NITIN RAJ MARWAH,MUMBAI vs. DY. COMMISSIONER OF INCOME TAX 10(2)(2), MUMBAI

The only dispute raised by the assessee, in the present appeal, is against the levy of penalty of Rs.14,87,062, under section 271(1)(c) of the Act.

The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is an individual and his main source of income was salary from M/s.Marwah Steels Private Limited, in the capacity as Director. Besides, the assessee declared income from house property and income from other sources. For the year under consideration, the assessee filed its return of income on 29/07/2014, declaring a total income of Rs.84,31,240. 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. During the assessment proceedings, it was observed that the assessee has claimed deduction under section 35(1)(iii) of the Act amounting to Rs.43,75,000, on account of donations given to the trusts/institutions. During the assessment proceedings, the assessee filed revised computation of total income withdrawing the weighted deduction claimed under section 35(1)(iii) of the Act aggregating to Rs.43,75,000, on account of donations given to trusts/institutions. Accordingly, the Assessing Officer (“AO”) vide order dated 31/10/2016, passed under section 143(3) of the Act, inter-alia, disallowed the deduction of Rs.43,75,000, claimed under section 35(1)(iii) of the Act and added the same to the total income of the assessee.

Subsequently, the penalty order dated 27/04/2017, was passed by the AO under section 271(1)(c) of the Act wherein a penalty of Rs.14,87,062, 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

During the hearing, the learned Authorised Representative (“learned AR”) 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 31/10/2016, 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 particulars of income or for furnishing inaccurate particulars of income.

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.14,87,062. From the perusal of the notice dated 31/10/2016, issued under section 274 r/w section 271(1)(c) of the Act, 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

In the result, the appeal by the assessee is allowed. Order pronounced in the open Court on 27/09/2023