INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty under section 271(1)(c) - Defective notice - Addition towards loss on sale of cars - Charge of penalty was not properly set out in notice

AO passed assessment order under section 144 making an addition towards loss on sale of car which was claimed by the assessee by debiting his Profit and loss account, but not allowed by AO for the reason of no separate allowability of such loss after the advent of the scheme of block of assets. Thereafter, penalty was imposed under section 271(1)(c) with reference to this addition. Assessee contended that AO did not strike off the irrelevant limb in the notice issued under section 274 read with section 271(1)(c). Held: It is well settled law that where the charge is not properly set out in the notice under section 274, viz., both the limbs stand therein without striking off of the inapplicable limb, but the penalty has, in fact, been levied for one of the two, such a penalty order gets vitiated. Turning to the facts of the extant cases, it was found that AO did not strike out the irrelevant limb therefrom. Following the judgment of Bombay High Court in case of Pr. CIT v. Golden Peace Hotels and Resorts (P.) Ltd. (2021) 124 Taxmann.com 248 (Bom-HC) : 2020 TaxPub(DT) 797 (Bom-HC), AO was directed to delete the penalty.

Followed:National Thermal Power Company Limited v. CIT (1998) 229 ITR 383 (SC) : 1998 TaxPub(DT) 342 (SC), Mohd. Farhan A. Shaikh v. Dy. CIT (2021) 125 Taxmann.com 253 (Bom-HC) : 2021 TaxPub(DT) 1503 (Bom-HC), Pr. CIT (Central) v. Golden Peace Hotels And Resorts Pvt. Ltd. (2021) 124 Taxmann.com 248 (Bom-HC) : 2020 TaxPub(DT) 797 (Bom-HC) and Pr. CIT (Central) v. Golden Peace Hotels & Resorts Pvt. Ltd. (2021) 124 Taxmann.com 249 (SC) : 2021 TaxPub(DT) 1240 (SC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10 & 2011-12

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