ITAT deletes Penalty since Notice u/s 274 was issued without Application of Mind [Read Order]

The Income Tax Appellate Tribunal, Mumbai bench, recently deleted the penalty imposed under Section 271(1) (c) of the Income Tax Act by finding that the Notice under section 274 was issued due to non- application of mind.

The bench including Judicial Member C.N. Prasad and Accountant Member Rajesh Kumar, was hearing an appeal filed by the assessee against order of CIT (A) Mumbai wherein the authority sustained the penalty on the addition made on account of change in method of accounting on valuation of inventories.

During the course of hearing, the counsel for the assessee submitted that the initiation of penalty proceedings u/s. 271(1) (c) of the Act was improper and also argued that AO was ignorant about the charges for which the penalty is initiated i.e. either concealment of income or furnishing inaccurate particulars.

The counsel for assessee, before the Tribunal, has placed reliance on various decisions of tribunal and on counterpart the revenue supported the decision of levying penalty on assessee by CIT (A).

The Tribunal bench keenly observed the notice issued u/s. 274 read with section 271(1)(c) of the Act, Assessment Order and the penalty orders.

While observing the notice issued u/s. 271(1)(c) of the Act for initiation of proceedings, the tribunal bench found that AO didn’t specify the charge for which he is proposing to initiate penalty proceedings and relied on the decision of coordinate bench of High Court in the case of CIT v. Samson Perinchery.

While upholding the decision of above mentioned case law the bench held that the notice issued by the AO under section 274 r.w.s. 271(1)(c) of the Act is passed without application of mind and therefore on this account itself the penalty imposed under section 271(1)(c) is liable to be deleted.