RAJESH KALRA,HANUMANGARH TOWN vs. DCIT, CIRCLE-1, BIKANER

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ITA 37/JODH/2023Status: DisposedITAT Jodhpur17 August 2023AY 2014-156 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that a defect in the penalty notice, specifically the failure to strike off the irrelevant charge (concealment of income or furnishing inaccurate particulars), vitiates the penalty proceedings. The penalty notice must clearly inform the assessee of the specific grounds for the penalty.

What were the facts?

The assessee's appeal against a penalty order was delayed by 85 days. The penalty was levied under Section 271(1)(c) after a survey and assessment order where the Assessing Officer estimated net profit at a higher rate than offered by the assessee.

What were the issues?

Whether a penalty under Section 271(1)(c) is valid when the penalty notice fails to specify the exact charge by not striking off the irrelevant alternative.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274

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Income Tax Appellate Tribunal, “DB” BENCH, JODHPUR

For Respondent: Ms. Prerana Choudhary
Hearing: 17.08.2023Pronounced: 17.08.2023

O R D E R

PER PAVAN KUMAR GADALE JM:

1.

The assessee has filed the appeal against the order of the order of the National Faceless Appeal Centre (NFAC), Delhi/ CIT(A) and passed u/s 271(1)(C) and U/sec 250 of the Act.

2.

There is a delay of 85 days in filing the appeal before the Honble Tribunal and the assessee has filed an affidavit for condonation of delay. Whereas, the facts mentioned in the affidavit are reasonable and the Ld.DR has no specific

Rajesh Kalra, Hanumangarh. - 2 - objections. Accordingly, we condone the delay and admit the appeal. The assessee has filed the appeal challenging the levy of penalty U/sec271(1)(C) of the Act.

3.

The brief facts of the case are that the assessee is engaged in the business of providing services and health care services. The assessee has filed the return of income for the A.Y 2014-15 on 28.02.2015 disclosing a total income of Rs. 57,60,353/-.There was a survey u/s 133A of the Act conducted at the premises of the assessee. The Assessing Officer (AO) considered the facts of survey operations and issued notice u/s 143(2) and U/sec142(1) of the Act. In compliance, the Ld. AR of the assessee appeared from time to time and submitted the details of computation income, tax audit report and other details. Further the AO has dealt on the disclosures made by the assessee during the survey and the facts with respect to the Gross profit percentage, net profit and gross collections of the assessee and has estimated the net profit @ 13% as against @12.10% offered by the assessee and made the addition of differential amount of Rs 7,64,812/- and passed the assessment order u/s 143(3) of the Act dated 30.12.2016.

Rajesh Kalra, Hanumangarh. - 3 - 4. Subsequently, the AO has initiated penalty proceedings u/s 271(1)(c) of the Act, whereas in the penalty proceedings the assessee was issued show cause notice and the assessee has filed the detailed submissions referred at Page 1 of the order but the AO was not satisfied with the explanations and levied a penalty of Rs.66,950/- and passed the order u/s 271(1)(c) of the Act dated 06-11-2020.

5.

Aggrieved by the penalty order, the assessee has filed an appeal before the CIT(A). In the appellate proceedings, the CIT(A) has considered the grounds of appeal, findings of the proceedings and confirmed the levy of penalty and dismissed the assessee appeal. Aggrieved by the CIT(A) order, the assessee has filed an appeal before the Hon’ble Tribunal.

6. At the time of hearing, none appeared on behalf of the assessee. Whereas the assessee has challenged the levy of penalty U/sec271(1)(C) of the Act. The Ld.DR supported the order of the CIT(A).

7. We heard the Ld. DR submissions and perused the material on record. The sole crux of the disputed issue is that the assessee has challenged the levy of penalty and legal issue of non striking of charge in the penalty notice i.e. whether the charge is for concealment of income or Rajesh Kalra, Hanumangarh. - 4 - furnishing of in accurate particulars of income and the impugned notice was filed. We find the Honble High Court of Bombay in Mohd Farhan A Shaikh Vs. DCIT in Tax Appeal No. 51 to 57 of 2012 dated 11.03.2021 (2021) 125 .taxmann. com 253 /434 ITR 1 (Bombay) has dealt on this disputed issue of not striking off charge in the penalty notice would vitiate the penalty proceedings. The Hon’ble High Court has made observations at page 56 as under;

180. One course of before us is curing a defect in the notice by referring to the assessment order, which may or not contain reason for the penalty proceedings. The other course of action is the prevention of defect in the notice – and that prevention takes just a tick mark. Prudence demands prevention is better than cure. Answers: Question No. 1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Sec. 271(1)(c), does a mere defect in the notice – not striking off the irrelevant matter vitiate the penalty proceedings? 181. It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under Sec. 271(1)(c), r.w.s. 274 of the Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other’s defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a deferent statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through Rajesh Kalra, Hanumangarh. - 5 - statutory notice. An omnibus notice suffers from the vice of vagueness.

182.

More Particularly, a penal provision, even with civil consequences, must be construed strictly. And ambiguity, if any, must be resolved in the affected assessee’s favour.

8.

We have considered the facts, circumstances and ratio of the decision of Honble High Court and are of the view that in the present case the A.O has not strike off the charge for levy of penalty for concealment of income or for furnishing of inaccurate particulars of income. Accordingly, we set aside the order of the CIT(A) and quash the penalty notice. And allow the grounds of appeal in favour of the assessee.

9.

In the result, the appeal filed by the assessee is allowed.

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