The Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ), ruled that initiating penalty under Section 271(1)(c) of the Income Tax Ac, 1961 without valid notice is invalid.
The appellant, Vaishali Kamlesh Bavishi, by filing the present appeal, sought to set aside the impugned order passed by the National Faceless Appeal Centre (NFAC) [Commissioner of Income Tax (Appeals), Delhi] (hereinafter referred to as CIT(A)] confirming the penalty levied by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act, 1961 qua the assessment year 2009-10.
On the basis of the assessment framed by the AO under section 143(3) of the Income Tax Act, 1961 making addition of Rs.2 lakhs being the 25% of the bogus purchases made by the assessee to the tune of Rs.11 lakhs which was added to the total income of the assessee under section 69C of the Income Tax Act, penalty proceedings under section 271(1)(c) of the Income Tax Act were initiated. Declining the contentions raised by the assessee, the AO proceeded to levy the penalty of Rs.77,600/- being 100% of the tax sought to be evaded.
Bare perusal of the notice issued in this case by the AO goes to prove that the AO at the time of issuing the notice was not satisfied if he was initiating the penalty against the assessee for concealing particulars of his income or for furnishing inaccurate particulars of such income.
The Bench comprising Prashant Maharishi, Accountant Member and Kuldip Singh, Judicial Member observed that “We are of the considered view that since the AO has failed to initiate the penalty proceedings under section 271(1)(c) of the Income Tax Act by issuing the valid notice, the penalty levied by the AO and confirmed by the CIT(A) is not sustainable in the eyes of law as the assessee has never been informed about the charges framed to initiate the penalty proceedings through statutory notice.”
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