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2022 (1) TMI 981 - AT - Income TaxPenalty levied on derivative loss - defective notice u/s 274 - CIT-A deleted the addition - Revenue argued though it is a speculative loss, holding that the genuineness of this loss is not in dispute - whether CIT (A) has erred in deleting the penalty ignoring the fact that the speculative loss was due to ‘trading in derivatives’ and wrong claim of it as ‘business loss’ cannot be bonafide because its main business is sugar export & the claim cannot be because of oversight but is an act of commission? - HELD THAT:- Bare perusal of the notice issued u/s 274 read with section 271(1)(c) of the Act, extracted above, in order to initiate the penalty proceedings against the assessee goes to prove that the AO himself was not aware / sure as to whether he is issuing notice to initiate the penalty proceedings either for “concealment of particulars of income” or “furnishing of inaccurate particulars of such income” by the assessee rather issued vague and ambiguous notice by incorporating both the limbs of section 271(1)(c). When the charge is to be framed against any person so as to move the penal provisions against him/her, he/she is required to be specifically made aware of the charges to be leveled against him/her. Following the decisions rendered in the cases of CIT vs. Manjunatha Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT], CIT vs. SSA’s Emerald Meadows and Pr. CIT vs. Sahara India Life Insurance Company Ltd.[2019 (8) TMI 409 - DELHI HIGH COURT], we are of the considered view that when the notice issued by the AO is bad in law being vague and ambiguous having not specified under which limb of section 271(1)(c) of the Act the same has been issued, the penalty proceedings initiated u/s 271(1)(c) are not sustainable. Even otherwise, when returned income/assessed income is made under MAT provisions and thereby made certain additions under normal provisions of the Act, penalty cannot be imposed on the basis of disallowances or additions as has been held by Hon’ble Delhi High Court in case of CIT vs. Nalwa Sons Investments Ltd. [2010 (8) TMI 40 - DELHI HIGH COURT] - Decided against revenue.
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