M/S. PRAKASH KUMAR ROUT,CUTTACK vs. ACIT, CENTRAL CIRCLE, CUTTACK

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ, कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK BEFORE SHRI C.M. GARG, JM & SHRI MANISH BORAD, AM आयकर अपीऱ सं./ITA No.307/CTK/2018 (नििाारण वषा / Assessment Year :2013-2014) M/s Pramod Kumar Rout, Vs ACIT, Central Circle, Cuttack Tangi, Kotsahi, Cuttack PAN No. : AFWPR 7916 R AND आयकर अपीऱ सं./ITA No.310&311/CTK/2018 (नििाारण वषा / Assessment Year :2013-2014 & 2014-2015) M/s Prakash Kumar Rout, Vs ACIT, Central Circle, Cuttack Tangi, Kotsahi, Cuttack PAN No. : AAUPR 1206 M AND आयकर अपीऱ सं./ITA No.312/CTK/2018 (नििाारण वषा / Assessment Year :2014-2015) Vs ACIT, Central Circle, Cuttack M/s Pragati Milk Products PvtLtd Tangi, Kotsahi, Cuttack PAN No. : AAECP 6353 J AND आयकर अपीऱ सं./ITA No.313/CTK/2018 (नििाारण वषा / Assessment Year :2014-2015) Vs ACIT, Central Circle, Cuttack M/s Pasupati Breeding Farm Private Limited, Tangi, Kotsahi, Cuttack PAN No. : AADCP 7306 A (अऩीऱाथी /Appellant) (प्रत्यथी / Respondent) .. राजस्व की ओर से /Revenue by : Shri M.K.Gautam, CITDR ननधााररती की ओर से /Assessee by : Shri P.R.Mohanty, Advocate सुनवाई की तारीख / Date of Hearing : 27/10/2021 घोषणा की तारीख/Date of Pronouncement : 29/10/2021

2 ITA Nos.307CTK/2018 & ITA Nos310-313/CTK/2018 आदेश / O R D E R Per Bench: The above captioned appeals filed at the instance of different assessees, are directed against the order passed by the CIT(A)-2, Bhubaneswar, dated 29.11.2017 for the assessment years 2013-2014 & 2014-2015. 2. At the outset, on perusal of the record, we found that all the appeals of the assessees are barred by limitation of 525 days. Ld. AR of the assessee has filed an application along with affidavit for condonation of delay stating the reasons for delay mentioned therein. Ld. DR objected to condone the delay and submitted that no sufficient cause for delay has been stated by the assessee, therefore, delay should not be condoned. 3. We have heard both the parties and looking to the facts and circumstances of the case as well as the reasons stated in the application and in the interest of justice, we condone the delay of 525 days in filing all the present appeals before the Tribunal and admit all the appeals for adjudication. 4. The sole issue raised in all the appeals is against the levy of penalty u/s.271AAB of the Act by the AO and confirmed by the CIT(A). 5. The AO in case of all the assessees under appeal found that the assessees were failed to disclose the income u/s.139(1) of the Act and also found that the assessees have knowingly concealed their respective incomes and submitted inaccurate particular for which the assessees are liable to pay penalty under the provisions of Section 271AAB of the Act.

3 ITA Nos.307CTK/2018 & ITA Nos310-313/CTK/2018 Accordingly, the AO initiated the penalty proceedings u/s. 271AAB of the Act vide order dated 27.09.2016. The penalty levied by the AO in all the appeals are as under :- Sl. ITA No. Assessee A.Y. Amount of No. penalty levied u/s.271AAB of the Act 1. 307/CTK/2018 M/s Pramod Kumar Rout 2013-14 14,033/- 2. 310/CTK/2018 M/s Prakash Kumar Rout 2013-14 7,26,800/- 3. 311/CTK/2018 M/s Prakash Kumar Rout 2014-15 4,60,028/- 4. 312/CTK/2018 M/s Pragati Milk Product Pvt. 2014-15 24,16,020/- Ltd. 5. 313/CTK/2018 M/s Pasupati Breeding Farm 2014-15 3,02,112/- Pvt. Ltd Against the penalty order, the assessee preferred appeal before the CIT(A) but did not succeed. Aggrieved further, the assessees are in their respective appeals before the Tribunal. 6. Ld. AR of the assessee before us argued on the legal issue challenging the notice issued u/s.274 of the Act and submitted that before levying the penalty u/s 271AAB of the Act Ld. A.O had to issue notice u/s 274 of the Act, as provided in Section 271AAB(3) of the Act. In the notice issued to the assessee there is no mention about the various conditions provided u/s 271 AAB of the Act relating to levy of penalty @ 10% or 20% or 30% (as the case may be). Nothing is specified in the notice about Clause-a, b & c of Section 271AAB of the Act as to at what percentage the penalty will be levied on the assessee for the undisclosed income not surrendered during the course of search. The assessee deserves an 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

4 ITA Nos.307CTK/2018 & ITA Nos310-313/CTK/2018 in issuing the notice. Further the ld. AR of the assessee submitted 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. Therefore, the ld. AR of the assessee submitted that penalty levied in all the cases of assessees deserve to be deleted. To support his contentions, ld. AR of the assessee relied on the following case laws :- i) DCIT Vs. Rashmi Cement Ltd., ITA No.1606/Kol/2017, order dated 28.02.2019; ii) ACIT Vs. Marvel Associates,ITA No.147/Vizag/2017, order dated 16.03.2018; iii) Padam Chand Pungliya Vs. ACIT, ITA No.112/JP/2018; iv) Anuj Mathur Vs. DCIT, (2018) 53 CCH 0276 Jaipur Trib; and v) Shri Arun Kala Vs. DCIT, ITA No.542/JP/2018, order dated 24.10.2019; 7. Ld. DR on the other hand, relied on the orders of authorities below and submitted his written submission as under :- i.) Kindly refer to statements of Shri Pramod Rout and Shri Prakash Rout recorded on oath u/s.132(4) of the Act during the course of search. As evident, both Shri Pramod Rout and Shri Prakash Rout have given evasive replies. In reply to question no.9 and 20, Shri Pramod Rout has stated that he did not receive remuneration from partnership firm namely Pashupati Feeds. On the other hand, while filing return of income in response to notice u/s.153A, such remuneration income from partnership firm has been offered to tax. Similar is the case with respect to interest income on FDs. Shri Prakash Rout too has given evasive replies in respect of reconciliation of FDs in reply to question no.14. While filing return of income in response to notice u/s.153A, such interest income has been offered to tax. Besides interest income has been offered to tax at low rate of interest on whims and fancies of the assessees. Therefore these cases are covered by clause (b) of section 271AAB (where such income has been offered to tax in the returns of income) and clause (c) of section 271AAB (where the AO has made additions on account of such interest income and other additions). ii.) The argument of the Id. AR of the assessee that levy of penalty u/s.271AAB is discretionary, is untenable. The Hon'ble Allahabad High Court in the case of Pr. CIT vs. Sandeep Chandak (93 taxmann.com 405) has held that penalty u/s.271AAB is automatic. The above decision has also been affirmed by the Hon'ble Supreme

5 ITA Nos.307CTK/2018 & ITA Nos310-313/CTK/2018 Court by dismissing the SLP (93 taxmann.com 406). It has been held by the Hon'ble Allahabad High Court that where assessee in course of search makes a statement in which he admits undisclosed income and specifies manner in which such income has been derived, than provisions of section 271AAB would automatically attract. In para-22, it has been held: "22. Section 271AAB provides the procedure for penalty where the search has been initiated. In the present case, admittedly a search and seizure operation is carried out in which the assessees have surrendered the amount of Rs.4 crores each (Rs.4 lakh each by all the three assessees) and therefore, in view of the provisions of Section 271AAB, the assessees are 'required to pay, by way of, penalty in addition to tax, if any, a sum computed @ 10% of undisclosed income of the specified period or previous years. In the case where the assessee in the course of search in a statement (under Section 4 of Section 132) admits the undisclosed income and specified manner in which such income has been derived, than the provisions of Section 271AAB automatically attracts and the proceedings are to be carried out/completed". In view of said decision and SLP being dismissed by the Hon'ble Supreme Court, the reliance placed by the assessee on decisions of Hon'ble Jaipur Tribunal, Kolkata Tribunal and others, is totally misplaced. iii.) The same view was held by Hon'ble Kolkata Tribunal in the case of DCIT vs. Amit Agarwal (88 taxmann.com 288) (para-g) which is reproduced as under: "In the instant case, the assessee himself had accepted the fact that he is engaged in commodities trading business and accordingly, he is mandated to maintain books of accounts u/s 44AA of the Act. It is not in dispute that as on date of search i.e. 01.08.2-012, the assessee had not entered the commodities transaction in its books of accounts. Hence, as per the definition of undisclosed income given in Explanation-C to Section 271AAB of the Act, the additional income disclosed by the assessee indeed takes the character of undisclosed income. We also find that the legislature in its wisdom had consciously omitted to include Section 271AAB of the Act in the provisions of section 273B of the Act. Hence there is no requirement to look into any reasonable cause adduced by the assessee warranting grant of any immunity from levying of penalty u/s 271AAB of the Act. Hence, even assuming that the mistake lies on the part of the Accountant by not entering the entries in the books of accounts regarding the commodity transaction, which might tantamount to reasonable cause, the assessee would still be exigible for levy of penalty as no immunity could be claimed in 'terms of Section 273B of the Act. We find that the Ld. CIT (A) had looked into irrelevant circumstances for deleting the levy of penalty in the instant case forgetting the fact that the levy

6 ITA Nos.307CTK/2018 & ITA Nos310-313/CTK/2018 of penalty uls 271AAB of the Act is automatic in nature as per the plain reading of the provisions of the Act. Hence, we hold that the Ld. AO had rightly levied penalty at 10% of undisclosed income amounting to Rs. 30lakhs in the instant case. Accordingly, the grounds raised by the Revenue are allowed". iv.) Similar opinion was expressed by Hon'ble Kolkata IT AT in the case of ACIT vs. Vishal Agarwal (100 taxmann.com 283) (para-13). v.) The Id. AR of the assessee has argued that the AO had not specified the charge or limb of section 271AAB for which penalty was to be imposed, as such the impugned notice was defective. However this issue stands covered in the favour of Revenue by the decision of Hon'ble Allahabad High Court in the case of Pr. CIT vs. Sandeep Chandak (93 taxmann.com 405) which has held that such defect is curable u/s.292BB of the Act. The above decision has also been affirmed by the Hon'ble Supreme Court by dismissing the SLP (93 taxmann.com 406). In para-27, it has been held as under: "The Ld. A.Rs have also challenged that the caption of the notice mentioned only Section 271 and not 271AAB. In this respect, the copy of notice has been produced by the Ld. A.R. before me. It is seen that the Ld. A.R. is correct in observing that the section of penalty has not been correctly mentioned by the AO in the caption. However, the AO will get the benefit of section 292BB of the Income Tax Act, 1961 because firstly, the assessee has raised no objection before the AO in this regard. Secondly, last line of the notice dearly mentions section 271AAB. Thirdly, the assessee has given reply to said notice which shows that the assessee fully comprehended the implication of the notice that it is for section 271AAB". vi.) In the case of Ramgopal Ochhavlal Maheswari vs. DCIT (l09 taxmann.com 184), the AO had issued notice u/s.271AAA of the Act to the assessee (which was not in vogue and had been replaced by section 271AAB) for levy of penalty in respect of undisclosed income. In para-12 of the decision, it was held that "The error in making reference to wrong section in our considered view purely technical do not impinge upon substratum in any manner and thus a curable defect rectifiable under section 292B. In other words, the mistake committed by AO in making reference to a non-est provision is a curable defect in view of the fact that cause existing for invoking both section are identical. The mistake and defect in penalty notice was corrected to bring it conformity with the intent and purpose for which the penalty proceedings were initiated originally. The mistake being technical, the assessee is precluded from taking any objection in regard in terms of section 292B of the Act". vii.) In the case of Pragati Milk Products (P.) Ltd. for AY 2014-15, it has been alleged that deduction u/s.80IB has been claimed @100% instead of 30% by mistake. However levy of penalty u/s.271AAB in respect of said deduction shall be covered by Explanation-c (clause -ii) of section 271AAB which states that "(u.)

7 ITA Nos.307CTK/2018 & ITA Nos310-313/CTK/2018 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" . • It is a settled law that there is a difference between a wrong claim and false claim. In the present case, there was a false claim since the Chartered Accountant had also filed Form No.10CCB for claiming such 100% deduction u/s, 80lB instead of 30% as provided in the Act. Without the search, this fact would not have been found or come to light. Hence it shall be in the nature of undisclosed income as per Explanation-c (clause-ii) of section 271AAB of the Act. The plea of mistake of the Chartered Accountant or the assessee is not plausible. This issue stands covered in the favour of revenue by the decision of Hon'ble Supreme Court in the case of Jivanlal & Sons vs. ACIT (103 Taxmann.com 208) and Hon'ble Delhi High Court in the case of CIT vs. Escorts Finance Ltd.(328 ITR 44). In the case of Escort Finance Ltd., the Hon'ble Delhi High Court held that it failed to understand as to how the chartered accountant, who is supposed to be expert in tax laws, could give such an opinion having regard to the plain language of section 3SD. It was not the case of the assessee that the return was filed claiming the aforesaid deduction on the basis of the said opinion. Its case was that based upon the opinion of chartered accountant, it was mentioned in the prospectus that the assessee would be entitled to relief u/s 3SD of the Act. Since a finance company is not entitled to the deduction ex-facie, thus, it was not a wrong claim but a false claim. This case also showed that the assessee's reliance on tax audit report was of no consequence. The Hon'ble Court further held that it was not understandable how a chartered accountant could give such an advice. In this case, the tax-auditor has not tendered any advice but filled up relevant column without due diligence. Therefore, it could be said that the explanation tendered by the assessee was not bona-fide. In view of above facts, the appeals filed by the assesses need to be dismissed. Ld. DR has also relied on the decision of Hon’ble Supreme Court in the case of Sandeep Chandak Vs. Pr.CIT, [2018] 93 taxmann.com 406 (SC). 8. We have heard the contentions of both the parties and perused the material available on record. In the instant case, on perusal of the penalty order dated 27.09.2016, we found that the AO in case of one of the

8 ITA Nos.307CTK/2018 & ITA Nos310-313/CTK/2018 assessees namely Shri Pramod Kumar Rout, in page 2 of the order has mentioned as under :- “In this case it is found that the assessee has knowingly concealed his income and submitted inaccurate particular for which the assessee is liable to pay penalty under this provision of Section 271AAB of the I.T.Act.” 9. Similar sentences have been mentioned by the AO in case of all the assessee under appeal. For proper adjudication, we would also like to reproduce one of the penalty notices issued in case of assessee namely M/s Pasupati Breeding Farm Pvt. Ltd., which read as under :-

9 ITA Nos.307CTK/2018 & ITA Nos310-313/CTK/2018 10. On perusal of the above notice issued to one of the assessees, we find that there is no mention about various conditions provided u/s 271AAB of the Act. In the notice dated 31.03.2016, the Ld. A.O has very casually used the proforma used for issuing notice before levying penalty u/s 271(1)(c) of the Act for the concealment of income or furnishing of inaccurate particulars of income. It does not talk anything about various clauses of section 271AAB of the Act for levying penalty @10%/20%/30%. 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 specific charge against the assessee. For this proposition, reliance can be placed on the decision of coordinate bench of the Tribunal in the case of Shri Ashok Bhatia Vs. DCIT, ITA No.869/Ind/2018, order dated 05.02.2020, wherein the relevant observations of the Tribunal as under :- 7. We have heard rival contentions and perused the records placed before us. The legal issue before us is that whether the notice issued u/s 274 r.w.s. 271AAB of the Act suffers from fatal error and technical defect thereby not providing an opportunity to the assessee to plead his case. Since the legal ground goes to be root cause of the issue levying penalty u/s 271AAB of the Act, we in view of the ratio held by the Hon'ble Apex Court in the case of National Thermal Power Company Limited (supra) admit the additional legal ground for adjudication. For levying penalty u/s 271AAB of the Act the Ld. A.O needs to primarily issue notice u/s 274 of the Act so for initiating proceedings u/s 271AAB of the Act the Ld. A.O has to first pass through the hurdle of Section 274 of the Act. For better understanding we reproduce the provisions of Section 271AAB 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, 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,

10 ITA Nos.307CTK/2018 & ITA Nos310-313/CTK/2018 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 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 of this section,-- (a) "specified date" means the due date of furnishing of return of income under sub-section (1) of section 139 or the date on which the period specified in the notice issued under section 153A for furnishing of return of income expires, as the case may be; (b) "specified previous year" means the previous year-- (i) which has ended before the date of search, but the date of furnishing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the date of search; or (ii) in which search was conducted; (c) "undisclosed income" means-- (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has--

11 ITA Nos.307CTK/2018 & ITA Nos310-313/CTK/2018 (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 Commissioner.] (3) An income- tax authority on making an order under this Chapter imposing a penalty, unless he is himself the Assessing Officer, shall forthwith send a copy of such order to the Assessing Officer'] 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 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 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 be visited by penalty @30% of the undisclosed income. Against this charge the assessee should have been given a reasonable opportunity of being heard. 9. Now let us revert back to the fact of the instant case of the assessee and look into what has been mentioned in the alleged

12 ITA Nos.307CTK/2018 & ITA Nos310-313/CTK/2018 notices issued u/s 274 r.w.s. 2371AAB of the Act, which are reproduced below; NOTICE UNDER SECTION 274 READ WITH SECTION 271AAB OF THE INCOME TAX ACT, 1961 PAN. ACFPB4590H OFFICE OF THE Asstt. Commissioner of Income Tax (Central)-I, Indore Date: 22.03.2016 To Shri Ashok Kumar Bhatia 33-A Radha Nagar Neelkanth Colony Indore-452006 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 return of 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 193(1) or by a notice given under section 193(2)/148 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 Act 1961, No. dated have concealed the particulars of your Income or furnished inaccurate particulars of such Income. You are hereby requested to appear before me on 21.04.2016 at 3.30 PM 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 avail yourself of this opportunity of bearing heard in person or through authorized representative you may show cause in writing on or before the side date which will be considered before any such order is made under section 271AAB. Sd/- (Amit Kumar Soni) Asstt. Commissioner of Income Tax (Central)-I Indore OFFICE OF THE Deputy Commissioner of Income Tax (Central)-I, Indore PAN. ACFPB4590H Date: 03.06.2016 To Shri Ashok Kumar Bhatia 33-A Radha Nagar Neelkanth Colony Indore- 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 11.50AM 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. Sd/- (Amit Kumar Soni) Deputy Commissioner of Income Tax (Central)-I Indore

13 ITA Nos.307CTK/2018 & ITA Nos310-313/CTK/2018

OFFICE OF THE Deputy Commissioner of Income Tax (Central)-I, Indore PAN. ACFPB4590H Date: 16.09.2016 To Shri Ashok Kumar Bhatia 33-A Radha Nagar Neelkanth Colony Indore-452006 Sir, Sub: Penalty fixation u/s 271AAB 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 2014-15 271AAB 22.03.2016 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 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. If any that you have nothing to say in this regard. It is to brought to your notice that there is a change in incumbent hence this notice is issued to provide opportunity of being heard to the assessee. Sd/- (Amit Kumar Soni) Deputy Commissioner of Income Tax (Central)-I Indore 10. 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(1)(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 271AAB. 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 the assessee. 11. Hon'ble Jurisdictional High Court in the case of PCIT V/s Kulwant Singh Bhatia (supra) dealt the issue of defective notice issued u/s 274 r.w.s. 271(1)(c) of the Act and Hon'ble court after relying judgment of Hon'ble Supreme Court in the case of CIT V/s Manjunatha Cotton Ginning Factory and CIT v/s SSA'S Emerald Meadows (supra) held that such show cause notices would not satisfy the requirement of law as notice was not specific. Merely

14 ITA Nos.307CTK/2018 & ITA Nos310-313/CTK/2018 issuing notice in general proforma 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(1)(c) of the Act ought to comply with the principles of natural justice". 12. In the case of DCIT V/s R. Elangovan Ltd (supra) , Co-ordinate Bench, Chennai while dealing with the legal ground challenging the validity of notice issued u/s 274 r.w.s. 271AAB of the Act had observed that ; "It is clear from the Sub Section (3) of Section 271 AAB that Sections 274 and Section 275 of the Act shall, so far as may be, apply. Sub Section (1) of Section 274 of the Act mandates that order imposing penalty has to be imposed only after hearing the assessee or giving a assessee opportunity of hearing. Opportunity that is to be given to the assessee should be a meaningful one and not a farce. Notice issued to the assessee reproduced (supra), does not show whether penalty proceedings were initiated for concealment of income or for furnishing inaccurate particulars of income or for having undisclosed income within the meaning of Section 271AAB of the Act. Notice 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 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

15 ITA Nos.307CTK/2018 & ITA Nos310-313/CTK/2018 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. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565. 4. In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court. The appeal is accordingly dismissed". In the earlier case of Manjunatha Cotton and Ginning Factory (supra) their lordship had observed as under:- "Notice under section 274 of the Act should specifically state the grounds mentioned in section 271(l)(c) , i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy the requirement of law; The assessee should know the grounds which he has to meet specifically. Otherwise, the principles of natural justice are offended. On the basis of such proceedings, no penalty could be imposed on the assessee) taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law; penalty proceedings are distinct from the assessment proceedings : though proceedings for imposition of penalty emanate from proceedings of assessment, they are independent and a separate aspect of the proceedings; The findings recorded in the assessment proceedings in so far as "concealment of income" and "furnishing of incorrect particulars" would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the proceedings 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.

16 ITA Nos.307CTK/2018 & ITA Nos310-313/CTK/2018 13. 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. 14. As regards to judgment of Hon'ble Allahabad High Court in the case of Pr. CIT Vs Sandeep Chandak (supra) which has been relied by the Departmental Representative is concerned, we find that in the decision rendered by the Co-ordinate Bench of Jaipur in the case of Ravi Mathur Vs DCIT (supra) wherein also similar issue of defective notice u/s 274 r.w.s. 271AAB was adjudicated, the judgment of Hon'ble Allahabad High Court in the case of Pr. CIT Vs Sandeep Chandak (supra) has been discussed and distinguished observing as follows:- It is further submitted that in para 5 of this judgment (Ravi Mathur), the case quoted by ld CIT(A) Pr. CIT vs Sandeep Chandak (All.) was distinguished as under: "5. Before we proceed further, the decisions relied upon by the ld D/R are to be considered. In the case of Principal CIT vs Sandeep Chandak & Others [TS-6389-HC-2017(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 ld A.Rs have also challenged that the caption of the notice mentioned only section 271 and not 271AAB. In this respect, the copy of notice has been produced by the ld. A.R. before me. It is seen that the ld A.R is correct in observing that the section of penalty has not been correctly mentioned by the AO in the caption. However, the AO will get the benefit of section 292BB of the Income Tax Act, 1961 because firstly, the assessee has raised no objection before the AO in this regard. Secondly, last line of the notice clearly mentions section 271AAB. Thirdly, the assessee has given reply to said notice which shows that the assessee fully comprehended the implication of the notice that it is for section 271AAB. The assessee has also challenged that the principles of natural justice has not followed by the AO. The detailed submissions of A.R. in this regard has already been reproduced above. The A.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

17 ITA Nos.307CTK/2018 & ITA Nos310-313/CTK/2018 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." 15. We, therefore respectfully following the judgment of jurisdictional High Court in the case of PCIT V/s Kulwant Singh Bhatia (supra), decision of Co-ordinate 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. 16. Since the penalty u/s 271AAB has been dealt and deleted on the preliminary legal 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. Thus grounds raised on merits are dismissed as infructuous. Appeal of the assessee for the Assessment Years 2014-15 is partly allowed. 11. Considering the factual aspects of the matter as discussed in the foregoing paragraphs as well as respectfully following the judicial precedence, relevant observations of which reproduced above, we are of the considered view that the penalty levied u/s.271AAB of the Act in all the appeals under consideration is not sustainable in the eyes of law as the matter written in the body of all the notices u/s.274 of the Act issued to

18 ITA Nos.307CTK/2018 & ITA Nos310-313/CTK/2018 the assessees under appeal do not refer to the charges of provision of Section 271AAB of the Act, which makes the alleged notice defective and invalid. Accordingly, we allow the legal ground raised by the assessee, thereby we set aside the impugned order passed by the CIT(A) and direct the AO to delete the penalty levied u/s.271AAB of the Act and allow the sole ground raised in all the appeals under consideration. 12. In the result, all the appeals of the all the assessees are allowed. Order pronounced in the open court on 29/10/ 2021. Sd/- Sd/- (सी.एम.गगा) (मनिष बोरड़) (C.M.GARG) (MANISH BORAD) ऱेखा सदस्य / ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनाांक Dated 29/10/2021 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीऱाथी / The Appellant- 1.

प्रत्यथी / The Respondent- 2. 3. आयकर आयुक्त(अऩीऱ) / The CIT(A), आयकर आयुक्त / CIT 4. ववभागीय प्रनतननधध, आयकर अऩीऱीय अधधकरण, कटक / DR, 5. ITAT, Cuttack 6. गार्ा पाईऱ / Guard file. सत्यावऩत प्रनत //True Copy// आदेशािुसार/ BY ORDER,

(Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack