Are penalty proceedings vitiated if notice u/s 274 does not strike off irrelevant portion?

IN THE INCOME TAX APPELLATE TRIBUNAL
‘B’ BENCH : BANGALORE
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
AND
SMT. BEENA PILLAI, JUDICIAL MEMBER
IT(TP)A No. 12/Bang/2021
Assessment Year : 2013-14

M/s. Maxim India Integrated
Circuit Design Pvt. Ltd.,
4th Floor, Tower B,
Commercio@Mantri,
Survey No. 51/2, 51/3, 51/4,
Devarabesanahalli,
Kariyammana Agrahara,
Varthur Hobli,
Bangalore.
PAN: AACCM9437E

vs

The Deputy
Commissioner of
Income Tax,
Circle (4) (2),
Bangalore.

Assessee by : Shri Padamchand Khincha, CA
Revenue by :
Shri Priyadarshi Mishra,
Addl. CIT (DR)
Date of Hearing : 06-09-2021
Date of Pronouncement : 20-10-2021
ORDER
 

At the outset Ld.AR submitted that the present appeal is filed with the delay of 922 days.

2. Referring to the affidavit and the application for condition of the filed by assessee, the Ld.AR submitted that originally appeal was filed before the Tribunal in IT(TP)A No.1573/B/2017 against the final assessment order passed by the Ld.AO dated 12.05.2017. He submitted that, the addition made under section 40 (a) (i) of the Act was filed as an additional ground before this Tribunal. However the Tribunal while passing order dated 02.11.2020 declined to admit the additional ground as the addition did not arise out of the final assessment order passed by the Ld.AO. This Tribunal observed that the addition was made in a separate order passed under section 154 of the Act by the Ld.AO, against which assessee had not preferred any.

3. Subsequently the Ld.AO found that disallowance was not made towards the lease line charges and payroll processing fee, despite the directions of DRP. The Ld.AO was of the opinion that this was a mistake apparent order. Accordingly rectification order under section 154 was passed on 19.05.2017, making the addition as per the directions by of DRP.

4. We know that there is service agreement entered into by assessee with its AE as per which payments made to assessee. The authorities below have not verified the agreement vis-à-vis the provisions of the Act and the DTAA. In the interest of justice, it is necessary to remand this issue back to Ld.AO to carry out necessary verifications for ascertaining the tax ability of the receipt in the hands of assessee. We direct the Ld.AO to consider the claim of assessee in the light of principles laid down by Hon’ble Supreme Court in case of Engineering Analysis (supra) and the service agreement entered into by assessee. Accordingly all grounds raised by the assessee are allowed for statistical purposes. In the result appeal filed by assessee stands allowed for statistical purposes.
Order pronounced in the open court on 20th October, 2021.

Please find attached the enclosed file for the full judgement