The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the penalty notice issued by the department without mentioning a specific charge must be treated as ‘defective’ for the purpose of section 271(1)(c) of the Income Tax Act.
The Assessing Officer, on the basis of the addition made against the assessee, imposed the penalty.
After considering the facts of the case, the first appellate authority held that the assessee had duly disclosed the loss on the sale of assets at Rs. 61,21,337/-, being part of administrative expenses and this amount was duly appearing in the schedules forming part of profit and loss account for the year under consideration. The accounts are audited by a qualified chartered accountant.
“In presence of these facts, the ld. CIT(A) has not fallen in error while holding that this was not a case of concealment. However, the fact remains that the assessee had made an ineligible claim, for which the bona fide of the assessee stands proved from the fact that as per Form No. 3CD, at item no. 17(a), the auditor has reported that there is no expenditure of capital nature which has been debited to the profit and loss account. Therefore, in our considered opinion, the claim of loss made on the basis of the tax audit report cannot be said to be non-bonafide,” the Tribunal said.
The Tribunal further relied on the decision in CIT vs. Reliance Petro Products Pvt. Ltd, wherein it was held that “mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the Return cannot amount to the inaccurate particulars.
“Moreover, though the assessee is neither an appeal nor in cross objection, the ld. DR could also not rebut the contention of the assessee made before ld. CIT(A) as well as before us in its submissions that the penalty notice itself was defective having not specifying a particular charge – whether concealment of particulars of income or furnishing of inaccurate particulars thereof. We, therefore, do not find any infirmity in the order of the ld. CIT(A) while deleting the impugned penalty,” the Tribunal said.
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