017 and 24 May 2018. The penalty was imposed for either concealment of income or furnishing inaccurate particulars of income. The notice, however, did not specify which limb of Section 271(1)(c) the penalty was being levied under.

Grounds of Appeal

In his appeal, Vinod Oberoi raised the following substantive grounds:

• The penalty notices dated 12 December 2017 and 24 May 2018 are bad in law as they do not specify whether the penalty is levied for concealment of income or for furnishing inaccurate particulars of income.
• The order of the CIT(A), reducing the penalty to 100% (Rs.20,366) from 200% (Rs.40,730) levied by the AO under Section 271(1)(c), is bad in law and on facts. The appellant argued that there was neither any concealment of particulars of income nor furnishing of inaccurate particulars of income.
• The penalty proceedings are distinct from the assessment proceedings and must stand on their own.
• The appellant contended that the case involved a bona fide and inadvertent omission, which does not imply guilt of either furnishing inaccurate particulars or attempting to conceal income.
• The appellant voluntarily corrected the mistake by offering the correct turnover and income for assessment before any show cause notice was issued.

Tribunal’s Findings

In its order, the Tribunal observed that the penalty notice issued under Section 274 read with Section 271(1)(c) was stereotyped and did not specify any limb or charge for which the notice was issued, i.e., either for concealment of particulars of income or furnishing of inaccurate particulars of such income. This was deemed a significant defect, rendering the notice invalid.

The Tribunal relied on the judgment of the Hon’ble Bombay High Court (Full Bench at Goa) in the case of Mr. Mohd. Farhan A. Shaikh vs. ACIT [434 ITR (1)], where it was held that an omnibus notice suffers from the vice of vagueness and does not satisfy the statutory requirements. The notice must be precise and inform the assessee of the grounds of the penalty proceedings.

Furthermore, the Hon’ble jurisdictional High Court in the case of PCIT Vs. Sahara India Life Insurance Co. Ltd. [432 ITR 84] held that a penalty notice is bad in law if it does not specify under which limb of Section 271(1)(c) the penalty proceedings were initiated.

Conclusion

Considering the above legal precedents, the Tribunal held that the penalty notice issued under Section 271(1)(c) was bad in law. Consequently, the penalty order passed under Section 271(1)(c) for the assessment year 2015-16 was quashed. Additionally, even on merits, the penalty was not leviable since the addition made by the Assessing Officer was on account of an ad-hoc estimation of net profit on the un-reconciled turnover as per books and Form 26AS. The addition of Rs.98,863/- was made on an ad-hoc basis and did not conclusively prove concealment of income or furnishing of inaccurate particulars of income.

The appeal filed by Shri Vinod Oberoi was allowed.

Order Pronounced

The order was pronounced in the open court on 20 September 2022.

Members:

• G. S. PANNU, PRESIDENT
• C. N. PRASAD, JUDICIAL MEMBER

By Order

Assistant Registrar, ITAT, New Delhi.

Vinod Oberoi vs. ITO Ward-54(3), New Delhi: Penalty Notice Challenge – ITA 5779/DEL/2019