OMNIBUS NOTICE IS VAGUE WHEN RELEVANT PORTION IS NOT CONVEYED CLEARLY AND IRRELEVANT PORTION ALSO REMAIN IN NOTICE- THIS RULE APPLY TO ALL PROCEEDINGS INCLUDING NOTICE U.S. 148

[DEV KUMAR KOTHARI]

Recent article about notice u.s.148

Notices u.s. 148 issued after 31.03.2021 in old formats and not in accordance with new provisions for reassessment – preliminary objections can be made. An Article By: - DEV KUMAR KOTHARI  July 28, 2021

Recent and old judgments about vague notice u.s. 271

Judgments in relation to penalty proceeding u.s. 271 rws 271.1.c  when charge was not clear as notice contained both aspects:

PR. COMMISSIONER OF INCOME TAX (CENTRAL) VERSUS M/S. GOLDEN PEACE HOTELS AND RESORTS PVT. LTD. [2021 (3) TMI 195 - SC ORDER]

DILIP N. SHROFF VERSUS JOINT COMMISSIONER OF INCOME-TAX AND ANOTHER [2007 (5) TMI 198 - SUPREME COURT]

COMMISSIONER OF INCOME TAX & ANR. VERSUS M/S SSA'S EMERALD MEADOWS [2016 (8) TMI 1145 - SC ORDER] 

DILIP N. SHROFF VERSUS JOINT COMMISSIONER OF INCOME-TAX AND ANOTHER [2007 (5) TMI 198 - SUPREME COURT]

Some of related judgments of High Courts:

THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) , BENGALURU VERSUS GOLDEN PEACE HOTELS AND RESORTS PVT. LTD. [2020 (2) TMI 333 - BOMBAY HIGH COURT]

COMMISSIONER OF INCOME TAX, BANGALORE AND THE INCOME TAX OFFICER, WARD-6 (3) , BANGALORE VERSUS M/S SSA’S EMERALD MEADOWS [2015 (11) TMI 1620 - KARNATAKA HIGH COURT]

THE PRINICIPAL COMMISSIONER OF INCOME TAX, PANAJI VERSUS  NEW ERA SOVA MINE, NEW ERA VAGLAR MINE AND NEW ERA KELI MINE.  [2019 (7) TMI 1002 - BOMBAY HIGH COURT]

THE COMMISSIONER OF INCOME TAX-11 VERSUS SHRI SAMSON PERINCHERY Income Tax Appeal No. 1154, 953, 1097, 1226 of 2014 [2017 (1) TMI 1292 - BOMBAY HIGH COURT]

 COMMISSIONER OF INCOME TAX AND ANOTHER VERSUS MANJUNATHA COTTON AND GINNING FACTORY, MANJUNATH GINNING AND PRESSING, VEERABHADRAPPA SANGAPPA AND CO., V.S. LAD AND SONS, G.M. EXPORT [2013 (7) TMI 620 - KARNATAKA HIGH COURT ]

MR. MOHD. FARHAN A. SHAIKH VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1 BELGAUM., THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1, BELGAUM. [2021 (3) TMI 608 - BOMBAY HIGH COURT]

On issue of reasons and  satisfaction recorded

2021 (3) TMI 1177 - DELHI HIGH COURT  SYNFONIA TRADELINKS PVT. LTD. VERSUS INCOME TAX OFFICER, WARD-22 (4)  

On reading of above judgments it is clear that 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.  For example when notice for penalty contains both aspects of concealment of income and furnishing of inaccurate particualrs.

In Dilip N. Shroff [2007 (5) TMI 198 - SUPREME COURT] supra it was held that   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.

In case of  Manjunatha (spra)  reference was made  to the Revenue’s practice of sending a printed form where all the grounds mentioned in section 271 are mentioned. According to it, such an omnibus notice does not satisfy the statutory requirement. It is more particularly so because the assessee has the initial burden, and his failure to discharge that burden has serious consequences: He may end up paying a penalty from 100% to 300% of the tax liability. In other words, as section 271 needs to be strictly construed, the notice under section 274 should satisfy the grounds which the assessee has to meet specifically. Otherwise, the principles of natural justice are offended on the grounds of vagueness. As a corollary, no penalty could be imposed based on a defective or vague notice.

In SSA’s Emerald Meadows  tThe Karnataka High Court has held that no notice could be issued under Section 274, read with Section 271(1)(c), of the IT Act, without indicating which particular limb of Section 271(1)(c) was invoked for initiating the penalty proceedings. It has, again, followed Manjuantha.

The Supreme Court dismissed SLP at  the case at the admission stage

Similar view was taken  in  recent case of  GOLDEN PEACE HOTELS AND RESORTS PVT. LTD (supra)  by the High court and the  Supreme Court.

Notice u.s. 148 – for assessment or reassessment:

Recently department has issued vague notices u.s. 148. In this regards readers may refer to recent article by the same learned author  

Notices u.s. 148 issued after 31.03.2021 in old formats and not in accordance with new provisions for reassessment – preliminary objections can be made.

In this article learned author had discussed about vagueness in notice as follows:

From the notice

Brief observations and requests of assessee

I, therefore, propose to assess/ re-assess the income/ loss for the said Assessment Year

What you want to do that is whether you propose to assess or re-assess is not clear , it is also not clear that whether you propose to assess or reassess income or loss. This indicates that while issuing notice  you have not at all considered my ROI in which all prescribed disclosures were made by me and the ROI was processed and no notice u.s. 143.2 was issued, that means assessment was made as per ROI.

Thus the notice issued us 148 is grossly vague because officers has not clearly conveyed whether he want to assess or reassess. This means that he has not at all  tried to find out whether assessee has furnished a ROI and whether he was assessed ( self assessment or by  way of intimation or regular assessment)

The notice is grossly vague about what AO want to do assess or reassess income or loss.

This shows that the notice has been issued without any  application of mind in so far it appears that:

AO has not examined ROI and assessment made earlier.

AO has not examined ROI on record to ascertain whether it was a return of income and / or loss.

AO has not considered  recorded  reasons vis a vis disclosure made in ROI already on record.

The notice says that “this notice is being issued after obtaining the necessary satisfaction of the PCIT,   xxx “.

This satisfaction also appears to be in a mechanical manner and without application of mind. Because the AO has to record reasons and send file to PR. CIT for his approval and satisfaction. When AO himself has not examined ROI and other aspects, as noted above, how Pr. CIT has derived satisfaction is not understandable.

On issue of reopening recorded reasons and satisfaction of Pr. CIT

Refer to judgment in case  SYNFONIA TRADELINKS PVT. LTD.(supra)

In this case issue of reopening of assessment u/s 147  was before the High Court. The aspect of  validity of sanction-order passed u/s 151 was also issue.

  Whether it was a fit case in which sanction should be accorded for issuance of notice under Section 148 of the Act and, thus, triggering the process of reassessment under Section 147?

In this regard the honourable Court observed  inter alia:

1. There is no explanation by the revenue as to why approval of ACIT was taken in the instant case.
2.  a bare perusal of the endorsement would show that there is no application of mind as to whether the information received by the AO had any nexus with the formation of honest belief that the assessee's taxable income had escaped.
3. Court also found  glaring fact s that the ACIT notes that income to the tune of ₹ 27,60,838/- had escaped taxation whereas, in the order recording reasons, the taxable income has been quantified as ₹ 26,93,500/- and   based on the arguments of counsel   the escaped income should be related to unsecured loans and  there is in play a third figure which is ₹ 25,95,277/-.
4.  The order recording reasons and the order granting sanction should speak for themselves. See GORDHANDAS BHANJI. [1951 (11) TMI 17 - SUPREME COURT] and MOHINDER SINGH GILL & ANR. [1977 (12) TMI 138 - SUPREME COURT]

Conclusion:

To be a valid  notice u.s. 148  the notice must be clear, unambiguous as to what the AO want

 To assess or reassess – both are different actions and in many cases one or other may not be applicable at all.

To assess or reassess  income or the assess or reassess loss.

The recording of reasons , satisfaction and approval and issue of  notice must only  be after careful application of mind and not in a mechanical manner.

It would be in fairness of tax administration and to reduce litigation that along with notice us. 148 copy of recorded reasons should be provided  and in reasons issues of proposed additions or disallowances with amount should be mentioned.

The   noticee/ assessee should be allowed reasonable time to furnish objections, if any.

After considering objections if the AO find no reason to proceed for reassessment or assessment he can drop proceeding or by passing a speaking order of rejection of objections can ask assessee to furnish ROI in response to the notice.