TaxTMI 
TaxTMI 
2024 (10) TMI 1690
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....t the notice issued by the assessing officer under section 271AAB of the Act was invalid, without jurisdiction and bad in law as it did not do not specify grounds or the clause under which penalty imposed by the assessing officer. 3. That the CIT(A) and assessing officer faded to appreciate that levy of penalty under section 271AAB(1A) of the Act is not automatic but only directory in nature and since significant amount of addition made in the assessment order already stands deleted, there is no locus levy any penalty under section 271AAB(LA) of the Act. 4. That the assessing officer CIT(A) erred on facts and in law on levying the penalty solely on the basis of findings given in the quantum proceedings, without: (a) appreciating that penalty proceedings are separate and independent from assessment proceedings; (b) considering the submissions of the appellant and (c) appreciating that the additions made in the assessment order were not in the nature of undisclosed income, and consequently. the impugned penalty order is bad in law. Without Prejudice 5 That the CIT(A) erred on facts and in law in confirming the penalty of Rs. 43,77,932 under section....
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....the assessee did not file any appeal. 5. Subsequently the Assessing Officer has levied the penalty of Rs. 4377932/- u/s 271AAB(1A) of the Act in respect of the additions sustained by the Ld CIT(A). Aggrieved the order of the AO the assessee has filed the appeal before the Ld CIT(A) who vide his order dated 07-12-2023 has dismissed the appeal against which the assessee is in appeal before us. 6. The Ld AR has submitted that the penalty order passed by AO is bad in law since no valid notice for assuming jurisdiction to impose penalty u/s 271AAB(1A) was issued. He has further submitted that before levying the penalty u/s 271AAB of the Act Ld AO has to be issued the notice u/s 274 of the Act, as provided in section 271A A B (3) of the Act. In the notice issued to the assessee there is no mention about the various conditions provided u/s 271AAB of the Act relating to levy of penalty @10% or @ 20% or @ 30% as the case may be. Nothing has been specified in the notice about clause a, b and c of section 271ABB of the Act as to at what percentage the penalty will be levied. The assessee deserves an opportunity to plead before the AO before being visited with the penalty with the penalt....
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....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 Section 271 AAB(1) of the Act, he intends to proceed against the assessee. In the instant case, in the absence of such material in the penalty notice, it has to be held that notice is defective. 17. The decisions of the Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory and SSA's Emerald Meadows and the decision of this Court in the case of Babuji Jacob clearly support our above conclusion. For all the above passed by the Tribunal. 7. Reliance also placed on the decision of the CO-Ordinate Bench, Jaipur, In the case of Ravi Mathur vs DCIT ITAno 969 of 2017 the Hon'ble tribunal Jaipur bench held 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 accounts does not exists, then the same has to be specified by the AO in the show cause notice and further the AO is required to ....
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....d 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(18) with retrospective 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 allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of CIT vs. Manjunath....
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....sment year, the appeal filed by the Revenue has become infructucous. 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. 8. In the case of Jaina marketing & Associates vs DCIT; [2024] 162 taxmann.com 439 the Delhi bench of the tribunal held as under :- 19. We have heard both the parties and perused the material available on record. In both the Assessment Years For the sake Le AY 2018-19 and 2019-20, the identical penalty notice u/s 271AAB has been issued convenience, the penalty notice for Assessment Year 2018-19 reproduced reads as under: "Whereas in the course of proceedings before me for the Assessment Year 2018-19. it appears to me that a search was conducted in your case and you were found to have undisclosed income, you are hereby requested to appear before me either personally or through a duly authorized representative at 11:30 AM on 02/07/2021 and show cause why an order imposing a penalty on you should not be made under section 271AAB of the Income Tax Act, 1961. If you do not wish to aval yourself of this opportunity of being heard in person or through a....
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....and has not raised any objection. He has further submitted that the assessee has not filed any appeal against the order of the Ld CIT(A) who made the additions. Reliance has placed on the judgement of Hon'ble Allahabad High Court in the case of Pr. CIT vs Sandeep Chandak (2018) 405 ITR 648. The relevant portion held as under :- 5. Before we proceed further, the decisions relied upon by the Ld DR are to be considered. In the case of Principal CIT vs Sandeep Chandak & Others [TS-6389- HC-20 17(Allahabad)-O] (supra) the issue before the Hon'ble High Court was the defect in the notice issued under section 271AAB on account mentioning wrong provision of the Act being 271(1)(c) of the Act. The Hon'ble High Court after considering the fact that the show cause notice issued by the AO though mentions section 271(1) in the caption of the said notice, however, the body of the show cause notice clearly mentions section 271AAB, which was fully comprehended by the assessee as reveals in the reply filed by the assessee against the said show cause notice. Hence the Hon'ble High Court has held as under. - "The Id A.Rs have also challenged that the caption of the notice....
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.... notice in general proforma will negate the very purpose of natural justice. The Hon'ble Apex Court in the case of Dilip N Shraf 161 Taxmann 218 held that "the quashi criminal proceedings u/s. 271(1)(c) of the Act ought to comply with the principles of natural justice". 10. Now we come back to the fact of the instant case of the assessee and look into what has been mentioned in the alleged notices u/s. 274 r.w.s. 27IAAB of the Act, which are reproduced as below: 11. For better understanding we reproduce the provisions of section 271 AAB and 274 of the Act which reads as follows; Section 271AAB of the Act. 271AAB. Penalty where search has been initiated - (1) The Assessing Officer may, nothwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section of this or after the 1st of the 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 --- (ii) substantiates the manner in which the undisclosed income was....
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....as- in found the books of account or in the course of a search (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year, or (B) otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of search; or (ii) 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. Section 274 of the Act (1) 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. (2) No order imposing a penalty under this Chapter shall be made- (a) by the Income tax Officer, where the penalty exceeds ten thousand rupees; (b) by the Assistant Commissioner, where the penalty exceeds twenty thousand rupees, except with the prior approval of the Deputy ....
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....ch in the books of account or other documents maintained in the normal course relating to such previous year ; or (B) Otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of search ; or . : have undisclosed income of the specified previous year as noted above 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 relation 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. You are hereby requested to appear before me at 11.30 A.M. On 30.01.2019 and show cause why an order imposing penalty on you should not be made under section 271AAB of the Income Tax Act, 1961. If you do wish to avail yourself of this opportunity of being heard in person or through authorized representative you may show cause in writing on or before the said date which will be considered before any such order is made under section 271AAB. Asstt. Commissioner of Income Tax Central Circle-28, New Delhi Document 2 NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE INCOME TAX ACT, 19....