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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: Dr. M. L. MEENA & SH. RAVISH SOOD
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE Dr. M. L. MEENA, ACCOUNTANT MEMBER AND SH. RAVISH SOOD, JUDICIAL MEMBER ITA No. 591/(Asr)/2017 Assessment Year: 2013-14
Shri Jinder Pal, Vs. Income Tax Officer, House No.1859, Gali No.4, Ward-3, Kartar Nagar, Chheharta, Hoshiarpur Amritsar. [PAN: ABJPP4463E] (Appellant) (Respondent)
ITA No. 455/(Asr)/2018 Assessment Year: 2012-13
Shri Chandan Bhardwaj, Vs. Asst. Commissioner of Income H. No. 233/1, VPO Patti, Tax, Circle-I, Distt. Tarn Taran Amritsar. [PAN: AHNPB0637N] (Appellant) (Respondent)
Appellant by : Sh. K. R. Jain, Adv. Respondent by: Smt. Ratinder Kaur, D.R.
Date of Hearing: 14.12.2021 Date of Pronouncement: 20.12.2021
ORDER Per Dr. M. L. Meena, AM: The aforesaid appeals have been filed by the Assessees against the separate impugned orders dated 12.06.2018, passed by Ld. Commissioner of
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Income Tax (Appeals)-I, Amritsar and dated 06.06.2017 passed by ld. Commissioner of Income Tax (Appeals)-II, Amritsar in relation to penalty proceedings u/s.271(1)(c) for the Assessment Years 2012-13 and 2013-14, respectively. These appeals were heard together as similar facts and issues are involved and are being disposed of by a common order for the sake of convenience. In the grounds of appeal, the Assessees have raised the following grounds:
ITA No.591/ASR/2017
That the order of the learned Income Tax Officer imposing penalty of Rs. 75,000/- is wrong, illegal and against facts. Likewise Ld. CIT(A) is not justified while confirming the same.
That intimation and completion of penalty proceedings are illegal and without justification.
That the learned AO has wrongly imposed the penalty on the assessee under section 271 (1)(c) because the assessee has neither concealed the particulars of his income nor furnished inaccurate particulars of his income. The AO had assessed the income of the assessee by applying flat rate of 8% on his gross receipts and assessed income on estimated basis. The Ld. CIT(A) has further erred in law and on facts while confirming the same.
ITA No.455/ASR/2018
That the order of the Ld. Income Tax Officer imposing a penalty u/s 271(1)(C) is wrong illegal and against facts and likewise CIT(A) is not justified while confirming the same.
That Ld. AO while imposing the penalty has not considered the facts of the case and proceeded to impose the penalty arbitrarily. The Ld. CIT(A) has further erred in law and on facts while confirming the same.
That the AO has further erred in not appreciating the explanation offered and
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proceeded to impose penalty on the difference between contract receipt shown in form 26AS and credited shown in books of account. The AO has further erred in law and on facts while imposing penalty on the alleged income assessed on estimated basis and likewise CIT(A) is not justified while confirming the same.
That Ld. AO has further erred in law and on facts while imposing penalty on the interest earned when the same was duly reflected in form 26AS and TDS has been deducted thereon. The AO has also not considered the fact that the assessee has voluntarily revised the computation of income before the assessment was finalized and likewise CIT(A) is not justified while confirming the same.
That no penalty notice dated 10/03/2017 has been served upon the appellant and as such penalty imposed is bad in law. 6. That no proper satisfaction for initiating the penalty proceedings has been recorded and such imposition of penalty is illegal. 7. That no penalty is impossible in view of the facts of the case.”
At the outset, assessee has challenged the penalty order on the issue of defective show cause notices issued in these cases of the appellants by Assessing Officer without striking one of the limbs. He has not specified whether the penalty was initiated for the concealment of income or furnishing of inaccurate particulars of such income as provided in clause (c) of the said notice. Copy of the notice issued in ITA No.591/ASR/2017 is reproduced herein.
NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(c) OF THE INCOME TAX ACT. 1961 Dated, the 4th August, 2016. PAN :
To
Shri Jinder Pal, 73, Gali No.5, Jawahar Nagar, Chheharta, Distt. Amritsar( Pb.).
Sir/Madam,
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Whereas in the course of proceedings before me for the assessment year 2013-14, it appears to me that you:-
(a) Have without reasonable cause failed to furnish me return of income which you were required to furnish by; a notice given under Section 22(T)/22(2)/34 of the Indian Income tax Act, 1922 or which you were required to furnish under Section 139(1) or by a notice given under Section 139(2)/148 of the Income- tax Act 1961, No……………………..dated……………………….or have without reasonable cause failed to furnish it within the time allowed and the manner required by the said Section 139(1) or by such notice.
(b) Have without reasonable cause failed to comply with a notice under Section 22(4)/23(2) of the Indian Income-tax Act, 1922 or under Section 142(1)/143(2) of the Income Tax Act, 1961. No.________ dated ………
(c) Have concealed the particulars of your Income or furnished inaccurate particulars of such Income.
You are hereby requested to appear before me at Amritsar on 11.08.2016 at 12:30 p.m. and show cause why an order imposing a penalty on you should not be made under Section 271 of the Income-tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative, you may show cause in writing on or before the said date will be considered before any such order is made under Section 271.
Yours faithfully,
(JAGDISH) Income Tax Officer, Ward-IV(2), Amritsar
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Copy of notice issued in ITA No.455/ASR/2018 is as under:
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Ld. Counsel for the assessee also contended that the addition was made on estimate basis by applying Net Profit rate of 8% as against 6.48% declared by the assessee on the total receipt. Ld. AR has further contended that the initiation and levy of penalty u/s.271(1)(c) was illegal and not justified as the Assessing Officer has imposed the penalty on the assessee u/s.271(1)(c) without making him conversant about the charge he was proceeded against by way of striking off one of the limbs in in clause (3) of the notice, specifying whether the assessee has concealed the particulars of your Income or furnished inaccurate particulars of such Income. Such imposition of levy of penalty is wrong, illegal and against the law and the ld. CIT(A) was not justified in confirming the same. In support, he placed reliance upon the judgment delivered by Co-ordinate Bench Amritsar in the case of CIT vs. M/s. Atam Rice Mills, Zira Vs. Asst. CIT, Range, Firozepur. He also placed reliance upon the judgment of Hon’ble Jurisdictional High Court in the case of CIT vs. Sangrur Vanaspati Mills, (2008) 303 ITR 53 and judgment of Hon’ble Apex Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd., (2010) 322 ITR 158 and many others as per synopsis.
The written synopsis submitted by the assessee reads as under:
That this is an appeal against the order u/s 271(1)(c) imposing a penalty of Rs.1,96,025/- and Ld CIT(A) has erred in law and on facts while confirming the same. 2. That proceedings initiated in this case are wrong, illegal and against facts. No specific allegation has been pointed out by the AO as to the concealment of particulars of income or furnishing of inaccurate particulars has been levied by the AO in the notice dated 23/03/2015 issued under section 274 read with section 271(1 )(c) of the Income Tax Act, 1961. Copy of notice u/s 271(1)(c) is attached herewith (Marked Annexure - A) 2.1 It may kindly be appreciated that the AO has initiated the penalty proceedings for concealment of income or furnishing inaccurate particulars of income which is contrary to the provisions of law. Notice issued by AO u/s 271(1)(c) read with section 274 of the Act is bad in law as it does not specify
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whether the penalty have been initiated for concealment of particulars of income or furnishing inaccurate particulars of income. 2.2 Reliance is placed on the decision of Hon’ble Income Tax Appellate Tribunal, Amritsar Bench in the case of Gaurav Mehra vs ACIT in ITA No. 266, 267 & 268/ASR/2014. 2.3 Reliance is also placed on the latest decision of Hon’ble Income Tax Appellate Tribunal, Amritsar Bench (Third Member) in the case of HPCL Mittal Energy Ltd. Vs ACIT in ITA no. 510, 554, 555 & 556/ASR/2014. 2.4 Reliance is further placed on the recent decision of Income Tax Appellate Tribunal, Amritsar Bench in the case of Sh. Harvinder Singh, Jammu vs Income Tax Officer in ITA No. 165- 167/ASR/2015 and decision of Ld CIT(A) in the case of Sh. Sandeep Soni in appeal no. 50/2015-16. 2.5 Further relying on the judgment of Hon’ble Punjab & Haryana High Court in the case of CIT v/s Munish Iron Store 263-ITR 484, the decision of ITAT Chandigarh Bench in the case of Charanjit Singh v/s ITO, Khanna in ITA No. 234/Chandi/99 A.Y. 1996-97 and the judgment of Hon’ble Punjab & Haryana High Court in the case of CIT, Bathinda v/s Sher-e-Punjab Agriculture Works, Rampura Phool in ITA No. 210 of 2007, the decision of ITAT Amritsar Bench in the case of M/s Vishal Filling Station, Myserkhana v/s The Assessing Officer, Ward 1 (3), Bathinda ITA No. 66/ASR/2007 (A.Y. 2003-04), the decision of ITAT Amritsar Bench in the case of the Dy CIT, Bathinda Vs M/s Ram Partap Oil Extractions (P) Ltd, Bareta in ITA No. 514 & 515/ASR/1999 (A.Y. 1987-88 & 1990-91), Commissioner of Income Tax & Anr. Vs Manjunatha Cotton & Ginning Factory (2013) 92 DTR 0111 of Hon’ble High Court of Karanataka, Hon’ble ITAT Indore Bench decision in Dy. CIT Khandwa vs M/s Nepa Ltd in ITA No. 683/Ind/2013 dt 13/10/2014 & Hon’ble ITAT Delhi Bench decision dated 07/09/2015 in Tristar Intech (P) Ltd vs. ACIT Circle 16(1) in ITA No. 1457/Del/2010 & Hon’ble ITAT Calcutta Bench decision dated 03-12-2015 in case of Suvaprasanna Bhatta charya vs. ACIT it is contended that no penalty u/s 271(1)(c) could be levied as the proceedings initiated were not valid and in accordance with the Act. 3. That on merits also no penalty is called for. AO made an addition of Rs. 42,54,123/- on the basis of Form 26AS and applied the rate of 10%. CIT(A) reduced the addition to Rs. 5,16,945/- and applied rate of 8% on total receipts as held by the Hon’ble ITAT, Amritsar Bench, Amritsar in the case of M/s Daljit Singh and Bros. Hence the addition confirmed by the CIT(A) amounts to Rs. 41,356/-
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3.1 The assessee declared the turnover on the basis of receipt while the AO/CIT(A) has taken the receipts on the basis of form 26AS which is gross receipts. It contains certain deductions made by the department for certain irregularities. Hence there is no intentional default on the part of the assessee 4. Further AO made an addition of Rs. 5,00,000/- on account of un-vouched expenses was deleted by the CIT(A) being without any basis. It may kindly be appreciated that the AO has erred in law and on facts while imposing the penalty and likewise CIT(A) is also not justified while confirming the same. Accordingly it is prayed that penalty imposed may kindly be deleted or such other relief as may be permissible may kindly be granted. 4. Ld. DR on the other hand, supported the impugned order. She placed reliance upon the judgment of Hon’ble Allahabad High Court delivered in the case of Asha Enterprises vs. CIT, 2018 Tax Pub (DT) 5244 (All-HC).
We have heard both the sides and perused the impugned orders, and the case law cited. It is admitted fact that the AO has made addition on estimate basis by applying Net Profit rate of 8% as against 6.48% declared by the assessee and secondly issued defective notice by not mentioning specific charge for the levy of the penalty as evident from the notice issued u/s 274 read with section 271(1)(c) of the Act.
The Id. counsel for the assessee submitted that the AO imposed penalty in a mechanical manner without due application of mind. The Ld. counsel for the assessee drew our attention to the notice dated 4th August, 2016 issued to the assessee under section 274 read with section 271(l)(c) by the AO, where the AO has mentioned “Have concealed the particulars of your Income or furnished inaccurate particulars of such income”. He further submitted that the AO is not sure whether the assessee is liable to penalty for concealment of particulars of income or furnishing inaccurate particulars of income. He further drew our
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attention to the assessment order, where the AO has stated that “Penalty proceedings u/s 271 (1)(c) have been initiated separately”. He argued that it shows that the AO was not sure about the specific default/charge of the assessee.
In the case of Gaurav “Mehra vs ACIT”, (Supra) the coordinate bench held as follows:
The Id. counsel further pleaded that in view of the jurisdictional Punjab & Haryana High Court decisions in the case of CIT vs. Munish Iron Store’ (supra) and ‘CIT vs. Shere Punjab Agricultural Works, Bhagta Bhai Ka (Rampura Phul)’ dated 18th May, 2007 in ITA No. 210 of 1997 (copies placed on record before the Bench), which have been followed in a number of cases by this Bench, including Vishal Filling Station vs. A.O.’ in ITA No.66(Asr)/2007, where on identical facts penalty has been cancelled, the impugned penalty may be cancelled. 6. The Id. DR, on the other hand, relied on the impugned order. 7. We have heard both the parties and have gone through the material available on record. From the facts discussed above, it is obvious that during the assessment proceedings, the AO has not recorded satisfaction about concealment of income or furnishing inaccurate particulars, as apparent from the body of the assessment order for the year under consideration. In the notice dated 17.12.2002, the AO observed have concealed the particulars of your income or furnished inaccurate particulars of such income.” Thus, the AO has failed to point out the specific fault/charge due to which penalty has been imposed. In the absence of specific fault/charge, penalty cannot be levied. Reliance placed by the Id. counsel for the assessee on the various decisions, cited hereinabove, fully supports the case of the assessee. The facts of the cases relied on by the Id. counsel are squarely applicable to the facts of the case at hand. 8. For the above discussion, the penalty is not imposable under section 271(1) (c) of the Act for year under consideration and is liable to be quashed on the ground that the AO has failed to apply his mind before
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initiating the penalty proceedings and, therefore, the proceedings initiated are bad in law. As such, the Id. CIT(A) was not justified in sustaining the penalty imposed by the AO. Accordingly, the order of the Id. CIT(A) is set aside and penalty levied by the AO is cancelled. 8. Further, the penalty is not attracted in the case of the assessee, as the the addition was made on estimated basis, the issue is settled by various the Hon’ble High Court. 9. The Hon’ble Punjab & Haryana High Court in the case of ‘Harigopal Singh vs. CIT’, reported at 258 ITR 85 (HC) (P&H) held that the Additions to income made, on estimate basis and that by itself does not lead to the conclusion that the assessee either concealed the particulars of his income or furnished inaccurate particulars of such income. The provisions of s. 271 (1)(c) are not attracted to cases where income of an assessee is assessed on estimate basis and additions are made therein on that basis. The judgment of Hon’ble Allahabad High Court delivered in the case of Asha Enterprises vs. CIT, 2018 Tax Pub (DT) 5244 (All- HC) relied by the ld. DR was being non – jurisdictional is not applicable in the present case as against the judgment of Jurirdictional High Court, so not dealt with.
Agra Bench in case of Rajesh Kumar Agrawal Vs. ACIT in ITA No. 342 /AGR/2014 vide order dated 31/07/2017 follows the Hon’ble Karnataka High Court in the case of CIT vs. Manjunath Cotton & Ginning Factory reported in 359 ITR 565 (Karnataka) while held as under:
It is evident that the Assessing Officer failed to record proper satisfaction while initiating the penalty proceedings u/s 271(1)(c) of the Act at either the stage of assessment proceeding or at the penalty proceeding. Principle of law in respect of satisfaction of specific charge
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for levy of penalty has been considered by the various courts and it is now well settled law that the initiation of penalty should be on a specific charge. Otherwise, the whole proceeding is bad in law and gets vitiated. 12. In view of above, we hold that the orders of the Ld. CIT(A) is not in conformity with the law and hence reversed. Thus, this ground of appeal of the assessee is allowed and other ground of appeal become infructuous.
In the case of ‘CIT V/s Vijay Kumar Jain’, reported at 325 ITR 378 (HC) (Chattisgarh) held that particulars of receipts furnished by the assessee not having been found inaccurate and there being no allegation by the revenue that the assessee has concealed any income in his return, penalty under section 271 (1)(c) could not be imposed simply on account of addition made by the AO on application of higher rate of net profit. 12. Similarly, the Hon'ble Delhi High Court in ‘CIT vs. Aero Traders Pvt. Ltd.’, reported in 322 ITR 316 (Del), has held that no penalty u/s 271(l)(c) can be imposed when income is determined on estimate basis. 13. Again, the Hon’ble HIGH COURT OF BOMBAY in case of “Mohd. Farhan A. Shaikh v. Deputy Commissioner of Income Tax”, [2021] 125 taxmann.com 253 (Bombay) held that a mere defect in notice of not striking off irrelevant matter would vitiate penalty proceedings. Since, penalty proceedings culminate under a different statutory scheme that remains distinct from assessment proceedings, therefore, assessee must be informed of grounds of penalty proceedings only through statutory notice. It is further observed that even if notice contains no caveat that inapplicable portion be deleted, it is in interest of fairness and justice that notice must be precise, it should give no room for ambiguity. 14. Recently, the Hon’ble Apex Court in the case of “Principal Commissioner of Income-tax (Central) v. Goa Coastal Resorts and Recreation (P.) Ltd.”, [2021] 130 taxmann.com 379 (SC), dismissed SLP against High Court's ruling that
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where there was no record of satisfaction by Assessing Officer in relation to any concealment of income or furnishing of inaccurate particulars by assessee in notice issued for initiation of penalty proceedings under section 271(1)(c), same being sine qua non for initiation of such proceedings. 15. In our view, the penalty is not imposable under section 271(1) (c) of the Act for year under consideration and it is liable to be quashed on the ground that the AO has failed to apply his mind by even not bothering to strike one of the allegations and thus fails to record satisfaction in the penalty proceedings. Thus, the penalties levies in both the cases of the appellant are bad in law. 16. Respectfully following the Judgement of Hon’ble Jurisdictional Punjab & Haryana High on the issue of estimated addition, the provisions of s. 271 (1)(c) are not attracted in these cases as the income of the assessee are assessed on estimate basis. 17. In the above view, we hold that the Id. CIT(A) was not justified in sustaining the impugned penalties being imposed u/s 271(1)(c) by the AO. Accordingly, both the orders of the Id. CIT(A) are hereby set aside and the penalties so levied u/s 271(1)(c) by the AO are cancelled.
Order pronounced in the open court on 20 December, 2021.
Sd/- Sd/- (Ravish Sood) (M. L. Meena) Judicial Member Accountant Member Date: 20.12.2021 prabhat
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Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T True Copy By Order