Generic tax notices: ITAT quashes Rs 57 lakh fine on Preity Zinta – Times of India
[ad_1]
MUMBAI: An omnibus (non-specific) notice served by the income tax (I-T) department on actress and film producer Preity Zinta for alleged “concealment of income or furnishing of inaccurate particulars of income” has been held as invalid by the Income Tax Appellate Tribunal (ITAT).
Serving of such a notice under section 271(1)(c) is the first step in initiation of penalty proceedings. Consequently, the Mumbai bench of the tribunal, comprising president P P Bhat and accountant member Shamim Yahya, held that the penalty of Rs 57 lakh will also stand deleted.
In passing its order, the ITAT relied on a full member decision of the Bombay high court and also other judicial decisions. Lately, owing to the scheme of faceless assessment and faceless penalty, the issue of omnibus notices has reared its head again. Many tax practitioners point out that the faceless penalty officers want taxpayers to furnish all documents instead of just those relating to the dispute. The notices are vague, they point out. Thus, this decision will also help the taxpayer community.
The crux of the litigation was a disallowance of bank interest of Rs 1.7 crore taken for production of the film ‘Ishque in Paris’, a project that was commenced during financial year 2011-12 and concluded in 2013-14. Zinta had claimed this interest as a business deduction during the financial year 2013-14. This was denied by the I-T officer who said it pertained to an earlier year. The officer then initiated penalty proceedings for furnishing of inaccurate particulars of income. Zinta contested this action by stating that the expenses were not bogus, there was no concealment of income and details of the project were declared in the I-T return. She had also filed a copy of the term-loan letter from the bank.
The commissioner (appeals) passed an order in favour of the actress, but the I-T department filed an appeal with the ITAT. However, the tax bench frowned on the practice of issuance of omnibus penalty notices by the I-T authorities. “The notice in this case also is an omnibus show-cause notice as it does not strike off or delete the inappropriate, irrelevant, not applicable portions. Such a generic notice betrays a non-application of mind. Hence, the penalty levied pursuant to such a notice is not legally binding in law,” states the order.
Serving of such a notice under section 271(1)(c) is the first step in initiation of penalty proceedings. Consequently, the Mumbai bench of the tribunal, comprising president P P Bhat and accountant member Shamim Yahya, held that the penalty of Rs 57 lakh will also stand deleted.
In passing its order, the ITAT relied on a full member decision of the Bombay high court and also other judicial decisions. Lately, owing to the scheme of faceless assessment and faceless penalty, the issue of omnibus notices has reared its head again. Many tax practitioners point out that the faceless penalty officers want taxpayers to furnish all documents instead of just those relating to the dispute. The notices are vague, they point out. Thus, this decision will also help the taxpayer community.
The crux of the litigation was a disallowance of bank interest of Rs 1.7 crore taken for production of the film ‘Ishque in Paris’, a project that was commenced during financial year 2011-12 and concluded in 2013-14. Zinta had claimed this interest as a business deduction during the financial year 2013-14. This was denied by the I-T officer who said it pertained to an earlier year. The officer then initiated penalty proceedings for furnishing of inaccurate particulars of income. Zinta contested this action by stating that the expenses were not bogus, there was no concealment of income and details of the project were declared in the I-T return. She had also filed a copy of the term-loan letter from the bank.
The commissioner (appeals) passed an order in favour of the actress, but the I-T department filed an appeal with the ITAT. However, the tax bench frowned on the practice of issuance of omnibus penalty notices by the I-T authorities. “The notice in this case also is an omnibus show-cause notice as it does not strike off or delete the inappropriate, irrelevant, not applicable portions. Such a generic notice betrays a non-application of mind. Hence, the penalty levied pursuant to such a notice is not legally binding in law,” states the order.
[ad_2]
Source link
