TaxTMI 
TaxTMI 
2019 (11) TMI 1093
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....r although the notice issued by assessing officer for initiating the penalty u/s 271AAB of the IT Act, 1961 is not in accordance with law not being specifically pointing out the default for which the ld. A.O. sought to impose penalty u/s 271AAB. 4. That the ld. CIT (A) is wrong in confirming penalty of Rs. 2,02,220/- u/s 271AAB of the Act in as much the penalty was levied by assessing officer simply on the basis that the assessee admitted the income of Rs. 20,22,200/- and disclosed in the return without proving that the said income was 'undisclosed income' of assessee within the meaning of section 271AAB of I.T. Act, 1961. 5. That the appellant craves the permission to add to or amend to any of the above grounds of appeal or to withdraw any of them." Ground No. 3 is regarding the validity of initiation of penalty proceedings under section 271AAB of the Act. Since the issue raised in ground no. 3 is legal in nature and goes to the root of the matter, therefore, the ground no. 3 is taken up first for hearing and adjudication. 2. The assessee is an Individual and derives income from partnership firm and income from other sources. There was a search and seizure action under sect....
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....sessee. The ld. A/R further submitted that the AO thereafter issued another show cause notice dated 15.05.2017 by changing only date of notice stating the same wordings of earlier notice dated 20.12.2016 that " Whereas in the course of assessment proceedings for the A.Y. 2015-16 penalty proceedings were initiated u/s 274 and 275 read with section 271AAB of the Act and a penalty notice was issued accordingly. You are hereby allowed further opportunity of being heard and show cause why an order imposing penalty on you should not be made u/s 271AAB of the IT Act, 1961. The assessee after receiving this notice filed his explanation dated 24.05.2017 received on Dak counter of A.O. on 25.05.2017. The AO on receipt of explanation of assessee passed the penalty order on 14.06.2017. 3.1. The ld. A/R submitted that both the notices were issued in a routine manner without mentioning under which clause of section 271AAB of the Act the assessee is liable for penalty. It submitted that section 271AAB(1) has three clauses (a) to (c) and each clause of sub-section (1) to sec. 271AAB provides the circumstances and violation attracting the penalty @ 10% or 20% or 30% of undisclosed income of speci....
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....e of the investment in question. It is a clear case of undisclosed income detected during the course of search and seizure action and, therefore, the surrender made by the assessee himself is self-explanatory to the nature of income surrendered by the assessee. The ld. D/R has contended that the assessee has participated in the penalty proceedings and has not raised any objection or has demanded before the AO about his unawareness of the nature of default attracting the levy of penalty under section 271AAB. It is not the case of the assessee that the disclosure was taken under coercion and further the assessee has offered the said amount to tax in the return of income which rules out the scope of any pressure or coercion by the search team for taking disclosure from the assessee. Thus the objection raised by the assessee that the AO has not specified the clause under section 271AAB(1) of the Act has no merit when the assessee himself has explained the nature of income disclosed and surrendered and also paid the tax on the same. The ld. D/R has submitted that as per the explanatory note of Finance Bill, 2012, the provisions of section 271AAB are mandatory in nature and the AO has n....
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....his opportunity of being heard in person or through Authorized Representative, you may show cause in writing on or before the date fixed for hearing on 25.05.2017 at 11.00 AM which will be considered before any such order (s) is/are made. Sd/- ( Kamlesh Kumar Meena ) Dy. Commissioner of Income-tax, Central Circle-2, Jaipur. Thus it is clear that the AO has even not mentioned in the show cause notice what is the default of the assessee and what was the undisclosed income against which the penalty was proposed to be levied. The Coordinate Bench of this Tribunal in case of Shri Shyam Sundar Khandelwal vs. DCIT (supra) has considered an identical issue in para 5.1 as under :- "5.1. The second limb of challenging the validity of initiation of penalty proceedings for not specifying the ground and default in the show cause notice issued under section 274 has been considered by the Coordinate Bench of this Tribunal in the case of Ravi Mathur vs. DCIT (supra) in para in para 7 as under :- "7. As regards the validity of notice under section 274 for want of specifying the ground and default, we find that when the basic condition of the undisclosed income not recorded in the books of ....
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....? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the penalty notice under Section 274 r.w.s. 271(1)(c) is bad in law and invalid despite the amendment of Section 271(1B) with retrospective effect and by virtue of the amendment, the assessing officer has initiated the penalty by properly recording the satisfaction for the same? (3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in deciding the appeals against the Revenue on the basis of notice issued under Section 274 without taking into consideration the assessment order when the assessing officer has specified that the assessee has concealed particulars of income? 3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (for short 'the Act') to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allow....
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....ti, the penalty order is set aside. 6. Since we have set aside the penalty order for the impugned assessment year, the appeal filed by the Revenue has become infructuous." In view of the decision of the Chennai Bench (supra), the show cause notice issued by the AO in the case of the assessee is not sustainable." We further note that in the case in hand, the AO in the show cause notice has neither specified the grounds and default on the part of the assessee nor even specified the undisclosed income on which the penalty was proposed to be levied. For ready reference we reproduce the show cause notices issued by the AO under section 274 read with section 271AAB on 23rd December, 2016, and 15th May, 2017 as under :- NOTICE UNDER SECTION 274 READ WITH SECTION 271 READ WITH SECTION 271AAB OF THE INCOME TAX ACT, 1961. Dated : 23.12.2016. To, M/s. Shri Shyam Sunder Khandelwal, 1839, Barah Gangore Ka Rasta, Johri Bazar, Jaipur. PAN-ADRPK 5862 C Whereas in the course of assessment proceedings for the AY 2015-16 penalty proceedings were initiated u/s 274 and 275 read with the section u/s 271AAB of the IT Act and a penalty notice was issued accordingly. You are hereby a....