MUKESH DESAI,MUMBAI vs. CIRCLE 25(3), MUMBAI

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.

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.