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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI SANDEEP SINGH KARHAIL, JM
This appeal is filed by the assessee against the appellate order passed by the National Faceless Appeal Centre, Delhi (Learned CIT-A) for assessment year 2010-11 on 22/2/2023 wherein the appeal filed by the assessee against the penalty order passed under section 271(1)(c) of the Income Tax Act, 1961 (the Act) dated 26/9/2016, levying penalty of Rs.38 lakhs, was partly allowed. The assessee is aggrieved and is in appeal before us raising three distinct grounds against levy of penalty.
The brief facts of the case shows that the assessee is a company engaged in manufacturing of MS ingots from scrap. It has filed its return of income for assessment year 2010-11 on 30/9/2010 at Nil income. Consequently, notice under section 148 of the Act was issued on 15/2/2016 wherein it was found that the assessee purchased bogus bills of Rs.1,23,02,354/-. In response to notice, the assessee reiterated the original return filed. Subsequently, after discussion, it was found that the total purchases from Hawala parties is Rs.32,02,852/-. Accordingly, 15% addition on account of profit was made in the hands of the assessee. As during the course of assessment proceedings, it was also found that the assessee has utilised Rs.90,99,502/- for addition of fixed assets and excess depreciation of Rs.7,76,143/- was also paid by the assessee. The same was also disallowed.
The assessment order under section 143(3) read with section 147 of the Act was passed on 2/3/2016, wherein penalty proceedings were initiated for concealment of income/furnishing of inaccurate particulars of income.
Thus, notice under section 271(1)(c) of the Act was issued which was replied by the assessee on 3/6/2016 making a detailed argument relying on several judicial precedents. The Learned Assessing
Officer rejected all of them and held in the penalty order dated 26/9/2016 that the total bogus accommodation entries are to the tune of Rs.11,02,278/-, tax thereon is worked out at Rs.38.51 lakhs and accordingly penalty of Rs.38 lakhs was levied.
Aggrieved assessee preferred appeal before the Learned CIT-A, who confirmed the penalty, however, he directed to levy penalty only on the addition of Rs.90,99,502/- of accommodation entries. Accordingly, the penalty amount of Rs.31,42,830/- was levied.
The assessee is in appeal before us.
The Learned AR of the assessee produced before us the notice under section 274 read with 271(1)(c) of the Act dated 2/3/2016 and submitted that in such penalty notice, none of the three charges are struck off and therefore, penalty is invalid.
The Learned DR supported the orders of the lower authorities.
We have carefully considered the rival contentions and perused the orders of the lower authorities. On verification of notice under section 274 read with 271(1)(c) of the Act, dated 2/3/2016, it is clear that the Assessing Officer has not struck off any of the twin charges, such as concealment of particulars of income or furnishing of inaccurate particulars of such income. We find that if one of the irrelevant matters is not struck off, it would mean that the Learned Assessing Officer was not sure while issuing the show cause notice whether he had proceeded on the basis that the assessee has concealed his income or he had furnished inaccurate particulars of income. If without being so sure about the charge on which he intends to impose penalty on the assessee, such a notice clearly shows non-application of mind and such notice is not valid. Such is the mandate of the Hon'ble Bombay High Court in the case of Mohd. Farhan A Shaik vs. ACIT, 434 ITR 1 and Ganga Iron and Steel Trading Co. Vs. CIT, 135 taxmann.com 244 and PCIT vs. Jahangir in IT Appeal No.805 of 2018 dated 6/9/2013. In view of the above judicial binding precedents, we quash the penalty order passed by the Learned Assessing Officer and reverse the order of the Learned CIT-A confirming the penalty partly. In the result, ground No.1 of the appeal is allowed.
Accordingly, appeal of the assessee is allowed.
Order pronounced in the open Court on 03.11.2023