SHRI SANJAYKUMAR BABULAL JAIN,MUM vs. DCIT, CC-6(3), MUM

PER OM PRAKASH KANT, AM

This appeal has been preferred by the assessee against order dated 29.11.2022 passed by the Ld. Commissioner of Income-tax (Appeals)-54, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2011-12, raising following grounds:

On the facts and in the circumstances of the case and in law the Hon’ble CIT(A) erred in upholding the penalty levied u/s 271(1)(c) of the IT Act of Rs.75,860/- by the Ld. AO and the reason assigned for doing so are wrong and contrary to the provision of Income Tax Act and rules made there under.

Shri Sanjaykumar Babulal Jain. Shri Sanjaykumar Babulal Jain 2 ITA No. 32/M/2023

"On the facts and in the circumstances of the case and in "On the facts and in the circumstances of the case and in "On the facts and in the circumstances of the case and in law, the notice dated 28.03.2014 issued to the law, the notice dated 28.03.2014 issued to the law, the notice dated 28.03.2014 issued to the appellant without indicating that there was concealment of particulars without indicating that there was concealment of particulars without indicating that there was concealment of particulars of income or furnishing of incorrect particulars of such of income or furnishing of incorrect particulars of such of income or furnishing of incorrect particulars of such income will vitiate the penalty notice and subsequent income will vitiate the penalty notice and subsequent income will vitiate the penalty notice and subsequent proceedings and hence the same is invalid and illegal" proceedings and hence the same is invalid and illegal" proceedings and hence the same is invalid and illegal" 3. The additional g The additional ground raised by the assessee being round raised by the assessee being purely of legal in nature and no investigation of the fresh facts is required and no investigation of the fresh facts is required and no investigation of the fresh facts is required therefore, same was admitted for adjudication in view of the therefore, same was admitted for adjudication in view of the therefore, same was admitted for adjudication in view of the decision of the Hon’ble Supreme Court in the case of NTPC Ltd. decision of the Hon’ble Supreme Court in the case of decision of the Hon’ble Supreme Court in the case of 229 ITR 83 (SC).

Shri Sanjaykumar Babulal Jain. Shri Sanjaykumar Babulal Jain 3 ITA No. 32/M/2023

Shri Sanjaykumar Babulal Jain. Shri Sanjaykumar Babulal Jain 4 ITA No. 32/M/2023

the income. Even charges for initiating penalty have not been ven charges for initiating penalty have not been ven charges for initiating penalty have not been specified in the assessment order. specified in the assessment order. The Hon’ble Bombay High Court The Hon’ble Bombay High Court in he case of Mohd. Farhan A. Shaikh v. DCIT Central Circle 1 Mohd. Farhan A. Shaikh v. DCIT Central Circle 1 Mohd. Farhan A. Shaikh v. DCIT Central Circle 1 (supra) has held that has held thatin such cases of not specifying the charges, in such cases of not specifying the charges, the penalty u/s 271(1)(c) of the Act cannot be sustained. /s 271(1)(c) of the Act cannot be sustained. /s 271(1)(c) of the Act cannot be sustained. The relevant finding of the Hon’ble relevant finding of the Hon’ble Bombay High Court Court (supra) is reproduced as under: reproduced as under:

“178. Therefore, in every instance, it is a question of 178. Therefore, in every instance, it is a question of 178. Therefore, in every instance, it is a question of inference whether the assessment order contained any inference whether the assessment order contained any inference whether the assessment order contained any grounds for ini grounds for initiating the penalty proceedings. Then, tiating the penalty proceedings. Then, whenever the notice is vague or imprecise, the assessee whenever the notice is vague or imprecise, the assessee whenever the notice is vague or imprecise, the assessee assails it as bad; the Revenue defends it by saying that the assails it as bad; the Revenue defends it by saying that the assails it as bad; the Revenue defends it by saying that the assessment order contains the precise charge. Thus, it assessment order contains the precise charge. Thus, it assessment order contains the precise charge. Thus, it becomes a matter of adjudication, opening lit becomes a matter of adjudication, opening lit becomes a matter of adjudication, opening litigious floodgates. The solution is a tick mark in the printed notice floodgates. The solution is a tick mark in the printed notice floodgates. The solution is a tick mark in the printed notice the Revenue is used to serving on the assessees. the Revenue is used to serving on the assessees. 179. Besides, the prima facie opinion in the assessment 179. Besides, the prima facie opinion in the assessment 179. Besides, the prima facie opinion in the assessment order need not always translate into actual penalty order need not always translate into actual penalty order need not always translate into actual penalty proceedings. These proceedings proceedings. These proceedings, in fact, commence with the , in fact, commence with the statutory notice under section 271(1)(c) read with section statutory notice under section 271(1)(c) read with section statutory notice under section 271(1)(c) read with section 274. Again, whether this prima facie opinion is sufficient to 274. Again, whether this prima facie opinion is sufficient to 274. Again, whether this prima facie opinion is sufficient to inform the assessee about the precise charge for the inform the assessee about the precise charge for the inform the assessee about the precise charge for the penalty is a matter of inference and, thus, a matter penalty is a matter of inference and, thus, a matter penalty is a matter of inference and, thus, a matter of litigation and adjudication. The solution, again, is a tick litigation and adjudication. The solution, again, is a tick litigation and adjudication. The solution, again, is a tick mark; it avoids litigation arising out of uncertainty. mark; it avoids litigation arising out of uncertainty. mark; it avoids litigation arising out of uncertainty. 180. One course of action before us is curing a defect in the 180. One course of action before us is curing a defect in the 180. One course of action before us is curing a defect in the notice by referring to the assessment order, which may or notice by referring to the assessment order, which may or notice by referring to the assessment order, which may or may not contain r may not contain reasons for the penalty proceedings. The easons for the penalty proceedings. The other course of action is the prevention of defect in the other course of action is the prevention of defect in the other course of action is the prevention of defect in the notice—and that prevention takes just a tick mark. and that prevention takes just a tick mark. and that prevention takes just a tick mark. Prudence demands prevention is better than cure. Prudence demands prevention is better than cure. Prudence demands prevention is better than cure. Answers: Question No.1: If the assessment order clearly Question No.1: If the assessment order clearly Question No.1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both satisfaction for imposing penalty on one or the other, or both satisfaction for imposing penalty on one or the other, or both

Shri Sanjaykumar Babulal Jain. Shri Sanjaykumar Babulal Jain 5 ITA No. 32/M/2023

grounds mentioned in Section 271(l)(c), does a mere defect grounds mentioned in Section 271(l)(c), does a mere defect grounds mentioned in Section 271(l)(c), does a mere defect in the notice in the notice—not striking off the irrelevant matter not striking off the irrelevant matter—vitiate the penalty proceedings? the penalty proceedings? 181. It does. The primary burden lies o 181. It does. The primary burden lies on the Revenue. In the n the Revenue. In the assessment proceedings, it forms an opinion, prima facie or assessment proceedings, it forms an opinion, prima facie or assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the otherwise, to launch penalty proceedings against the otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the assessee. But that translates into action only through the assessee. But that translates into action only through the statutory notice under section 271(1)(c), read with section statutory notice under section 271(1)(c), read with section statutory notice under section 271(1)(c), read with section 274 of IT Act. True, the assessment proceedings form the 4 of IT Act. True, the assessment proceedings form the 4 of IT Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not basis for the penalty proceedings, but they are not basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. composite proceedings to draw strength from each other. composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding Nor can each cure the other's defect. A penalty proceeding Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it m is a corollary; nevertheless, it must stand on its own. These ust stand on its own. These proceedings culminate under a different statutory scheme proceedings culminate under a different statutory scheme proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. that remains distinct from the assessment proceedings. that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of Therefore, the assessee must be informed of the grounds of Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An the penalty proceedings only through statutory notice. An the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness. omnibus notice suffers from the vice of vagueness. omnibus notice suffers from the vice of vagueness. 182. More particularly, a penal provision, even with civil 182. More particularly, a penal provision, even with civil 182. More particularly, a penal provision, even with civil consequences, must be construed strictly. And ambiguity, if consequences, must be construed strictly. And ambiguity, if consequences, must be construed strictly. And ambiguity, if any, must be resolved in the affected assessee’s favour. any, must be resolved in the affected assessee’s favour. any, must be resolved in the affected assessee’s favour. 183. Therefore, we answer t 183. Therefore, we answer the first question to the effect he first question to the effect that Goa Dourado Promotions and other cases have that Goa Dourado Promotions and other cases have that Goa Dourado Promotions and other cases have adopted an approach more in consonance with the adopted an approach more in consonance with the adopted an approach more in consonance with the statutory scheme. That means we must hold that statutory scheme. That means we must hold that statutory scheme. That means we must hold that Kaushalya does not lay down the correct proposition of law. Kaushalya does not lay down the correct proposition of law. Kaushalya does not lay down the correct proposition of law. …………………………………” …………………………………” 9.1 Respectfully following the finding of the Hon’ble Jurisdictional Respectfully following the finding of the Hon’ble Jurisdictional Respectfully following the finding of the Hon’ble Jurisdictional High Court, the penalty proceedings init High Court, the penalty proceedings initiated are held to held to invalid and therefore same is cancelled. T cancelled. The order of the Ld. CIT( he order of the Ld. CIT(A) on the issue-in-dispute is set aside. The additional ground of appeal of the dispute is set aside. The additional ground of appeal of the dispute is set aside. The additional ground of appeal of the assessee is accordingly allowed. assessee is accordingly allowed.

Shri Sanjaykumar Babulal Jain. Shri Sanjaykumar Babulal Jain 6 ITA No. 32/M/2023

9.2 Since we have already cancelled the penalty, therefore, we are Since we have already cancelled the penalty, therefore, we are Since we have already cancelled the penalty, therefore, we are not required to adjudicate upon the ground not required to adjudicate upon the grounds raised by the assessee. raised by the assessee.