Penalty Proceedings Vitiated Due to Defective Show-Cause Notice: ITAT

Penalty Proceedings Vitiated Due to Defective Show-Cause Notice: ITAT

The assessee faced a penalty under Section 271(1)(c) for AY 2012-13 for allegedly furnishing inaccurate particulars of income. The penalty was sustained by NFAC.

In appeal before the ITAT, the assessee argued that the penalty notice failed to specify the precise limb, concealment, or furnishing of inaccurate particulars, rendering the penalty void as per binding High Court rulings.

Issue Raised: When the Assessing Officer’s show-cause notice does not clearly state the specific charge, concealment of income or furnishing of inaccurate particulars, is it still possible to impose a penalty under Section 271(1)(c)?

ITAT’s Decision: The ITAT allowed the assessee’s appeal, holding that the penalty notices issued under Section 271(1)(c) read with Section 274 were defective, as they failed to specify the exact charge, whether the penalty was for concealment of income or furnishing of inaccurate particulars. Relying on the High Court rulings in PCIT v. Sahara India Life Insurance Co. Ltd. and PCIT v. Gopal Kumar Goyal, the Tribunal concluded that such non-specification vitiates the entire penalty proceedings.

Thus, the penalty was quashed, and all other grounds raised on merits were rendered academic.

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