TaxTMI 
TaxTMI 
2025 (2) TMI 1221
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessments of AYs 2009-10 to 2015-16 were framed u/s 153A/143(3). Presently, we are concerned with AY 2014-15 for which the assessee filed return declaring a total income of Rs. 14,45,690/- on 30.03.3016 in response to notice u/s 153A but the AO completed assessment at a total income of Rs. 17,21,79,560/- after making certain additions vide assessment-order dated 30.12.2016. Simultaneously, the AO initiated penalty proceeding u/s 271AAB vide notice dated 30.12.2016 u/s 274 r.w.s. 271AAB which culminated into passing of penalty-order dated 21.03.2022 imposing a penalty of Rs. 1,63,64,882/- u/s 271AAB(1)(b) @ 60% on undisclosed income of Rs. 2,72,74,804/-. The five issues for which this penalty was imposed, have been neatly noted by CIT(A) in Para 2.1 to 2.5 of impugned order, we re-produce the same: "2.1 The return of income for the AY 2014-15 was filed on 28/11/2014 u/s 139(1) of the Act declaring total income of Rs. 14,35,62,680/-. In response to the notice u/s 153A of the Act, the assessee had filed return of income on 30/03/2016 for the AY 2014-15, declaring total income at Rs. 14,45,690/- The appellant had revised the deduction u/s 80-IA of the Act to Rs. 17,91,52,742/-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....B of the Act was initiated on this issue. 2.5 On the basis of incriminating document, it was found that the PATH group has sold a Crusher at Village-Doll, Distt. Dhar. The Crusher was sold in AY 2011-12 but the depreciation on the same was claimed consistently by the appellant and onwards when the appellant was confronted with this fact, the appellant offered undisclosed income in the submission. Addition of Rs. 2,12,774/- was made to the total income of the assessee for the AY 2014-15 and penalty proceedings u/s 271AAB was initiated on this issue." 3. Aggrieved by penalty-order, the assessee carried matter in first-appeal but did not get any success. Now, the assessee has come in next appeal before us assailing the orders of lower-authorities. 4. The assessee has raised following grounds: "1. The Ld. CIT(A) erred in confirming penalty u/s 271AAB of the I.T. Act is against the law and without appreciating the law and the facts of case. He is failed to appreciate that Penalty u/s 271AAB can be pressed into service only on existence of undisclosed income. 2. The Ld. CIT(A) failed to appreciate that penalty contemplated under section 271AAB of the Inco....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee firstly drew us to the provision of section 271AAB reading as under: "271AAB. Penalty where search has been initiated (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of July, 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,- (a) a sum computed at the rate of ten 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, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) on or before the specified date- (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of twenty per cent of the undisclosed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted." 7. Then, Ld. AR carried us to the show-notices dated 30.12.2016 & 04.01.2022 issued by AO u/s 274 read with section 271AAB, placed at Page 116 & 132 of Paper-Book, the same are scanned and re-produced here for immediate reference: 8. Thereafter, Ld. AR submitted that the AO has, in the notice dated 31.12.2016 by which the penalty proceeding was initiated, mentioned "you have disclosed/undisclosed income u/s 132(4) of the Act during specified previous year". Further, in the subsequent notice dated 04.01.2022 also, the AO has mentioned that "a search was conducted in your case and you were found to have undisclosed income." Ld. AR submitted that the AO has made vague allegations against assessee and there is no specific charge made out by the AO as to under which clause (a), (b) or (c) of section 271AAB(1), penalty was leviable on assessee.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the allegation/quantum etc.. As per notice dated 30/12/2016 it was clearly mentioned that "have disclosed/undisclosed income u/s 132(4) of the Act during specified previous year". Hence the contention of the assessee there was not specifying the allegation is not correct. Further, as per the Act there is no need to mention any quantum in the penalty notice. The quantum was already discussed in assessment order in details. It is also a fact that notice dated 04/01/2022 was issued through ITBA and it was clearly mentioned that "a search was conducted in your case and you were found to have undisclosed income." In the assessment-order the AO has discussed the entire issue in details and initiated penalty proceedings u/s 271AAB of the Act. The assessee company quoted various decisions. The same was perused carefully. It is found that the facts of this case are different from the quoted case laws and thus find not applicable in this case. (v) Regarding the contention of the assessee that the notice issued u/s 271AAB of the Act is silent about any default. In the notice dated 30/12/2016, it was clearly mentioned that "have disclosed/undisclosed income U/s 132(4) of the Act durin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and order of penalty made by AO in the light of decisions cited by Ld. AR. On perusal of section 271AAB(1), we find that there are three different limbs of section 271AAB(1) covered in different clauses (a), (b) and (c) prescribing penalties for three different situations and conditions and those three limbs/clauses are mutually exclusive to each other. While Clause (a) deals a situation where the assessee admits/discloses income in the statements u/s 132(4) and simultaneously other prescribed conditions are also satisfied; Clause (b) deals a different situation where the assessee does not disclose/admit income in the statements u/s 132(4) but satisfies other prescribed conditions; and Clause (c) deals a case not covered under (a) or (b). However, in the notice dated 30.12.2016 the AO has mentioned "you have disclosed/ undisclosed income u/s 132(4) of the Act during specified previous year" and in subsequent notice dated 04.01.2022, the AO has mentioned "a search was conducted in your case and you were found to have undisclosed income." Ld. AR is very correct in submitting that the notices issued by AO do not specify the exact charge of default committed by assessee or the clause/l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he statement and letter submitted before the DDIT; that it was only on the stock inventory drawn on the date of search and the tentative Trading Account prepared on the date of search, that the alleged difference was worked out; that the surrender made did not fall within the definition of "undisclosed income" and thus, no penalty was exigible u/s 271AAB of the Act. The ld. Counsel for the assessee further submitted that no specific charge had been made out by the Assessing Officer either while passing the assessment order, or while issuing impugned penalty notice; that in such circumstances also, no penalty was exigible u/s 271AAB. The ld. Counsel for the assessee placed reliance on the Judgment of the Hon'ble Madras High Court in the case of 'Principal Commissioner of Income Tax v/s Shri R. Elangovan' in appeal Nos. 770 and 771 of 2018. 7.1 Reliance has also been placed on the decision dated 20.03.2024, of the Delhi Bench of the Tribunal in the case of 'Jaina Marketing & Associates Vs DCIT', passed in ITA Nos. 225 & 226/Del/2023, for assessment years 2018-19 and 2019-20. 8. On the other hand, the ld. DR has placed strong reliance on the impug....
X X X X Extracts X X X X
X X X X Extracts X X X X
....set aside. The ld. Counsel for the assessee relied on various judicial precedents in support of the said submissions. 9.2 As can be seen from the notice issued u/s 271AAB of the Act, as reproduced herein above, the assessee rightly contends that it does not depict the charge against the assessee, as to under which clause (a), (b) or (c) of Section 271AAB(1), or clause (a) or (b) of 271AAB (1A) of the Act, penalty is leviable on the assessee. Therefore, we are of the opinion that the notice initiating penalty u/s 271 AAB of the Act is vague and the assessee was not made aware of the actual charge on which the penalty proceedings will be initiated on the assessee. The various judicial precedents, as discussed in the following paras have held that the penalty notice should be clear enough to convey to the assessee, the exact charge which is to be levied against him/her/it for levying penalty for the contravention of the related provisions of the Act. 10. An identical question came for consideration before the Jaipur bench of the Tribunal in the case of 'Sri. Mahaveer Prasad Agarwal Vs. The DCIT', in ITA No. 1218/JP/2019, vide order dated 02-06-2022, wherein a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... mentioning specific default of the assessee in terms of clause (a), (b) or (c) of section 271AAB of the Act, the, show cause notice issued in routine manner cannot be considered a valid notice in the eyes of law and accordingly the levy of penalty against the assessee is held to be void ab initio. Further, the assessee has substantiated the undisclosed cash available, as to the extent of surrendered income of Rs. 8,73,000/-. 6. In view of the above, considering the peculiar facts, the grievance of the assessee is accepted as genuine and as such the order of the Id. CIT (A) sustaining the penalty is hereby quashed. 7. In the result, appeal of the assessee is allowed.' 10.1 The Indore Bench of the Tribunal, in ITA No. 869/lnd/2018, in the case of 'Shri Ashok Bhatia vs. DCIT', vide order dated 05.02.2020, held as under: "8. 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 Sect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a will negate the very purpose of natural justice. Hon'ble Apex Court in the case of Dilip N Shraf 161 Taxmann 218 held that "the quasi criminal proceedings u/s 271(l)(c) of the Act ought to comply with the principles of natural justice". 15. We, therefore respectfully following the judgment of jurisdictional High Court in the case of PCIT V/s Kulwant Singh Bhatia (supra), decision of Coordinate Bench of Chennai in the case of DCIT V/s R. Elangovan (supra) and Jaipur Bench in the case of Ravi Mathur Vs DCIT (supra) and in the given facts and circumstances of the case wherein the matter written in the body of the notice issued u/s 274 of the Act. does not refer to the charges of provision of Section 271AAB of the Act makes the alleged notice defective and invalid and thus deserves to be quashed. Since the penalty proceedings itself has been quashed the impugned penalty of Rs. 64,22,348/- stands deleted. Thus assessee succeeds on legal ground challenging the validity of notice issued u/s 274 r.w.s. 271AAB of the Act." 10.2 The Kolkata Bench of the ITAT, in the case of 'Sushil Kumar Paul vs. ACIT' in ITA No. 2274/Kol/2019, vide order dated 15.12.2022, hel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al in ITA No. 1218/JP/2019 dated 02.08.2022, ' Shri Mahaveer Prasad Agarwal vs. DCIT'. 11. All the above decisions, it is seen have been considered by the Delhi Bench of the Tribunal in 'Jaina Marketing & Associates' (supra), to decide the matter in favour of the assessee. 11.1 Then, the Hon'ble Madras High Court, in the case of 'Pr. CIT Vs Shri R. Elangovan', order dated 30.03.2021, passed in Tax Appeal Nos. 770 and 771 of 2018 (copy placed at APB 14-19), has held as follows: "11. The argument of Mr. T.R. Senthil Kumar, learned Senior Standing Counsel appearing for the Revenue is that the notice issued by the Assessing Officer while imposing penalty clearly stated that it was a notice issued under Section 274 read with Section 271AAB of the Act. Therefore, the assessee was aware that he had to face penalty proceedings initiated under Section 271AAB of the Act. That apart, the assessee submitted two replies and was also heard in person and thereafter penalty was imposed. Hence, it is submitted that the order passed by the Tribunal setting aside the penalty in its entirety is not sustainable. The learned Senior Standing Counsel ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he impugned order, has verbatim reproduced the penalty notice and we find that the notice is absolutely vague and none of the irrelevant portions had been struck off nor the relevant portions had been marked or indicated. Hence, the Tribunal is right in observing that the penalty could not have been levied based on such defective notice and more particularly, when the assessee has been strenuously canvassing the jurisdictional issue from the inception. 16. In so far as the decision of the Allahabad High Court in the case of Sandeep Chandak is concerned, the factual position is slightly different. This decision is for the principle that where the assessee, in the course of search, makes a statement, in which, he admits the undisclosed income and specifies the manner, in which, such income has been derived, then the provisions of Section 271AAB of the Act would automatically get attracted. There can be no quarrel over this proposition. But, once the provisions get attracted, it is incumbent on the part of the Assessing Officer to specify as to under which clause in 271AAB(1) of the Act, he intends to proceed against the assessee. In the instant case, in the absence of such m....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rules, 1963 on 24/02/2025. ============= Document 1 ANNEAT 01/12/2016 I.T.N.S .- 29 116 NOTICE UNDER SECTION 274 READ WITH SECTION 271AAB OF THE INCOME TAX ACT, 1961 To M/s Prakash Asphalting & Toll Highways (PAN: - AABCP0398N) (India) Ltd. 76, Mall Road Mhow, Distt. Indore-452001 Whereas in the course of proceedings before me for the assessment year 2014-15_it appears to me that you :- *have without reasonable cause failed to furnish me retuîn pf income with you were required to furnish by a notice given under section 22(1)/22(2)/34 of the India Income Tax Act, 1922 or which you were required to furnish under section 139(1) or by a notice given under section 139(2)/148/153A of the Income Tax Act 1961, No. dated .. or have without reasonable cause failed to furnish it within the allowed and the manner required by the side section 139(1) or by such notice. "have-without reasonable-cause failed-to-comply with-a-notice-under-section-22(4)/23(2)-of-the-india Income Tax Act, 1922-or-under-section-142(1)/143(2) of the-Income Tax-Act1961. No. dated have disclosed /undisclosed income u/s 132(4) of the Act during specified previous year. You are her....