Section 274 provides for the procedure to be followed while imposing the penalty – Non-compliance make the notice defective

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Section 274 provides for the procedure to be followed while imposing the penalty – Non-compliance make the notice defective

 

Section 274 provides for the procedure to be followed while imposing the penalty. The non-compliance makes the notice defective and may result in quashing the penalty proceeding.

Various courts have time and again held that if AO failed to classify the exact nature of default for invoking the Penal provision, the order may be considered as arbitrary, unwarranted, and perverse.

Here was one case on the issue as under:

Anchal Towers Pvt. Ltd (Appellant) Vs. ITO, Ward-4(3), Kolkata (Repondent).

In this case, assessee submitted that since the notice issued u/s 274 r.w.s. 271(1)(c) of the Act was defective, therefore, the penalty proceedings deserves to be held as invalid and void ab initio. Ld. Counsel for the assessee also submitted that the issue stands squarely covered by the decision of Hon’ble Jurisdictional High Court in the case of PCIT vs. Brijendra Kumar Poddar, IA No:GA/2/2018 dated 23.11.2021.

The grounds before ITAT by the appellant were as under:

  1. “1. FOR THAT the Ld. Commissioner of Income Tax (Appeals)-2, Kolkata failed to appreciate that none of the conditions precedent required to be satisfied for the assumption of jurisdiction u/s. 274 read with s. 271(l)(c) of the Income Tax Act, 1961 existed and/or have been complied with and/or fulfilled in the instant case by the Ld. Income Tax Officer, Ward 4(3), Kolkata and his specious action in upholding the impugned order dated 30-06-2017 imposing penalty in the sum of Rs. 1,91,580/- in pursuance to notice dated 14-12-2016 is therefore ab initio void, ultra vires and ex-facie null in law.
  1. FOR THAT the Ld. Commissioner of Income Tax (Appeals)-2, Kolkata did not consider that the impugned notice dated 14-12-2016 issued u/s. 274 read with s. 271(l)(c) of the Income Tax Act, 1961 issued by the Ld. Income Tax Officer, Ward 4(3), Kolkata failed to classify the exact nature of default for invoking the mischief thereof and the impugned action in that respect is altogether arbitrary, unwarranted, and perverse.
  1. FOR THAT the Ld. Commissioner of Income Tax (Appeals)-2, Kolkata acted unlawfully in upholding the impugned order imposing penalty of Rs. 1,91,580/- by the Ld. Income Tax Officer, Ward 4(3), Kolkata solely and exclusively relying upon the findings in the quantum proceedings by simply adopting the principle of res judicata without adducing on record any independent reasons in support therefor and such adverse finding de hors any compelling basis is altogether unfounded, un justified, and untenable in law.
  1. FOR THAT the Ld. Commissioner of Income Tax (Appeals)-2, Kolkata was wholly in error in upholding the impugned order imposing penalty of Rs. 1,91,580/- passed by the Ld. Income Tax Officer, Ward 4(3), Kolkata without considering the facts of the present case in light of the Explanation 1 appended to the provisions of s. 271(l)(c) of the Income Tax Act, 1961 and the specious findings reached on such extraneous considerations not germane to the issue is totally illegal, illegitimate, and infirm in law.”.

ITAT Kolkata held as under:

  1. AO has mentioned both the charges in the notice rather than raising a specific charge on the assessee. Such type of notices where specific charges are not levelled against the assessee, are found to be defective by various Hon’ble Courts.
  1. Since we are bound by the Hon’ble Jurisdictional High Court of Calcutta, we find that in the case of Brijendra Kumar Poddar (supra), Hon’ble Court dealing with the similar facts and the issues, confirmed the order of the Tribunal deciding against the Revenue taking note of the judgment of Hon’ble Bombay High Court in the case of CIT vs. Samson Perinchery reported in [2017] 392 ITR 4 (Bombay) dated 05.01.2017 laying down the ratio that if the show cause notice issued u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income, such show cause notice are defective.
  1. We, therefore, respectfully following the ratio laid down by the Hon’ble Jurisdictional High Court, are inclined to hold that since the notice issued u/s 274 of the Act is defective, penalty proceedings are invalid and bad in law and liable to be quashed. In the result, legal grounds raised by the assessee challenging the levy of penalty u/s 271(1)(c) of the Act are allowed.

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