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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
The present appeal has been filed by the assessee challenging the impugned order dated 07/06/2023, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals), Pune-11, Pune, [“learned CIT(A)”], which in turn arose from the penalty order dated 31/03/2017 passed under section 271(1)(c) of the Act, for the assessment year 2010–11.
In this appeal, the assessee has raised the following grounds:-
“1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in sustaining the penalty levied by the Ld. A.O. u/s. 271(1)(c) for Rs. 4,48,381/-.
M/s. Innovators Façade systems Pvt. Ltd. ITA no.2792/Mum./2023
2. On the facts and circumstances of the case and in law, the Ld. C\Gamma T(A) erred in upholding the order of Ld. A.O despite the fact that the Ld. AO has not mentioned the specific limb in the show cause notice issued u/s 274 as to whether penalty is proposed to be levied for concealment of income or furnishing inaccurate particulars of income.
On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the order of Ld. A.O in levying penalty of Rs. 4,48,381/-on the ground that the appellant has furnished inaccurate particulars of income. That the appellant craves leaves to add, amend, modify or delete all or any of the grounds of appeal
4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the order of the Ld. A.O. by confirming the penalty-imposed u/s.271(1)(c) without appreciating the fact that no penalty should be levied where addition is made on the basis of estimation of income.
5. Appellant craves leave to add, alter, modify or delete any of the grounds of appeal.”
3. The brief facts of the case as emanating from the record are: The assessee is a contract of civil and interior work which includes external and internal glazing of glass work and providing and fixing aluminium windows. For the year under consideration, the assessee filed its return of income on 14/10/2010 declaring a total income of Rs. 1,72,47,772. The return filed by the assessee was selected for scrutiny and statutory notices under section 143(2) as well as section 142(1) of the Act were issued and served on the assessee. On the basis of information received from the Department of Sales Tax, Maharashtra regarding certain parties who are engaged in providing accommodation entries, it was observed that the assessee is one of the beneficiaries and has availed the accommodation entries being bogus purchases. Accordingly, a survey under section 133A of the Act was carried out at the office premises of the assessee. During the survey proceedings, statements of Directors of the assessee were recorded in which they offered to tax additional income on account of non-genuine expenditures over and Page | 2
M/s. Innovators Façade systems Pvt. Ltd. ITA no.2792/Mum./2023 above the income as per regular books of account. Accordingly, the Assessing Officer (“AO”) vide order dated 04/03/2013 passed under section 143(3) of the Act made an addition of Rs. 6,28,80,474 to the total income of the assessee on account of bogus purchases on the basis of surrender during the aforesaid survey proceedings. Further, the AO disallowed uniform maintenance allowance claim by the assessee under section 37(1) of the Act. The AO also disallowed the depreciation claimed on television sets installed at the residences of the Directors. Accordingly, the AO assessed the total income of the assessee at Rs. 8,06,06,450.
Subsequently, the penalty order dated 31/03/2017 was passed by the AO under section 271(1)(c) of the Act wherein a penalty of Rs. 4,48,381, was levied. In the further appeal against the penalty order, the learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee and upheld the levy of penalty under section 271(1)(c) of the Act. Being aggrieved, the assessee is in appeal before us.
During the hearing, the learned Authorised Representative (“learned AR”), inter-alia, submitted that the penalty in the present case has been levied without specifying the head under which the same has been levied. The learned AR by referring to the penalty notice dated 05/03/2013 issued under section 274 r/w section 271(1)(c) of the Act submitted that the AO has not specified whether the penalty has been levied for concealment of income or for furnishing inaccurate particulars of income.
M/s. Innovators Façade systems Pvt. Ltd. ITA no.2792/Mum./2023
On the other hand, the learned Departmental Representative (“learned DR”) vehemently relied upon the order passed by the lower authorities.
We have considered the rival submissions and perused the material available on record. In the present case, the AO initiated penalty proceedings under section 271(1)(c) of the Act and levied a penalty of Rs. 4,48,381. From the perusal of the notice dated 05/03/2013 issued under section 274 r/w section 271(1)(c) of the Act, furnished during the hearing, we find that the AO did not strike–off any of the twin charges i.e., concealment of particulars of income or furnishing of inaccurate particulars of income. The case of the assessee is squarely covered by the decision of the Hon'ble Jurisdictional High Court in Mohd. Farhan A. Shaikh v/s CIT, [2021] 434 ITR 1 (Bom.), wherein the Larger Bench of the Hon’ble Court has held that the defect in notice by not striking off the irrelevant matter would vitiate the penalty proceedings. Accordingly, respectfully following the aforesaid decision of the Hon'ble Jurisdictional High Court, the penalty order passed under section 271(1)(c) of the Act is quashed.
In the result, the appeal by the assessee is allowed. Order pronounced in the open Court on 15/12/2023