ORDER
PER YOGESH KUMAR U.S., JM
This appeal is filed by the assessee against the order dated 26/03/2019 passed by the ld. Commissioner of Income Tax (Appeals)-7, Ghaziabad, hereinafter referred to CIT (Appeals)] for Assessment Year 2009-10.
2. The assessee has raised the following substantive grounds of appeal:-
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"1. That the Ld. CIT(A) erred in law, on facts and in surrounding circumstances in dismissing the appeal in limine, in a cursory and summary manner without discussing the merits of appeal leading to injustice to the hapless appellant.
2. That the Ld. CIT(A) also erred in law in failing to appreciate that no penalty proceedings are liable to be initiated/finalised during the pendency of quantum appeal.
3. That the Ld. CIT(A) also erred in law in failing to appreciate that the penalty is imposable either for concealment of particulars of income or for furnishing of inaccurate particulars of such income and consequently the imposition of impugned penalty for both limbs by Ld. A.O. tantamounts to violation of statutory provisions of section 271 (1 )(c) of I.T. Act.
4. That the Ld. CIT(A) also erred in law in ignoring the fundamental error in impugned assessment order and penalty notice, having no indication as to for which limb, the penalty proceedings are proposed to be initiated.
5. That the Ld. CIT(A) also erred in law, on facts and in surrounding circumstances in failing to consider the issue of condonation of delay with empathically pragmatically, resulting in a meritorious matter being thrown out at the very threshold and cause of justice being defeated.
6. That the Ld. CIT(A) also erred in law in failing to provide adequate opportunity of hearing coupled with opportunity of explaining the so called minor defects so cited in impugned appellate order.
7. That the Ld. CIT(A) also erred in failing to appreciate that mere issuance of notices, without ensuring valid service as per law is nothing but an exercise in futility having no legal sanctity.
8. That without prejudice to above, the appellant will file application for condonation of delay in filing the present appeal at the time of hearing.
9. That the appellant craves leave to modify/amend or add any
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one or more grounds."
3. Brief facts of the case are that, the information has been received that the assessee had deposited cash amounting to Rs. 35,60,000/- to his savings bank account during the Financial Year 2008-09. Notice u/s 148 was issued but the assessee has not apply to notice u/s 148 of the Act. Thereafter notice u/s 142(1) were issued and no compliance was made to the said notices. The said assessment order came to be passed u/s 147/144 of the Act on 26/10/2016, assessing the income of the assessee at Rs. 35,60,000/- and simultaneously notice u/s 271(1)(c) of the Act was also issued. The penalty order came to be passed u/s 271(1)(c) of the Act on 27/04/2017 by imposing penalty of Rs. 11,02,400/-.
4. As against the penalty order dated 27/04/2017, the assessee has preferred an appeal before the CIT(A). Since the appeal before the CIT(A) was filed a delay of 8 months, the appeal of the assessee has been dismissed on the ground of delay in latches. As against the order dated 26/03/2019, the assessee has preferred the present appeal on the grounds mentioned above.
5. There is a delay of 2 months in filing the present appeal, the assessee has pleaded by way of an affidavit for condonation of delay on the ground that the assessee could not file the appeal on time due to prolonged aliment. The assessee has also produced medical certificate to substantiate the said claim. For the reasons stated in the affidavit, we condone the delay in filing the present appeal.
6. We have heard the parties, perused the material on record and gave our thoughtful consideration.
7. It is found that the assessee has filed an appeal before the CIT(A) with a delay of more than 8 months. The assessee has given explanation "that the certified copy u/s 271 (1)(c) for the Assessment Year 2009-10 was received on
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25/01/2018 by the assessee and as appeal application filed on 22/02/2018 is being within the prescribed time as per Income Tax Act, 1961." The Ld. CIT(A) without even calculating the days of delay in filing the appeal, dismissed the appeal in limine. The copy of the penalty order placed on record, which reveals that the certified copy has been issued by the Income Tax Officer, Ward-1(4), Ghaziabad on 25/01/2018. There is no material on record to show that the penalty order has been served on the assessee prior to the said date i.e. 25/01/2018. In the absence of the same, the Ld. CIT(A) ought to have accepted the contention of the assessee and by condoning the delay in filing the appeal and should have decided the appeal on merit. Therefore, we inclined to condone the delay in filing the appeal before the
CIT(A).
8. In so far as merit of the case is concerned, the Ld. Counsel for the assessee vehemently submitted that the penalty notice has been passed u/s 274 of the Act without any specific charge, hence notice issued u/s 274 of the Act and the order passed u/s 271(1)(c) of the Act are illegal and bad in law and without jurisdiction. The Ld. Counsel for the assessee has also relied on various judicial pronouncements in support of his case.
9. Per contra, the Ld. DR submitted that the assessee did not comply the notices issued u/s 271(1) (c) of the Act and the assessee had concealed the particular of his true income therefore, has the penalty has been rightly imposed against the assessee. Further submitted that mere non mentioning of specific charge in the notice issued u/s 274 of the Act will not vitiate the entire penalty proceedings. Therefore, submitted that, the appeal of the assessee deserves to be dismissed.
10. On perusal of the paper book, the notice issued 274 read with Section 271 of the Income Tax Act has been produced at Page No. 1, which is reproduced as under:-
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"
11. On verifying the notice issued u/s 274 read with Section 271 of the Act, it is found that the said notice is stereotype one and the AO has not specified any limb or charge for which the notice was issued i.e. either for concealment of particulars of income or furnishing of inaccurate particulars of such income. It can be seen from the notice issued u/s 274 read with Section 271(1)(c) of the Act, Assessing Officer did not strike off irrelevant limb in the notice specifying the charge for which notice was issued.
12. The identical issue as to whether 'the order of the penalty is sustainable which was initiated by issuing a defective notice without striking off irrelevant limb and without specifying the charge for which notice was issued?' has been decided by the Hon'ble Bombay High Court (full bench at Goa) in the case of Mr. Mohd. Farhan A. Shaikh vs. ACIT [434 ITR (1)] and the Hon'ble High Court held as under:-
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"Question No. l: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(l)(c), does a mere defect in the notice--not striking off the irrelevant matter--vitiate the penalty proceedings?
181. It does. The primary burden ties on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(l)(c), read with section 274 of IT Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings.
Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness.
182. More particularly, a penal provision, even with civil consequences, must be construed strictly. And ambiguity, if any, must be resolved in the affected assessee'sfavour.
183. Therefore, we answer the first question to the effect that Goa Dourado Promotions and other cases have adopted an approach more in consonance with the statutory scheme. That means we must hold that Kaushaiya does not lay down the correct proposition of law.
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Question No.2: Has Kaushaiya failed to discuss the aspect of 'prejudice?
184. Indeed, Kaushaiya did discuss the aspect of prejudice. As we I.T.A.No.1409/Del/2016 have already noted, Kaushaiya noted that the assessment orders already contained the reasons why penalty should be initiated. So, the assessee, stresses Kaushaiya,
"fully knew in detail the exact charge of the Revenue against him".
For Kaushaiya, the statutory notice suffered from neither non- application of mind nor any prejudice. According to it, "the so-called ambiguous wording in the notice [has not] impaired or prejudiced the right of the assessee to a reasonable opportunity of being heard". It went onto observe that for sustaining the piea of natural justice on the ground of absence of opportunity, "it has to be established that prejudice is caused to the concerned person by the procedure followed". Kaushalya doses the discussion by observing that the notice issuing "is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done ",
185. No doubt, there can exist a case where vagueness and ambiguity in the notice can demonstrate non-application of mind by the authority and/or ultimate prejudice to the right of opportunity of hearing contemplated under section 274. So asserts Kaushalya. In fact, for one assessment year, it set aside the penalty proceedings on the grounds of non-application of mind and prejudice.
186. That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or justification, avoids prejudice to the assessee. That is where, we reckon, the reasoning suffers. Kaushalya's insistence that the previous proceedings supply
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justification and cure the defect in penalty proceedings has not met our acceptance.
Question No. 3: What is the effect of the Supreme Court's decision in Dilip N. Shroff on the issue of non-application of mind when the irrelevant portions of the printed notices are not struck off ?
187. In DUip N. Shroff, for the Supreme Court, it is of "some significance that in the standard Pro-forma used by the assessing officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done". Then, Dilip N. Shroff, on facts, has felt that the assessing officer himself was not sure whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars.
188. We may, in this context, respectfully observe that a contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must be precise. It should give no room for I.T.A.No.1409/Del/2016 ambiguity. Therefore, Dilip N. Shroff disapproves of the routine, ritualistic practice of issuing omnibus show-cause notices. That practice certainly betrays nonappiication of mind. And, therefore, the infraction of a mandatory procedure leading to penai consequences assumes or implies prejudice.
189. In Sudhir Kumar Singh, the Supreme Court has encapsulated the principles of prejudice. One of the principles is that "where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to
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invalidity of the orders passed. Here again, prejudice must be caused to the litigant, "except in the case of a mandatory provision of law which is conceived not only in individual interest but also in the public interest".
190. Here, section 271(l)(c) is one such provision. With calamitous, albeit commercial, consequences, the provision is mandatory and brooks no trifling with or dilution. For a further precedential prop, we may refer to Rajesh Kumar v. Commissioner Of Income-Tax[74], in which the Apex Court has quoted with approval its earlier judgment in State of Orissa v. Dr. Binapani Dei[ 75]. According to it, when by reason of action on the part of a statutory authority, civil or evil consequences ensue, principles of natural justice must be followed. In such an event, although no express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue contravenes the principles of natural justice, it may also be held ultra vires Article 14 of the Constitution.
191. As a result, we hold that Dilip N. Shroff treats omnibus show cause notices as betraying non-application of mind and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that generic notice. Conclusion: We have, thus, answered the reference as required by us; so we direct the Registry to place these two Tax Appeals before the Division Bench concerned for further adjudication."
13. As could be seen from the above the Hon'ble Bombay High Court (Full Bench at Goa) in the case of Mr. Mohd. Farhan A. Shaikh v. ACIT [(2021) 434 ITR 1 (Bom)] while dealing with the issue of non-strike off of the irrelevant part in the notice issued u/s.271(l)(c) of the Act, held that assessee must be
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informed of the grounds of the penalty proceedings only through statutory notice and an omnibus notice suffers from the vice of vagueness.
14. Ratio of this full bench decision of the Hon'ble Bombay High Court (Goa) squarely applies to the facts of the Assessee's case as the notice u/s. 274 r.w.s. 271(l)(c) of the Act were issued without striking off the irrelevant portion of the limb and failed to intimate the assessee the relevant limb and charge for which the notices were issued.
15. Thus, by following the above ratio, we are of the opinion that, the penalty order passed u/s 271(1)(c) of the Act by the Assessing Officer and the order of the CIT(A) in confirming the penalty order are erroneous. Accordingly, the penalty order dated 27/04/2017 passed by the A.O for Assessment Year 2009-10 is hereby quashed. Accordingly, Assessee's Grounds of Appeal are allowed.
16. In the result, Appeal filed by the assessee is Allowed. Order pronounced in the Open Court on : 02.12.2022. Sd/- Sd/-
(B. R. R. KUMAR) (YOGESH KUMAR U.S.)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : 02/12/2022
*R.N Sr. PS
Copy forwarded to :
1. Appellant
2. Respondent
3. CIT
4. CIT (Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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