TaxTMI 
TaxTMI 
2020 (2) TMI 321
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.... this common order for the sake of brevity and convenience. 3. First we take up the appeals filed by the assessee(s) against the order of Ld. CIT(A) confirming levy of penalty u/s 271(1(c ) of the Act raising following grounds of appeal:- Shri Hemant Kumar Jain ITA No. 730/Ind/2018 Assessment Year 2010-11 1.1 That the Ld. CIT(A) has grossly erred in confirming penalty u/s 271(1)(c) of the Act of Rs. 15,000/- levied by A.O which is not in accordance with the law and therefore penalty requires to be deleted. 1.2 That the Ld. CIT(A) has erred in not accepting the assessee's contention and various judicial pronouncements therefore penalty requires to be deleted. 2. That the appellant craves leave to adduce additional grounds and/or amend or withdraw any of the aforesaid grounds before, or at the time of hearing of appeal. ITA No. 731/Ind/2018 Assessment Year 2011-12 1.1 That the Ld. CIT(A) has grossly erred in confirming penalty u/s 271(1)(c) of the Act of Rs. 20,000/- levied by A.O which is not in accordance with the law and therefore penalty requires to be deleted. 1.2 That the Ld. CIT(A) has erred in not accepting the....
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....e assessee associates on 09.04.2014. Notices u/s 153A of the Act were issued to the assessee(s). In response to the notice return of income for Assessment Years 2010- 11 to 2013-14 were filed. The assessee(s) offered additional income which includes undisclosed investment in hundies. Penalty proceeding u/s 271(1)(c) were initiated and finally levied. The details of the same are as under:- A.Y. Return income u/s 153A Additional income offered Concealed income Penalty u/s 271(1)(c) Remarks Hemant Jain 2010-11 3,00,380 1,42,380 1,42,380 15,000 Hundi investment Rs. 1,35,000 Hundi interest Rs. 7380/- 2011-12 3,74,540 1,93,690 1,93,690 20,000 Hundi investment Rs. 1,70,000 Hundi interest Rs. 23690/- 2012-13 4,50,030 2,49,240 2,49,240 26,000 Hundi investment Rs. 1,87,500 Hundi interest Rs. 61740/- 2013-14 1,54,31,110 1,52,01,350 1,52,01,350 46,00,000 Hundi investment Rs. 1,43,20,000/- Hundi interest Rs. 8,81,350/- Harsh Jain 2013-14 1,04,60,940 1,01,18,850 1,01,18,850 32,00,000 Hundi investment Rs. 96,00,000 Hundi interest Rs. 5,18,850/- Aggrieved assessee preferred appea....
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....y. He has to apply mind meticulously and carefully for each issue separately and establish precisely whether there was concealment of income or furnishing of inaccurate particulars of income. The Assessee cannot be fastened with the liability of penalty without there being a clear or specific charge. Fixing a charge in a vague and casual manner is not permitted under the law. Fixing twin charges is also not permitted under the law. Therefore, as per the ratio laid down by Hon'ble M.P. High Court in Pr. CIT vs Kulwant Singh Bhatia, (CL - 9-13) the notice issued by the AO is not valid and consequently, the order passed under Sec 271 (i) (c) is also not valid. B.Failure by the AO to specify in the s. 274 notice whether the penalty is being initiated for 'furnishing of inaccurate particulars of income' or for 'concealment of income' is fatal. It reflects non-application of mind and renders the levy of penalty invalid (Manjunatha Cotton 359 ITR 565 (Kar) (CL 43-62) C.The notice issued without application of mind, vague and not specific is liable to be quashed. Placing reliance on the judgment of Hon'ble Jurisdictional High Cour....
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....why an order imposing penalty on you should not be made under section 271(1)(c) of the Income Tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorised representative, you may show cause in writing or before the said date which will be considered before any such order is made under section 271(1)(c). Sd/- (Amit Kumar Soni) Asstt. Commissioner of Income Tax (Central)-1 Indore OFFICE OF THE Deputy Commissioner of Income Tax (Central)-I, Indore PAN. ADXPJ4863C Date: 16.09.2016 To, Shri Hemant Kumar Jain, 20, Parsi Mohalla, Indore Sir, Sub: Penalty fixation u/s 271(1)(c) r.w.s. 129 of the Income Tax Act, 1961 -reg. Please refer to the above The following penalty proceeding are initiated during assessment as mentioned below: S.NO. A.Y. Section Penalty initiated on 1 2010-11 271(1)(c) 31.03.2016 You are requested to appear before the undersigned on 19.09.2016 at 11.00 AM in my office at Room No.101, Aayakar Bhawan, Main opp. White Church, Indore personally or through authorized representative to....
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....t in the case of CIT Vs. Manjunatha Cotton Ginning Factory(supra) was further followed by the Karnataka High Court in the case of CIT Vs. SSA'S Emerald Meadows, (2016) 73 taxman.com 248 (SC) dated 23.11.2015 (ITA 380/2015) wherein Hon'ble High Court dismissed the appeal of the revenue by observing that the "Tribunal has allowed the appeal of the assessee holding that the notice issued by the Assessing Officer under Section 274 read with Section 271(1)( c) of the Act of 1961 was bad-in-law as it did not specify which limb of Section 271(1)(c) of the Act of 1961, the penalty proceedings had been initiated, i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars. The Tribunal while allowing the appeal of the assessee, had relied on the decision of the Division Bench of Karnataka High Court decision in the case of CIT Vs. Maniunatha Cotton Ginning Factory(supra)". 14. It is further pointed out that the SLP filed by the Deptt. before the Apex Court on 5.8.2016 in the matter of CIT Vs. SSA'S Emerald Meadows(supra) was dismissed. 15. Very recently the Hon'ble jurisdictional High Court in the case of Principal Commissioner of Income ....
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....se the alleged notice is not sustainable in law. 18. We also find that in the recent decision authored by us in the case of Shri Varad Mehta ITA. No.693/Ind/2016 adjudicating the similar legal issue challenging the validity of the penalty proceedings initiated u/s 271(1)(c) of the Act for the alleged technical error and non application of mind by the Ld.A.O in issuing notice u/s 274 of the Act we observed as follows:- "13. From perusal of the above show cause notice we find that the Ld.A.O has merely mentioned the section but the specific charge i.e. whether the penalty have been initiated for concealment of particulars of income or for furnishing inaccurate particulars of income has not been mentioned. Now whether such type of notice which does not speak about the specific charge leveled against the assessee is valid and tenable in the eyes of law needs to be examined. 14. We find that similar issue came up before the jurisdictional High Court in the case of Shri Kulwant Singh Bhatia (supra) wherein the Hon'ble Court discussed the judgment of Hon'ble High Court in the case of CIT V/s Manjunatha Cotton Ginning Factory (supra) and CIT V/s SSA's Emeralad ....
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....000/- imposed u/s 271(1)(c) on this ground itself. We accordingly allow the additional ground raised by the assessee on the legality of the penalty proceedings initiated u/s 271(1)(c) of the Act. Since the penalty u/s 271(1)(c) also has been dealt on the preliminary points other arguments of the assessee dealing with the merits of the levy of penalty are not been dealt with, as the same are rendered academic in nature and the appeal of the assessee for the Assessment Year 2008-09 is allowed". 19. We therefore in the given facts and circumstances of the case and respectfully following the above referred judgments of Hon'ble Apex Court, Hon'ble High jurisdictional Courts and other Hon'ble Courts and in view of the similarity of facts wherein the notice issued u/s 274 r.w.s 271(1)(c) of the Act is suffering from serious technical error and non application of mind by Ld.A.O who failed to level specific charge on the assessee at the time of initiating penalty proceedings due to which the principle of natural justice seems not to have been followed. We accordingly allow the assessee's appeal on this legal ground and hold that the impugned penalty notices issued u/s 274 r.w.s. 271(1)(c....
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....ing penalty u/s 271AAB of the Act at Rs. 1,20,000/- levied by A.O which is not in accordance with the law and therefore penalty requires to be deleted. 1.3 That the Ld. CIT(A) has erred in not accepting the assessee's contention and various judicial pronouncements therefore penalty requires to be deleted. 2. That the appellant craves leave to adduce additional grounds and/or amend or withdraw any of the aforesaid grounds before, or at the time of hearing of appeal. Shri Harsh Jain ITA No. 870/Ind/2018 Assessment Years 2014-15 1.1 That the Ld. CIT(A) has grossly erred in confirming penalty u/s 271AAB of the Act at Rs. 46,62,900/- which is not in accordance with the law and therefore penalty requires to be deleted. 1.2 That the Ld. CIT(A) has erred in not accepting the assessee's contention and various judicial pronouncements therefore penalty requires to be deleted. 2. That the appellant craves leave to adduce additional grounds and/or amend or withdraw any of the aforesaid grounds before, or at the time of hearing of appeal. Shri Harsh Jain ITA No. 871/Ind/2018 Assessment Years 2015-16 1.1 That the Ld. CIT(A) h....
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....n opportunity to plead before the Ld. A.O before being visited with the penalty u/s 271AAB of the Act. The alleged notice issued u/s 274 r.w.s 271AAB of the Act is liable to be quashed since there is a technical defect in issuing the notice. Reliance placed on the decision of Co-ordinate Bench, Chennai in the case of DCIT V/s R. Elangovan 1199/CHNY/2017 order dated 05.04.2018 which has also been followed by Jaipur Bench of Tribunal in the case of Ravi Mathur Vs. DCIT, ITA No.969/JP/2017 laying down the proposition that show cause notice issued u/s 274 of the Act without drawing requisite levy of penalty u/s 271AAB of the Act is a defective notice and is liable to be quashed. 28. Per contra Ld. Departmental Representative vehemently argued supporting the orders of lower authorities and also submitted that the legal issue raised by the assessee is liable to be dismissed since in the notice issued u/s 274 of the Act the Ld. A.O has specifically mentioned the section 271AAB of the Act and it may have been a clerical error on the part of the Ld. A.O to use the same proforma as used for issuing notice u/s 274 r.w.s. 271(1)(c ) of the Act. On merits the assessee has no case since the a....
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....or the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of twenty per cent of the undisclosed income of the specified previous year, if such assessee- (i) in the course of the search, in a statement under sub-section (4) of section 132, does not admit the undisclosed income; and (ii) on or before the specified date- (A) declares such income in the return of income furnished for the specified previous year; and (B) pays the tax, together with interest, if any, in respect of the undisclosed income; (c) a sum which shall not be less than thirty per cent but which shall not exceed ninety per cent of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b). (2) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). (3) The provisions of sections 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section. Explanation.-For the purposes o....
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....;] 30. From perusal of the above provision we observe that sub section 3 of Section 271AAB of the Act talks about issuing the notice u/s 274 of the Act. So for initiating the penalty proceedings u/s 271AAB of the Act the first step to be taken by Ld.A.O is to issue a valid notice u/s 274 of the Act. Sub-section (1) to Section 274 of the Act provides a procedure that " No order imposing a penalty under this Chapter shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard". To comply with this requirement the notice u/s 274 should be clear enough to convey the assessee about the charge which is to be leveled against him/her/it for levying the penalty for the contravention of the related provisions of the Act which in the instant case relates to not surrendering of undisclosed amount during the course of search which is subsequently admitted during the course of assessment and not challenged before the Ld. CIT(A). So it was incumbent for Ld. A.O that in the notice issued u/s 274 of the Act he should have mentioned that penalty u/s 271AAB of the Act may be levied @10/20/ 30% since the assessee falls in Clauses (a)/(b)/(c) of sect....
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....)-1 Indore OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX (Central) -1, INDORE Room No. 101, Aaykar Bhawan (Main), Opp. White Church, Indore F.No. DCIT(Cen)-1/Ind/271AAB/ 16-17 Dated: 03/06/2016 PAN: ADXPJ4863C To Shri Hemant Kumar Jain 20, Parsi Mohalla I ndore-452006 Sir, Sub: Penalty fixation u/s 271AAB of the Income Tax Act, 1961 for the A.Y. 2014-15- reg. Please refer to the penalty proceedings u/ s 271AAB of the Income Tax Act, 1961 for the A.Y. 2014-15 in the above mentioned case, you are hereby requested to appear before the undersigned on 10/06/2016 at 04.25 PM in my office at Room No. 101, Aayakar Bhawan, Main, Opp. White Church, Indore personally or through authorized representative to show cause as to why penalty u/s 271AAB of the I.T. Act, 1961 be not levied against you? If you do not want to appear personally, you may send your written reply on or before above mentioned date, otherwise penalty proceedings shall be decided on merits. Yours faithfully, Sd/- (Amit Kumar Soni) Asstt. Commissioner of Income Tax (Central)-1 Indore 32. From going through the above notice is....
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....in our opinion was vague. Hon'ble Karnataka High Court in the case of SSA's Emerald Meadows (supra) relying in its own judgment in the case of Manjunatha Cotton and Ginning Factory (supra) had held as under:- "2. This appeal has been filed raising the following substantial questions of law. (1) Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case? (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 (1 B) 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 decidi....
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....ings on the merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared invalid in the penalty proceedings". View taken by the Hon'ble Karnataka High Court in the above judgment was indirectly affirmed by the Hon'ble Apex Court, when it dismissed an SLP filed by the Revenue against the judgment in the case of SSA's Emerald Meadows (supra), specifically observing that there was no merits in the petition filed by the Revenue. Considering the above cited judgments, we hold that the notice issued ujs.274 r.w.s. 271AAB of the Act, reproduced by us at para 5 above was not valid. Ex-consequenti, the penalty order is set aside. 35. The view taken by the Co-ordinate Bench of Chennai in the case of DCIT V/s R. Elangovan 1199/CHNY/2017 order dated 05.04.2018 has been subsequently followed by the Co-ordinate Bench of Jaipur in the case of Ravi Mathur Vs. DCIT, ITA No.969/JP/2017 holding that such show cause notice issued u/s 274 r.w.s. 271AAB of the Act are not sustainable in law". 36. As regards to judgment of H....
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....R. did not produce any evidence to show that he was not given proper opportunity of hearing. It is clear from the penalty order that the AO has given notice and which was also replied by the assessee. Therefore, in my opinion, principle of natural justice has not been violated. Thus in view of above discussion penalty imposed by AO u/s. 271AAB of the Act is confirmed." Thus it was found by the Hon'ble High Court that the mistake in mentioning the section in the show cause notice is covered under section 292BB and the AO will get the benefit of the same. The said decision will not help the case of the revenue so far as the isse involves the merits of levy of penalty under section 271AAB. As regards the decision of Kolkata Benches of the Tribunal in the case of DCIT vs Amit Agrawal (TS-7675-ITAT-2017(Kolkata)-O) (Supra), we find that the said decision was subsequently recalled by the Tribunal and a fresh order dated 14th March, 2018 was passed by the Tribunal in favour of the assessee. Therefore, the decision relied upon by the Ld D/R is no more in existence." 36. We, therefore respectfully following the judgment/decision referred above and in the given facts and....