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

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.

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 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.

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.

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 dated 18.2.2020 while dealing with identical issue the Co-ordinate Bench has been pleased to observe as follows:

In the result, the appeal of the assessee is allowed.