Sec. 271B of Income Tax Act, 1961— Penalty — Since the AO has not struck down the irrelevant portion/fault which is not applicable in the facts and circumstances of the case, the notice reproduced is vague and therefore, bad in law.
Facts: AO noted that the assessee had turnover of Rs. 2,08,57,841/- for the AY 2015-16 (erroneously typed in the penalty order dated 30.11.2018 as AY 2016-17) and, therefore, according to him (AO) the assessee was required to get its accounts audited u/s. 44AB before 30-09-2015 (erroneously typed in the penalty order of the AO as 30-09-2016) and Tax Audit Report by 30-09-2015 ((erroneously typed in the penalty order of the AO as 17-10-2016). According to him, since no TAR was furnished by the assessee by or before the specified date, the AO after issuing penalty notice dated 15-05-2018 for proposing levy of penalty u/s. 271B was pleased to levy penalty of Rs. 1,04,289/- In this background penalty u/ s 271 B @ 0.50% or Rs. 1,50,000/- of the total turnover whichever in less, the gross receipt of the assessee Rs. 2,08,57,841/- and penalty U/s 271 B is levied at Rs. 1,04,289/- with the prior approval of the Joint Commissioner of Income Tax for not obtaining and furnishing audit report before the specified date u/s 44AB. Being aggrieved, assessee preferred an appeal before CIT(A), who was pleased to confirm the same by passing the impugned order. Being aggrieved, assessee went on appeal before Tribunal.
Held, that AO by issuing penalty notice u/s. 271B has not spelt out what was the fault for which the assessee is being proceeded against for levy of penalty. Since the AO has not struck down the irrelevant portion/fault which is not applicable in the facts and circumstances of the case, the notice reproduced is vague and therefore, bad in law as held by the Co-ordinate Bench of the Tribunal in the case of Parkinson Electrical Corprn . The notice proposing penalty should clearly spell out the fault/charge for which the assessee is put on notice, so that he can defend the charge properly. With regard to the tax audit report, it was held that there was reasonable cause for not filing the TAR within due date. Moreover, there has been several mistakes which has crept in the impugned penalty order of the AO, which shows total non- application of mind of necessary facts by the AO. Therefore, from any angle , the penalty levied u/s. 271B cannot be sustained, so it needs to be deleted and we direct the AO to do so. In the result, the appeal of assessee is allowed. - NORTH EASTERN CONSTRUCTIONS V/s ITO -  26 ITCD Online 087 (ITAT-GAUHATI)