Penalty 271(1)(c) Non-deletion of few words not invalidated notice when relevant clause was duly ticked-ITAT

Penalty 271(1)(c) Non-deletion of few words not invalidated notice or caused any prejudice to the assessee when relevant clause was duly ticked-ITAT 

ABCAUS Case Law Citation:
ABCAUS 1229 (2017) (05) ITAT

The Grievance:
The appellant assessee was aggrieved by the order passed by the CIT(A) qua confirmation of penalty u/s 271(1)(c) of Income Tax Act, 1961 (‘the Act’).

Assessment Year : 2006-07
Date/Month of Pronouncement: May, 2017

Brief Facts of the Case:
The appellant assessee was a limited company which was assessed u/s 143(3) wherein disallowances were made regarding depreciation claimed u/s 32 & for interest u/s 43B of the Act. Thereafter, the Assessing Officer (‘AO’) initiated penalty proceedings for furnishing of inaccurate particulars of income by issuance of notice u/s 274 read with Section 271(1)(c) of the Act.

Finally, the AO imposed the penalty of which was contested without any success before the CIT(A).

Aggrieved, the assessee was in appeal before the Tribunal.

Contentions of the appellant assessee:
The Assessee raised additional ground of appeal assailing the imposition of penalty on legal grounds by contending that the notice issued u/s 274 was defective as only a tick-mark was placed against the clause ‘have concealed the particulars of your income or furnished inaccurate particulars of such income’ without deleting the appropriate words which vitiates the penalty proceedings. Reliance was placed on the judgments of Apex Court in the case of CIT Vs. SSA’S Emerald Meadows & Hon’ble Karnataka High Court in CIT Vs. Manjunatha Cotton & Ginning Factory

Contention of the Respondent Revenue:
The Department placed reliance on Section 292B and contended that mere defect in the notice do not vitiates the penalty proceedings and no prejudice was caused to the assessee by non deletion of few words. The assessee was very well knew the grounds for which he was being penalized and the AO with due application of mind initiated penalty proceedings in quantum assessment for furnishing of inaccurate particulars of income and finally levied the penalty on the same ground. Moreover, the assessee actively contested the penalty proceedings before AO and therefore, the legal grounds, being only hyper-technical in nature, did not carry much weight.

Observations made by the Tribunal:
The ITAT observed that a perusal of quantum order revealed that the penalty was initiated for furnishing of inaccurate particulars and finally the same was levied on the same ground. It was noticed that notice u/s 274 was duly served on the assessee and the relevant clause of the standard printed form was duly ticked by the AO which showed due application of mind qua penalty proceedings.

The Tribunal opined that mere non-deletion of few words, on the facts of the case, had not caused any prejudiced to the assessee particularly when the penalty proceedings were actively contested by him before the AO. It was observed that the assessee, at all times, was aware of the grounds for which he was being penalized.

It was observed that the provisions of Section 292B also cures minor defect in the notice provided such notice in substance and effect was in conformity with the intent and purpose of the act. On overall facts and circumstances, the ITAT found that such condition was fulfilled in the instant case.

The Tribunal found that the revenue’s Special Leave Petition (SLP) was dismissed by the Apex court in the case relied by the assessee which in turn, relied upon the judgment rendered in CIT Vs. Manjunatha Cotton & Ginning Factory. However after perusing the ratio of the judgment rendered in CIT Vs. Manjunatha Cotton & Ginning Factory the ITAT observed that the assessee’s appeal was allowed by the Hon’ble High court after considering the multiple factors and not solely on the basis of defect in notice u/s 274.

Therefore, the ITAT opined that the penalty could not be deleted merely on the basis of defect pointed out in the notice and therefore, the legal ground raised was rejected.

Held:
The ITAT rejected the legal ground raised by the assessee.