TaxTMI 
TaxTMI 
2024 (6) TMI 1486
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.... 3. That levy of penalty and upholding the same is bad in law in as much as neither any specific charge has been made out nor any satisfaction was recorded while issuing the penalty notice u/s 271AAB. 3. The brief facts of the case are that a search and seizure operation u/s 132 of the Income Tax Act, 1961 was conducted at the business premises of the assessee ltd. company, who is in the business of iron and steel, on 27.08.2015. Assessment in this case was completed u/s 143(3) of the I.T Act, 1961 on 29.12.2017 and income of the assessee was assessed at Rs.3,88,23,170/- after making the addition of Rs.88,86,872/- on account of undisclosed investment in stock. During the search operation, physical stock was taken and stock was found to be excess by Rs.1.20 Crores. The statement of Sh. Sanjeev Garg was recorded u/s 132(4) of the I.T. Act, in which, he accepted the discrepancies in the stock and offered Rs.25 Lacs as additional income over and above the normal business income for the A.Y. 2016-17. 4. Aggrieved by the assessment order, the assessee filed an appeal before the Ld.CIT(A). The Ld. CIT(A)-5, Ludhiana vide order dated 23.01.2019, partly allowed the appeal of ....
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....o undisclosed income; that hence, specifying the limb in the penalty notice is not a requirement in the present scenario, as the penalty notice is for the concealment of income and the difference is only with respect to the rate at which the penalty has to be levied; that the AO has applied the minimum rate of 10% while levying the penalty for concealment of income keeping in view the facts & circumstances the case; that therefore, the contentions of the appellant on this issue are not acceptable; and that the contention of the AR that there is no striking off of the limb of penalty is not tenable, as the AO, in the penalty order itself, has given a clear finding that the income falls within the meaning of undisclosed income, as defined in Explanation (c) to Section 271AAB(l)(a). It has also been contended that the ld. CIT(A) has correctly placed reliance on the decision of the Amritsar Bench of the Tribunal in the case of 'HPCL Mittal Energy Limited Vs. Addl. CIT, Circle-1, Bathinda' in ITA Nos.554&555/Asr/2014. 9. Heard. The notice issued to the assessee u/s 274 read with Section 271AAB, a copy whereof has been placed at APB 13, reads as follows : 9.1 The ld. Counsel for th....
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....terms of the definition under section 271AAB of the Act has to be considered and decided in the penalty Since the assessee has offered the said income in the return of income filed under section 139(1) of the Act, therefore, the question of taking any decision by the AO in the assessment proceedings about the true nature of surrender made by the. assessee does not arise and only when the AO has proposed to levy the penalty then it is a pre-condition for invoking the provisions of section 271AAB that the said income disclosed by the assessee in the statement under section 132(4) is an undisclosed income as per the definition provided under section 271AAB. Therefore, the AO in the proceedings uno section 271AAB has to examine all the facts of the case as well as the basis of the surrender and then arrive to the conclusion that income disclosed by the assessee falls in the definition of undiscloses income as stipulated in the explanation to the said section. Therefore we do not agree with the contention of the Id. D/R that the levy of penalty under section 271AAB is mandatory simply because the AO has to first issue a show cause notice to the assessee and then has to make a decision f....
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....tice issued u/s 274 of the Act he should have mentioned that penalty u/s 271AAB of the Act may be levied na 10/20/30% since the assessee falls in Clauses (a)/(b)/(c) of section 271AAB of the Act. He should have further mentioned that as the assessees case falls under clause-c of section 271AAB of the Act, why she should not he visited by penalty (30% of the undisclosed income. Against this charge the assessee should have been given a reasonable opportunity of being heard. From going through the above three notices issued to the assessee on 22.03.2016, 03.06.2016 and 16.09.2016, we find that there is no mention about various conditions provided u/s 271 AAB of the Act. The Ld. A.O has very casually used the proforma used for issuing notice before levying penalty u/s 271(l)(c) of the Act for the concealment of income or furnishing of inaccurate particulars of income. Except mentioning the Section 271AAB of the Act in the notice it does not talk anything about the provision of section 271 AAB. Certainly such notice has a fatal error and technically is not a correct notice in the eyes of law because it intends to penalize an assessee without spelling about the charge against th....
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....elated provisions of the Act. So it was incumbent for Id. AO that In the notice issued u/s 274 of the Act should have mentioned, that penalty u/s 271 AAB of the Act may be levied @ 7 0/20/'30% since the assessee falls in Clauses (a)/(b)/(c) of section 271 AAB of the Act. He should have further mentioned that as the assesseee's case falls under Clause-c of section 271AAB of the Act, why he should not be visited by the penalty (ee. 30% of the undisclosed income. Against this charge, the assessee should have been given reasonable opportunity of being heard. 10. From going through the above notice issued to the assessee on 28.12.2017. we find that there is no mention about various conditions provided u/s 27IAAB of the Act. The Id. AO has very casually used the proforma used for issuing notice before levying penalty u/s 271(l)(c) of the Act for the concealment of income or furnishing of inaccurate particulars of income. Except mentioning the section 271AAB of the Act in the notice, it does not talk anything about the provisions of section 271AAB. Therefore, certainly such notice has a fatal error and technically' is not a correct notice in the eyes of law because it....
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.... counsel for the assessee has placed reliance on the decisions of the Karnataka High Court in the case of CIT Vs. Manjunatha Cotton and Ginning Factory [reported in (2013) 359 ITR 565] and in the case of CIT Vs. SSA's Emerald Meadows [(2016) 73 Taxmann. Com 241 ] and also the decision of this Court, to which, one of us (TSSJ) was a party, in the case of Babuji Jacob Vs. ITO, Non Corporate Ward 1(2), Chennai [reported in (2021) 124 Taxmann.com 363]. 14. In our considered view, the Tribunal is fully right in vacating the penalty on the ground that the notice was defective. The provisions of the Act have clearly laid down the procedure to be followed and adhered to while imposing the penalty. The proposal for such penalty proceedings was separately initiated upon completion of assessment and there may be cases where the assessee would not even contest the order of assessment. But, that would not preclude the assessee from challenging the penalty proceedings, as penalty proceedings are independent and the procedure required to be followed cannot be dispensed with. 15. As rightly pointed out by the learned counsel appearing for the assessee, Section 271AAB of the A....
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....en that the said decision pertains to levy of penalty u/s 271(1)(c) of the Act. The decisions discussed hereinabove, on the other hand, are directly on penalty levied u/s 271AAB(1) of the Act, which is the penalty presently in question. 12. No decision contrary to the decisions discussed hereinabove has been brought to our notice. 13. For the detailed reasoning and discussion contained in the preceding paragraphs, considering the fact that no specific charge has been mentioned in the penalty notice issued u/s 271AAB of the Act, following the decisions discussed herein above, ground No.3 is accepted and the penalty is deleted. 14. In view of our above decision on Ground No.3, nothing further survives for adjudication, nor was anything else argued. 15. In the result, the appeal is allowed. Order pronounced on 05.06.2024. ============= Document 1 3 NOTICE UNDER SECTION 274 READ WITH SECTION 271AAB OF THE INCOME TAX ACT, 1961. Office of the Asstt. Commissioner of Income Tax, Central Circle-11. Opp. B.V.M. School, Kitchlu Nagar, Ludhiana. Dated: 08.06.2018 PAN-AAACH6019D To The Principal Officer. M/s Happy Steels Private Limited. B-XXIX-2254. Kanganwal....