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Defect in Notice that creates Jurisdiction is an Incurable Defect: ITAT

In Sahara India Commercial Corporation Ltd. vs DCIT, the assessee filed the return of wealth on 23/11/2009 and subsequently having realized that inadvertently they have omitted to add the taxable assets of the partnership firms in which the assessee company was a partner, filed a revised computation of wealth on 20/12/2010 showing the net wealth at Rs.36,90,03,980/-. Assessment was complete on the total net wealth of Rs. Rs.36,90,03,980/-. However the AO proceeded to levy penalty under section 18 (1) (c) of the Act for concealment of income,

The Appellate Tribunal found that no doubt the assessment order reads that the penalty proceedings were initiated for furnishing inaccurate particulars of wealth and also the penalty order states that the penalty was imposed for furnishing inaccurate particulars. However, the notice issued under section 18 (1) (c) of the Act on 29/12/2010 shows that the said notice was issued for concealment of the particulars as well as furnishing  inaccurate particulars of income.

The Tribunal referred to CIT vs Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Kar)., which held that once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable.

In view of the above decisions, the Tribunal of the considered opinion that the defect in the notice that creates jurisdiction is an incurable defect and vitiates the proceedings. 

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