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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
O R D E R
PER PAVAN KUMAR GADALE JM:
The assessee has filed the appeal against the order of the Commissioner of Income Tax (Appeals)(CIT(A)) – 38, Mumbai passed u/s 250 of the Act. The assessee has raised the ground of appeal challenging the levy of penalty u/sec271(1)C of the Act.
Shri Sonpal Singh Pal Singhsaini, Mumbai. - 2 - 2. The brief facts of the case are that the assessee is a director of M/s Sona Transport Pvt Ltd and derives income from salary, house property and other sources. The assessee has filed the return of income for the A.Y 2009-10 on 17.09.2009 disclosing a total income of Rs.4,42,930/- and the return of income was processed u/s 143(1) of the Act.Subsequently the case was selected for scrutiny and notice u/s 143(2) and 142(1) of the Act along with questionnaire was issued. As per the AIR information (i)the assessee has received interest income from State bank of Patiala and Apra Sahakari Bank Ltd and the assessee has not disclosed the interest income in the return of income filed, since the assessee has failed to disclose the interest income, the Assessing Officer (AO) has made addition of Rs. 1,51,536/-.(ii) Further the AO found as per the AIR information, certain cash deposits made in the savings bank of the assessee in three bank accounts. Whereas, the assessee has filed the explanations vide letter dated 15.07.2011 explaining the reasons, sources and withdrawals from transport company but the AO was not satisfied with the explanations and made addition of Rs.57,70,300/-.(iii)
Shri Sonpal Singh Pal Singhsaini, Mumbai. - 3 - the AO found that there is difference of Rs.26,11,350/- in the balance sheet and made addition. Finally the A.O. has assessed the total income of Rs.89,76,120/- and passed the order u/s 143(3) of the Act dated 23-12-2011.
Subsequently, the AO has initiated penalty proceedings u/s 271(1)(c) of the Act, whereas in the penalty proceedings the assessee was issued show cause notice and the assessee has filed the detailed explanations referred at Page 3 Para 4 of the order. The AO has considered findings of scrutiny assessment, submissions and was not satisfied with the explanations as dealt in the order and levied a penalty of Rs.13,10,559/- and passed the order u/s 271(1)(c) of the Act dated 24-03-2015.
Aggrieved by the penalty order, the assessee has filed an appeal before the CIT(A). In the appellate proceedings, the CIT(A) has considered the grounds of appeal, submissions and has confirmed the penalty levied by the A.O and dismissed the assessee appeal.
Shri Sonpal Singh Pal Singhsaini, Mumbai. - 4 - Aggrieved by the CIT(A) order, the assessee has filed an appeal before the Hon’ble Tribunal.
At the time of hearing, the Ld. AR of the assessee submitted that the assessee has cooperated in submitting the information with the A.O. Further the notice issued for levy of penalty is invalid and relied on the judicial decisions and prayed for allowing the appeal. Contra, the Ld. DR submitted that the CIT(A) has rightly confirmed the levy of penalty and the technicalities raised by the assessee are devoid of merits and supported the order of the CIT(A).
We heard the rival submissions and perused the material on record. The sole crux of the disputed issue is that the assessee has challenged the levy of penalty on legal issue as the A.O. has not applied his mind and non striking of charge in the penalty notice i.e. whether the charge is for concealment of income or furnishing of in accurate particulars of income. The Ld.AR demonstrated the copy of penalty notice dated 23-12-2011 and the submissions are realistic. We find the Jurisdictional Honble High Court of Bombay in Mohd Farhan A Shaikh Vs. DCIT in Tax Appeal No. 51 Shri Sonpal Singh Pal Singhsaini, Mumbai. - 5 - to57of2012dated11.03.202(2021)125.taxmann.com25 3 /434 ITR 1 (Bombay) has dealt on this disputed issue of not striking off charge in the penalty notice would vitiate the penalty proceedings. The Hon’ble High Court has made observations at page 56 as under;
One course of before us is curing a defect in the notice by referring to the assessment order, which may or not contain reason for the penalty proceedings. The other course of action is the prevention of defect in the notice – and that prevention takes just a tick mark. Prudence demands prevention is better than cure. Answers: Question No. 1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Sec. 271(1)(c), does a mere defect in the notice – not striking off the irrelevant matter vitiate the penalty proceedings?
It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under Sec. 271(1)(c), r.w.s. 274 of the Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other’s defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a deferent statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty Shri Sonpal Singh Pal Singhsaini, Mumbai. - 6 - proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness.
More Particularly, a penal provision, even with civil consequences, must be construed strictly. And ambiguity, if any, must be resolved in the affected assessee’s favour. 7. We have considered the facts, circumstances and ratio of the decision of Honble High Court and are of the view that in the present case the A.O has not strike off the charge for levy of penalty for concealment of income or for furnishing of inaccurate particulars of income. Accordingly, we set aside the order of the CIT(A) and quash the penalty notice. And allow the grounds of appeal in favour of the assessee.