Penalty Proceedings without Application of Mind by Assessing Officer is Invalid: ITAT [Read Order]

The Cuttack bench of Income Tax Appellate Tribunal (ITAT) has recently ruled that penalty proceeding initiated without the application of mind by the Assessing Officer is invalid.

In the present case Assessee is an individual Mr.T.Biswanath Patro filed his return of income for the relevant assessment year.

During the assessment period the Assessing Officer (AO) has issued a notice under section 274/271(1)(c) of the Income Tax Act 1961 and penalty proceedings were initiated for furnishing inaccurate particulars of income or concealment of particulars of income and also imposed penalty of Rs. 29,09,417.

Thereafter, the Assessee approached the CIT(A) on appeal and counsel for the Assessee advocate D.K.Sheth submitted that according to the order of the Supreme Court, Omission by the AO to explicitly specify in the penalty notice as to whether penalty proceedings are being initiated for furnishing of inaccurate particulars or for concealment of income makes the penalty order liable for cancellation. Hence penalty of Rs.29,09,417 imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act is, therefore, liable to be cancelled.

After analyzing the facts of the case the authority granted relief to the Assessee by deleting the penalty imposed by the AO. Aggrieved by the order of the authority the Revenue carried the matter before the Tribunal on appeal.

While perusing the available material facts on records, the tribunal bench including Judicial Member Pavan Kumar Gadale and Accountant Member N.S.Saini rejected observed that “the notice issued under section 271(1)(c) of the Act apparently goes to prove that the Assessing Officer initiated the penalty proceedings by issuing the notice under section 274/271(1)(c) of the Income Tax Act without specifying whether the assessee has concealed ”particulars of income” or assessee has furnished “inaccurate particulars of income”, so as to provide adequate opportunity to the assessee to explain the show cause notice. Rather notice in this case has been issued in a stereotyped manner without applying any mind which is bad in law, hence the same is not a valid notice sufficient to impose penalty under section 271(1)(c) of the Act”.

While dismissing the appeal filed by the Revenue, the bench further observed that in the present case the AO has issued notice under section 274 r.w.s. 271(1)(c) of the Income Tax Act without striking off the irrelevant words, the penalty proceedings show a non-application of mind by the Assessing Officer and is, thus, unsustainable”.