Facts of the Case

The Revenue filed an appeal under Section 260A of the Income-tax Act, 1961 challenging the common order dated 08.02.2023 passed by the Income Tax Appellate Tribunal in ITA No. 1441/Del/2019 for Assessment Years 2007-08 and 2008-09. The ITAT had allowed the assessee’s appeal and deleted penalties imposed under Section 271(1)(c).

The penalty proceedings were initiated by the Assessing Officer through a printed statutory notice which did not strike off the inapplicable portion and failed to specify whether the penalty was proposed for concealment of income or for furnishing inaccurate particulars of income.

Issues Involved

Whether a penalty notice issued under Section 271(1)(c) without specifying the exact limb of the provision is valid in law, and whether deletion of penalty by the ITAT raised any substantial question of law.

Appellant’s Arguments

The Revenue contended that the ITAT erred in deleting the penalty merely on a technical defect in the notice and that the assessment records clearly reflected the basis for initiation of penalty proceedings. It was argued that failure to strike off irrelevant portions of the printed notice should not invalidate the penalty.

Respondent’s Arguments

The assessee submitted that the issue was no longer res integra and stood conclusively settled by binding decisions of the Delhi High Court following the Karnataka High Court judgment in CIT vs. Manjunatha Cotton & Ginning Factory and the Supreme Court’s dismissal of SLP in SSA’s Emerald Meadows. It was argued that a vague notice which does not specify the charge violates principles of natural justice and renders the entire penalty proceedings void.

Court Order / Findings

The Delhi High Court recorded the fair concession of the Revenue that the issue involved in the present appeal was covered by earlier judgments of the Court, including Principal Commissioner of Income Tax vs. Sahara India Life Insurance Co. Ltd. and Pr. Commissioner of Income Tax vs. Corteva Agriscience Pvt. Ltd.

The Court reiterated that Section 271(1)(c) contains two distinct and mutually exclusive limbs and that the assessee must be informed with clarity as to the precise charge. A notice which does not specify whether the allegation is concealment of income or furnishing inaccurate particulars is vague and invalid in law.

Following settled precedent, the Court held that the ITAT was correct in deleting the penalty and that no substantial question of law arose for consideration.

Important Clarification

The Court clarified that issuance of a valid and unambiguous notice is a sine qua non for initiation of penalty proceedings under Section 271(1)(c). A printed notice without striking off the irrelevant limb fails to satisfy the statutory requirement and vitiates the penalty proceedings.

Final Outcome

The appeal filed by the Revenue was dismissed. The Delhi High Court upheld the order of the Income Tax Appellate Tribunal deleting the penalty imposed under Section 271(1)(c) for Assessment Years 2007-08 and 2008-09 and decided the matter in favour of King Buildcon Pvt. Ltd. and against the Revenue.

Link to download source- https://www.mytaxexpert.co.in/uploads/1769506807_PR.COMMISSIONEROFINCOMETAX4VsKINGBUILDCONPVT.LTD.pdf

 

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