MUKESH DESAI,MUMBAI vs. CIRCLE 25(3), MUMBAI
What did the Tribunal hold?
The Tribunal held that the show cause notice for penalty was invalid because the AO failed to strike out the inapplicable limb (concealment of income or furnishing inaccurate particulars) as required by law. This procedural defect vitiates the penalty proceedings.
What were the facts?
The assessee's return of income was selected for scrutiny, leading to additions by the Assessing Officer (AO) for bogus purchases, foreign travel, depreciation, and cash deposits. The AO initiated penalty proceedings under Section 271(1)(c) of the Income Tax Act, levying a penalty.
What were the issues?
The primary issue was the validity of the penalty levied under Section 271(1)(c) due to a defective show cause notice. The Tribunal also considered the assessee's contention of not being given a proper opportunity to be heard.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
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- Mr. Mohd. Farhan A. Shaikh v. ACIT672 citing125 Taxmann.com 253 · 2021 · HC · Read judgment
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI B R BASKARAN, AM & MS. KAVITHA RAJAGOPAL, JM
O R D E R Per Kavitha Rajagopal, J M:
This appeal has been filed by the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) (‘ld.CIT(A) for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2010-11.
The solitary issue involved in this appeal is that the assessee has challenged the penalty levied u/s. 271(1)(c) of the Act amounting to Rs.65,61,479/-.
The brief facts of the case are that the assessee is an individual and proprietor of M/s. Pathik Computers. The assessee filed its return of income for the impugned year dated 14.10.2010, declaring total income at Rs.18,33,430/-. The assessee’s case was selected for scrutiny in the assessment order u/s. 143(3) of the Act passed on 30.03.2013, determining the total income at Rs.2,31,88,490/- where the Assessing Officer had made deposits aggregating to Rs.2,13,55,059/-.
The A.O. initiated the penalty proceedings u/s. 271(1)(c) of the Act vide order dated 31.03.2018 and the penalty of Rs.65,61,479/- was levied.
The assessee has challenged the said order before the ld. CIT(A) on the ground that the assessee was not given opportunity of being heard. The ld. CIT(A) confirmed the penalty levied by the A.O. on the ground that the assessee has failed to furnish the documents to substantiate his contention inspite of several opportunities.
The assessee is in appeal before us, challenging the impugned order.
The learned Authorised Representative (ld. AR for short) for the assessee contended that the assessee was not given sufficient opportunity before the ld. CIT(A) and further contended that the penalty order was levied for concealment of income and that the assessee had made wrong claim bogus expenses by way of bogus purchases, foreign travel, cash deposit and depreciation of home theatre. The ld. AR further stated that the impugned show cause notice dated 30.03.2013 was invalid for the reason that the A.O. has failed to strike out inappropriate limb u/s. 271(1)(c) of the Act. The ld. AR relied on the decision of the Hon'ble Jurisdictional High Court in the case of Mohd.
Farhan A. Shaikh v. ACIT [2021] 125 taxmann.com 253 (Bom).
The learned Departmental Representative (ld. DR for short) for the Revenue had nothing to controvert on the said fact. evident that the impugned show cause notice dated 30.03.2013 issued to the assessee by the A.O., it is observed that the A.O. has failed to strike out the irrelevant limb, i.e., whether ‘concealment of particulars of income’ or ‘furnished inaccurate particulars’. The A.O. is said to have issued the impugned notice mechanically without following the mandatory criteria of the statutory provision. It is observed that the notice issued to the A.O. must specific whether the A.O. has levied penalty for concealment of particulars of income or for furnishing of inaccurate particulars of income precisely. It is a settled position that non striking of inapplicable limb vitiates the penalty proceedings. Though the assessee has not raised this issue as a ground of appeal, the ld. AR for the assessee relied on the said legal ground during the appellate proceeding. It is pertinent to point out that it is a settled proposition of law where various courts have taken the view that the non striking of the irrelevant limbs tantamount to the deletion of levy of penalty u/s. 271(1)(c) of the Act. The Hon'ble High Court in Mohd. Farhan A. Shaikh (supra) has held that the non striking of irrelevant limb u/s. 271(1)(c) of the Act as to whether it was for concealment of particulars of income or furnishing of inaccurate particulars would vitiate the penalty proceedings.
10. By respectfully, following the above said decision, we are of the considered opinion that the penalty levied by the A.O. and confirmed by the ld. CIT(A) ought to be deleted on the legal ground. As these issues has been decided on this ground it is not necessary to adjudicate the same on merits of the case.
Order pronounced in the open court on 31.03.2023
More judgments on Section 271(1)(c)
- Ajaybhai Dineshbhai Bagdai, Near Central… vs The Income Tax Officer, Ward-1(2)(1), New…ITA 74/RJT/2026[2013-14]Status: Disposed19 Oct 2026AY 2013-14
- Shalin Jayantbhai Desai, Vadodara vs ACIT, Circle-4(2), Vadodara Present…ITA 2569/AHD/2026[2010-11]Status: Disposed19 Oct 2026AY 2010-11
- Neo Structo Construction P. Ltd., Ahmedabad vs The Pr. CIT- 3, AhmedabadITA 1216/AHD/2026[2015-2016]Status: Disposed16 Oct 2026AY 2015-2016
- Hetal Vinodchandra Sheth, Ahmedabad vs The ITO, Ward-5(3)(1), AhmedabadITA 2370/AHD/2025[2014-15]Status: Disposed16 Oct 2026AY 2014-15
- Hetal Vinodchandra Sheth, Ahmedabad vs The ITO, Ward-5(3)(1), AhmedabadITA 2369/AHD/2025[2014-15]Status: Disposed16 Oct 2026AY 2014-15
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