SHRI ARVIN DAMODARLAL BIYANI,MUMBAI vs. DCIT -11(2) (1), MUMBAI
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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI
BEFORE SHRI B. R. BASKARAN, AM AND MS. KAVITHA RAJAGOPAL, JM
ITA No.1453/Mum/2022 (Assessment Year: 2010-11) Shri Arvind Damodarlal Biyani DCIT-11(2) 6-161, Mittal Estate, Mumbai Vs. Sir M. V. Road, Andheri (E), Mumbai-400 059 PAN/GIR No. AADPB 0689 H (Appellant) (Respondent) : : Shri Hiro Rai Assessee by Revenue by : Shri Manoj Sinha Date of Hearing : 11.10.2022 Date of Pronouncement : 06.01.2023
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 levy of penalty u/s. 271(1)(c) of the
Act by the Assessing Officer (AO for short) and confirmed by the ld. CIT(A) on the
ground that the same is illegal and invalid as the A.O. has failed to specify under which
limb of section 271(1)(c), the penalty was levied.
The brief facts of the case are that the assessee is a director in M/s. Damodar Yarn
Manufacturing Pvt. Ltd. from where the assessee had received remuneration. The
2 ITA No. 1453/Mum/2022 (A.Y. 2010-11) Shri Arvind Damodarlal Biyani vs. DCIT assessee filed his return of income dated 26.07.2010, declaring total income at
Rs.19,88,524/- after claiming deduction u/s. 80C and u/s.80D, amounting to
Rs.1,00,000/- and Rs.15,000/- respectively. The assessee’s case was selected for scrutiny
and the assessment order dated 11.01.2013 was passed u/s. 143(3) of the Act where the
A.O. had made certain additions/disallowances. The A.O. had also initiated penalty
proceedings and penalty amounting to Rs.15,85,836/- was levied vide order dated
29.03.2016.
The assessee was in appeal before the ld. CIT(A), challenging the assessment
order and the penalty order before the ld. CIT(A). It is observed that the quantum
addition as well as the penalty has been confirmed by the ld. CIT(A).
The assessee is now before us challenging the order of the ld. CIT(A) in
confirming the penalty levied u/s. 271(1)(c) of the Act on the ground that the A.O. has
failed to specify under which limb of section 271(1)(c), penalty was levied, i.e., either for
concealment of income or for furnishing of inaccurate particulars of income.
The ld. AR for the same contended that the penalty notice dated 11.05.2013 did
not specify, on what limbs of the provision of section 271(1)(c), penalty was levied. The
ld. AR further stated that the A.O. has failed to strike of the irrelevant ground in the
penalty notice. The ld. AR relied on the decision of the Hon'ble Bombay High Court in
the case of Mohd. Farhan A. Shaikh v. ACIT 320 CTR 26 (Bom)(FB).
The ld. Departmental Representative (ld. DR for short), on the other hand,
controverted the same and relied on the decision of the lower authorities.
3 ITA No. 1453/Mum/2022 (A.Y. 2010-11) Shri Arvind Damodarlal Biyani vs. DCIT 8. Having heard the rival submissions and perused the materials available on record,
it is observed that the assessee’s case was selected for scrutiny, as the assessee has earned
interest income, amounting to Rs.27,33,699/- and other income, amounting to
Rs.27,59,226/-, against which interest expenditure amounting to Rs.51,76,302/- has been
claimed by the assessee, thereby arriving at net interest income at nil. The A.O. has held
that the assessee has not proved the genuinity of the transaction and has also not
substantiated the claim of deduction, thereby initiating the penalty proceeding against the
assessee. It is observed that the statutory notice u/s. 271(1)(c) of the Act r.w.s. 274 dated
11.01.2013 reveals that the A.O. has failed to specify on which ground, the notice has
been issued u/s. 271(1)(c) of the Act without striking of the irrelevant ground. It is also
observed from the assessment order that the A.O. has failed to specify on what grounds
penalty has been levied u/s. 271(1)(c) of the Act, i.e., for concealment of particulars of
assessee’s income or for furnishing of inaccurate particulars of such income. We would
like to place our reliance on the decision of the Hon'ble Bombay High Court in the case
of Mohd. Farhan A. Shaikh (supra), where the Hon'ble Jurisdictional High Court has held
that the penalty proceeding is vitiated, if there is a lacuna in the notice in not striking out
the irrelevant ground by the A.O. It is evident from the said decision that if the printed
format of the notice issued to the assessee by the A.O., the inapplicable portion is not
struck off as to which limb the penalty is proposed to be imposed then the same is
inferred to be non-application of mind by the A.O. which resultantly vitiate the
imposition of penalty. Thus, it is clear that the intention of the statutory notice is to make
the noticee be conscious of the ground of the notice to present his case pertaining to the
said ground.
4 ITA No. 1453/Mum/2022 (A.Y. 2010-11) Shri Arvind Damodarlal Biyani vs. DCIT 9. By respectfully following the above decision, we are of the considered view that
the defect in the statutory notice in not striking out of the irrelevant ground vitiates the
penalty proceedings for the reason that the assessee has not given sufficient notice for
preparing his defense, as to the grounds on which the penalty proceedings have been
initiated.
From the above observation, we deem it fit and proper to delete the penalty levied
by the A.O. on this legal ground.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 06.01.2023
Sd/- Sd/-
(B. R. Baskaran) (Kavitha Rajagopal) Accountant Member Judicial Member Mumbai; Dated : 06.01.2023 Roshani, Sr. PS
Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER,
(Dy./Asstt. Registrar) ITAT, Mumbai
