GANGESH BELLAHALLI KRISHNADAS,NAVRANG BAR AND RESTAURANT vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1), MYSORE

PER MADHUMITA ROY, JUDICIAL MEMBER:

The instant appeal filed by the assessee is directed against the order dated 25.8.2023 passed by the National Faceless Appeal Centre (in short “NFAC”) arising out of the order dated 29.8.2021 passed by the ld. AO u/s 271(1)(c) of the Income Tax, 1961 (in short “The Act”) for the Assessment Year 2010-11, whereby and whereunder the penalty imposed by the ld. AO has been confirmed. 2. The brief facts leading to the case is this that the assessee, being an individual filed its return of income for the Assessment Year 2010-11 on 26.3.2012 by declaring total income at Rs.10,18,390/-, which was finalized under scrutiny assessment u/s 143(3) of the Act on 30.01.2014 upon determining the total income at Rs.32,54,010/- by the ld. AO. In appeal, the ld. CIT(A) restricted the addition to the

ITA No.777/Bang/2023 Sri Gangesh Bellahalli Krishnadas, Mysore Page 2 of 4 tune of Rs.8,60,616/-. Subsequently, penalty initiated against the assessee by and under the issuance of notice dated 30.01.2014 u/s 274 of the Act under the signature of the DCIT Circle-1(1), Mysore, which was completed upon levying penalty of Rs.2,86,532/- being 100% of tax sought to be evaded u/s 271(1)(c) of the Act dated 29.08.2011, which was in turn confirmed by the First Appellate Authority. Hence, the instant appeal before us. 3. The case of the assessee before us is this that the notice dated 30.01.2014 issued by the ld. DCIT, Circle-1(1) Mysore u/s 274 of the Act did not specify the limb for initiating the penalty proceedings u/s 271(1)(c) of the Act, meaning thereby, neither the allegation of concealment of particulars of income of the assessee nor the furnishing of inaccurate particulars of such income by the assessee has been specified in that notice. In that view of the matter, as it is trite law that initiation of penalty proceedings should be made by the issuance of notice by the ld. AO specifying the allegation to be levelled against the assessee, which is admittedly absent in the instant case, the entire proceedings is vitiated and liable to be quashed. 3.1 On this ground, he drew our attention at page 16 of the paper book filed before us being the notice dated 30.01.2014 issued u/s 274 of the Act by the DCIT Circle-1(1), Mysore. Further that, it has also been pointed out by the ld. Counsel appearing for the assessee that the penalty order dated 29.8.2021 alleged furnishing of inaccurate particulars of income to the tune of Rs.8,60,616/- by the assessee, which was wrongly confirmed by the First Appellate Authority. Such submissions made by the ld. A.R. has not been controverted by the ld. D.R. However, he relied upon the orders passed by the authorities below in levying the penalty and confirmation of the same by the First Appellate Authority. 4. We have heard the rival submissions made by the respective parties and also perused the relevant materials available on record. Upon perusal of the notice dated 30.01.2014 appearing at page 16 of

ITA No.777/Bang/2023 Sri Gangesh Bellahalli Krishnadas, Mysore Page 3 of 4 the paper book filed before us, we find that the contention made by the assessee is correct. No limb has been specified by the DCIT while initiating the penalty proceedings under the statutory provision, which is sine-qua-non and in the absence of which the entire proceedings is vitiated and therefore, it has to be quashed as submitted by the ld. A.R., which appears to be acceptable. We find in the identical facts and circumstances; the Co-ordinate Bench has been pleased to quash the entire penalty as no limb has been specified while the proceeding was initiated by the ld. AO. In ITA No.1950/Bang/2017 dated 18.2.2020 while dealing with identical issue the Co-ordinate Bench has been pleased to observe as follows:

“ 5.2 It is clear from the aforesaid decision that on the facts of the present case that the show cause notice u/s, 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Further, the Hon’ble Karnataka High Court in the case of CIT v. SSA's Emerald Meadows in ITA No.380 of 2015 dated 23.11.2015, it was held that imposing penalty u/s 271(l)(c) of the Act is bad in law and invalid for the reason that the show cause notice issued u/s 274 of the I.T. Act does not specify the charge against the assessee as to, whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. As against this decision of the Hon’ble Karnataka High Court, the Revenue has preferred an appeal in SLP in CC No. 11485 of 2016 and the Hon'ble Supreme Court by order dated 05.08.2016 dismissed the SLP preferred by the Department. These judgments were followed by the co-ordinate Bench in the case DCIT v. Shri C.S. Prasad in ITA No.359/Bang/2018 - order dated 15.02.2019. Following the decision of the Hon'ble Karnataka High Court, we hold that the orders imposing penalty in that assessment year has to be held as invalid and consequently penalty imposed is cancelled.”

ITA No.777/Bang/2023 Sri Gangesh Bellahalli Krishnadas, Mysore Page 4 of 4 4.1 It appears that the order passed by the Hon’ble jurisdictional High Court has also taken into consideration by the Co-ordinate Bench. Thus, respectfully relying upon the same, we quash the entire penalty proceeding in the absence of the non-specific notice issued to the assessee while initiating the proceeding.

Order pronounced in the open court on 14th Dec, 2023

Sd/- Sd/- (Chandra Poojari) (Madhumita Roy) Accountant Member Judicial Member

Bangalore, Dated 14th Dec, 2023. VG/SPS

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Asst. Registrar, ITAT, Bangalore