Application of punishment. 271(1)(c) without mentioning the part that is likely to be set aside: ITAT Delhi

ACIT and Tata Teleservices Ltd (ITAT Delhi)

ITAT Delhi held that penalty could not be levied under section 271(1)(c) of the Income Tax Act as the notification did not specify which criminal proceedings had been initiated. Thus, the penalty is accrued to you. 271(1)(c) deleted.

Facts- The only issue to be decided in the assessee’s cross-appeal is whether penalty of concealment under Section 271(1)(c) of the Act can be imposed if the AO fails to omit the improper portion from the penalty notice as follows. Whether the assessee has concealed income information or provided false income information.

Solution- PCIT and Sahara India Life Insurance Co. Ltd, the Judicial Supreme Court held that the notice issued by the AO would be unlawful if it did not specify which part of section 271(1)(c) was covered. A criminal case has been initiated for hiding income information or providing incorrect income information.

When the criminal notice in the report dated 24.12.2009 is examined, ld. The AO has omitted the irrelevant part which mentions the specific offense committed by the assessee. That’s why we direct ld. The AO will delete the penalty imposed under Section 271(1)(c) of the Act. Accordingly, the grounds given by the assessee in his cross objection are allowed.

FULL TEXT OF ITAT DELHI ORDER

1. The appeal in ITA No.2759/Del/2024 for AY 2007-08 was filed by the National Faceless Appeals Center (NFAC), Delhi (hereinafter ^„ NFAC’, in short, in the Appeal No. ITBA/NFAC/S/250/2023-24/1063789663(1) dated 31.03.2024, against the order of assessment adopted in Article 271(1)(C) of the Revenue Code, Tax Act, 1961 (hereinafter hereinafter referred to as) ^„Act dated 30.03.2018 by the Assessing Officer, ACIT, Circle-25(1), Delhi (hereinafter referred to as) ^„ID. AO’).

2. The only issue to be decided in the assessee’s cross appeal is the ld. The AO has not omitted the improper part in the penalty notice as to whether the assessee concealed income information or gave false income information.

3. We listened to the competitors’ presentations and reviewed the materials available on record. We find ld. AR has recorded the show cause notice issued for penalty No. 274 read with Section 271(1)(c) of the Act dated 24.12.2009; died here. The AO specifically did not mention the offense committed by the assessee by omitting the irrelevant part, namely, whether the assessee had concealed the income details or given false income details. The quick question that now arises is whether failure to delete the irrelevant part in the penalty notice by not specifically mentioning the offense committed by the assessee would be fatal to the criminal case. This issue no longer has a clear integrity considering the Full Bench Decision of the Hon’ble Bombay High Court in the Mohd case. Farhan A Shaikh vs DCIT reported in 434 ITR 1 (Bom)(FB) dated 11.3.2021. The relevant part of the decision in question is reproduced below: –

“Question 3: What is the impact of the decision of the Supreme Court in Dilip N. Shroff Case (supra) on non-implementation of notice if irrelevant portions of print advertisements are not deleted?

187 In Dilip N. Shroff’s case (supra), for the Supreme Court, it is of some significance that “the standard used by the assessing officer in issuing a notice is in Pro-forma, notwithstanding the same presumptions that improper words and paragraphs are improper”. will be erased, but the same was not done.” Later, in the case of Dilip N. Shroff (supra), it was felt that, looking at the facts, the assessing officer was not sure whether he was acting on the basis that the assessee had concealed his income or furnished false information.

188. In this context, we may respectfully observe that the violation of a necessary condition or requirement for a communication to be a valid communication is, without further evidence, fatal. However, even if there is no notice in the notification regarding the deletion of the invalid part, it is in the interest of fairness and justice that the notification be final. There should be no room for ambiguity. Therefore, Dilip N. Shroff Case (supra) disapproves of the routine, ritualistic practice of publishing multi-purpose demonstrative notices. This practice certainly betrays a lack of application of reason. And therefore, a violation of a mandatory procedure that leads to criminal consequences presupposes or implies bias.

189. In the Sudhir Kumar Singh case, the Supreme Court outlined the principles of prejudice. One of the principles is: “Where procedural and/or substantive provisions of law incorporate principles of natural justice, their violation is per se It does not result in the invalidity of the orders given. Here again, the plaintiff must be harmed, “except in the case of a mandatory legal provision.” It is intended not only for individual interests but also for the public good.”

190. Here, Article 271(1)(c) is such a provision. This provision, which has grave consequences even though it is commercial, is mandatory and does not tolerate any slighting or dilution. For further precedent support we may refer to Rajesh Kumar v. CIT (2007) 27 SCC 181 ; where Apex Court, State of Orissa v. Dr. He cited with approval his earlier decision in the case of Binapani Dei AIR 1967 SC 1269. Accordingly, when legal or adverse consequences arise due to the action of a legal authority, the principles of natural justice must be followed. In such a case, compliance with the principles of natural justice will be implied, although there is no express provision to this effect. If a law is contrary to the principles of natural justice, it can also be considered ultra vires under Article 14 of the Constitution.

191. In conclusion, we hold that the Dilip N. Shroff Case (supra) considers multi-purpose demonstrative notices to be a betrayal of lack of reason and specifically disapproves of the practice of publishing notices in printed form without deleting or crossing out the text in the text. parts of this general notice that are not applicable.

Solution:

Thus, we responded to the reference in the way we needed; We therefore direct the Registry to submit these two Tax Appeals to the relevant Divisional Board for further decision.”

4. PCIT vs Sahara India Life Insurance Co. reported in 432 ITR 84(Del). A similar view was taken by the Supreme Judicial Court in the Ltd case; here the case is framed as follows:-

“21. The respondent challenged the upholding of the sentence under Section 271(1)(c) of the Act passed by the ITAT. This follows the decision of the Karnataka High Court in the case of CIT v. Manjunatha Cotton and Ginning Mill. (2013) 35 taxmann.com 250/218 Tax Officer 423/359 ITR 565 and observed that the notification issued by the AO would be unlawful if it did not specify under which section of Article 271(1)(c) the criminal proceedings were initiated, i.e. whether it was initiated for concealment of income particulars or for furnishing false information. income details. The Karnataka High Court had followed the above decision in its subsequent judgment in the Emerald Meadows case of CIT v. SSA. (2016) 73 taxmann.com 241, The appeal was dismissed by the Supreme Court of India in SLP order No. 11485 of 2016 vide its order dated 5 August 2016.

22. In this matter too, this Court has not found any error made by the ITAT. No significant legal issues arise.

23. Accordingly, the objections are dismissed.”

5. In the concrete case, when the criminal warning in the report dated 24.12.2009 is examined, ld. The AO has omitted the irrelevant part which mentions the specific offense committed by the assessee. The ratio laid down in the Supreme Court decision cited above is directly applicable to the facts of the present case before us. That’s why we direct ld. The AO will delete the penalty imposed under Section 271(1)(c) of the Act. Accordingly, the grounds given by the assessee in his cross objection are allowed.

6. Considering the said decision on cross-objection of the assessee, the grounds given by the revenue in its main objection are academic in nature.

7. In the result, the revenue objection is rejected and the assessee’s cross objection is allowed.

The decision was announced in open court on 11/10/2024.