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2022 (5) TMI 734 - AT - Income TaxPenalty u/s 271(1)(c) - defective notice u/s 274 - no specific charge towards either concealing the particulars of income or furnishing of inaccurate particulars of income was made - HELD THAT:- Where the charge is not properly set out in the notice u/s 274, viz., both the limbs stand therein without striking off the inapplicable limb, the penalty order gets vitiated. Turning to the facts of the extant case, we find from the notice u/s 274 of the Act that the AO retained both the limbs, whereas penalty was imposed only with reference to one of them. Respectfully following the above Full Bench judgment of the Hon’ble jurisdictional High Court, [2021 (3) TMI 608 - BOMBAY HIGH COURT] we overturn the impugned order on this legal issue and direct to delete the penalty to the extent imposed by the AO. Enhancement of penalty directed by the ld. CIT(A) - It is clear from the mandate of section 251(1)(b), that CIT(A) has been conferred with a power to enhance the penalty already imposed by AO. Once section 251(1)(b) empowers CIT(A) to enhance the penalty in unambiguous terms, no fetters can be brought in to check such a power by a claim that CIT(A) cannot enhance the penalty without making enhancement in the income in the quantum appeal. Having found, in principle, that CIT(A) is empowered to enhance the penalty, now we turn to the factual panorama of the case for ascertaining if the penalty was rightly directed to be enhanced. At this stage, it is relevant to mention that the AO initiated penalty without striking out the irrelevant limb of section 271(1)(c), which we have held supra, has the consequence of vitiating the penalty order. Once the penalty order itself does not stand because of wrong issuance of notice u/s.274, the power of enhancement of penalty conferred by section 251(1)(b) automatically becomes meaningless because this provision talks of “vary it so as to enhance the penalty.” Varying the penalty for enhancement pre-supposes the existence of some valid penalty which is subject to variation. If the penalty ceases to exist in entirety, it cannot be varied so as to make enhancement. In view of the fact that the penalty imposed by the AO has been held above to be vitiated, there can be no question of any enhancement thereto. We, therefore, hold that the ld. CIT(A) was not justified in confirming and further directing to enhance the penalty imposed by the AO u/s.271(1)(c) of the Act. Assessee appeal allowed.
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