SHRI NAVNEET MODI,RANCHI vs. DCIT,CIRCLE-2, RANCHI

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ITA 53/RAN/2019Status: DisposedITAT Ranchi28 April 2023AY 2013-147 pages

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Income Tax Appellate Tribunal, “RANCHI BENCH, RANCHI

Before: Shri Sanjay Garg & Shri Rajesh Kumar

I.T.A. No.53/Ran/2019 Assessment Year: 2013-14 Shri Navneet Modi

IN THE INCOME TAX APPELLATE TRIBUNAL “RANCHI BENCH, RANCHI VIRTUAL HEARING AT KOLKATA Before Shri Sanjay Garg, Judicial Member and Shri Rajesh Kumar, Accountant Member I.T.A. No.53/Ran/2019 Assessment Year: 2013-14 Shri Navneet Modi….…..…………..…...…......................……...…..….. Appellant Modi House, Kanke Dam Side Road, Kanke, Ranchi-834008. [PAN: ACTPM1511F] vs. DCIT, Circle-2, Ranchi.………………………….……….…………….. Respondent Appearances by: Shri Devesh Poddar, Adv., appeared on behalf of the appellant. Shri Pranob Kumar Koley, Sr. DR, appeared on behalf of the Respondent. Date of concluding the hearing : February 28, 2023 Date of pronouncing the order : April 28, 2023 ORDER Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 03.10.2018 of the Commissioner of Income Tax (Appeals), Ranchi [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’).

2.

Earlier, the present appeal was disposed of vide order dated 30.10.2019 of this Tribunal. However, the said order was recalled vide order dated 29.12.2022 passed in MA No.20/Ran/2019. In view of this, we proceed to decide the appeal afresh.

I.T.A. No.53/Ran/2019 Assessment Year: 2013-14 Shri Navneet Modi

3.

The assessee in this appeal has agitated the levy of penalty of Rs.25,548/- u/s 271(1)(c) of the Act.

4.

The brief facts of the case are that the Assessing Officer during the assessment proceedings noted that the assessee has not offered to tax certain interest income received by him as was deciphered from Form 26AS. He, therefore, made the addition of Rs.77,420/- and initiated the penalty proceedings u/s 271(1)(c) of the Act. Further the Assessing Officer made certain disallowances on account of cash payments made above the statutory limit of Rs.20,000/- making a disallowance of Rs.1,04,634/- u/s 40A(3) of the Act. The Assessing Officer also disallowed certain expenditure on ad hoc basis out of the total expenses on account of transport and freight. The Assessing Officer further made ad hoc disallowances out of certain expenditure on diesel and petrol, fuel and gas etc. totalling to Rs.1,36,234/- and assessed the total income by the assessee at Rs.31,65,966/- and initiated penalty proceedings u/s 271(1)(c) of the Act.

5.

During the penalty proceedings, the ld counsel for the assessee has submitted that certain disallowances were made on ad hoc basis and in that case, there was neither concealment of income nor furnishing of inaccurate particulars of income. Further that in respect of interest income shown in Form 26AS, the same was neither reflected in Form 26AS nor the parties provided the TDS certificate to the assessee at the time of filing of Income Tax Return for the assessment year under consideration. The ld. Assessing Officer rejected all the contentions made by the assessee on single line order that the contention of the assessee was not accepted and the amount is treated as income not disclosed and levied the impugned penalty.

I.T.A. No.53/Ran/2019 Assessment Year: 2013-14 Shri Navneet Modi

6.

In appeal, the ld. CIT(A) confirmed the penalty so levied by the Assessing Officer.

7.

We have heard the rival contentions and gone through the record. At the outset, the ld. Counsel for the assessee has invited our attention to the impugned assessment order to submit that in the assessment order there was not separately mentioned by the Assessing Officer about each of the item as to how and on what account, the penalty proceedings were being initiated on that issue. The Assessing Officer simply initiated the penalty proceedings on the entire amount added by the assessee under different heads. The ld. Counsel for the assessee has pleaded that in respect of the items where there was ad hoc disallowance made by the Assessing Officer @5% and 1% etc. in respect of certain expenses, there was no question of concealment of income or furnishing of inaccurate particulars of income. He has further contended that the Assessing Officer was supposed to mention either in the assessment order or in the notices issued u/s 274 of the Act as to on what account the penalty proceedings were being initiated in respect of each of the addition. The ld. counsel has further invited our attention to the copy of the notices issued u/s 274 r.w.s 271(1)(c) of the Act and it is found that the said notices are general and there is no mention of as to whether the penalty proceedings are initiated in respect of which item and on what account i.e. on account of concealment of income or for furnishing inaccurate particulars of income. It is generally mentioned in the notice that you have concealed particulars of income or you have furnished inaccurate particulars of such income. The ld. counsel has submitted that the items of income and the charge of concealment of

I.T.A. No.53/Ran/2019 Assessment Year: 2013-14 Shri Navneet Modi

income or furnishing inaccurate particulars of income, even the amount of income and tax sought to evade has also not been mentioned.

8.

A perusal of the penalty order also reveals that even none of the contentions raised by the assessee have been discussed by the Assessing Officer and the penalty order passed u/s 271(1)(c) of the Act is vague and nothing had been discussed in the said penalty order as to how and on what account the penalty is leviable in the case of the assessee in respect of each item of addition. The ld. counsel has also relied upon the decision of the Coordinate Bench of the Tribunal in the case of ‘Sri Pawan Kumar Agarwal vs. DCIT in ITA No.337 to 339/Ran/2018’ vide order dated 21.05.2019, wherein, the Tribunal while relying upon the decision of the Karnataka High Court in the case of ‘CIT vs. M/s SSA’s Emerald Meadows’ vide order dated 23.11.2016 and of the Hon’ble Supreme Court in the case of ‘Dilip N. Shroff vs. JCIT 291 ITR 519(SC)’ has deleted the penalty, wherein, the Revenue has failed to bring specific charge of penalty i.e. of concealment of income or furnishing inaccurate particulars of income. Relevant part of the order of the Coordinate Bench of the Tribunal is reproduced as under:

“8. Hon'ble Apex Court vide judgment in case of M/s. SSA's Emerald Meadows, (2016) 73 taxmann.com 248(SC) dismissed the Special Leave Petition filed by the Revenue against the judgment rendered by Hon'ble High Court of Karnataka whereby identical issue was decided in favour of the assessee. Operative part of the judgment in case of M/s. SSA's Emerald Meadows (supra) decided by Hon'ble High Court of Karnataka is reproduced below :- "2. This appeal has been filed raising the following substantial questions of law:

I.T.A. No.53/Ran/2019 Assessment Year: 2013-14 Shri Navneet Modi

(1) Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case? (2 Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in. holding that the penalty notice under Section 274 r.w.s. 271(l)(c) is had in law and. invalid in spite the amendment of Section 271(1 B) with retrospective effect and by virtue of the amendment, the assessing officer has initiated the penalty by properly recording the satisfaction for the same? (3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in deciding the appeals against the Revenue on the basis of notice issued, under Section 274without taking into consideration the assessment order when the assessing officer has specified that the assessee has concealed particulars of income? 3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (for short 'the Act') to be bad in law as it did not specify which limb of Section 271(l)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. .The Tribunal, while allowing the appeal of the assessee, has relied 01 the derision of the Division Bench of this Court rendered In the case of COMMISSIONER or INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565. 4. In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court, the appeal is accordingly dismissed." 9. Bare perusal of the notice issued u/s 274 r.w.s.271(1)(c) of the Act apparently goes to prove that the Assessing Officer initiated the penalty proceedings by issuing the notice u/s 274/271(1)(c) of the Act without specifying the assessee has concealed ''particulars of income" or assessee has furnished "inaccurate particulars of income", so as to provide adequate opportunity to the assessee to explain the show cause

I.T.A. No.53/Ran/2019 Assessment Year: 2013-14 Shri Navneet Modi

notice. Rather notice in this case has been issued in a stereotyped manner without applying any mind which is bad in law, hence is not a valid notice sufficient to impose penalty u/s 271(1)(c) of the Act. 10. The penalty provisions of section 271(1)(c) of the Act are attracted where the assessee has concealed the particulars of income or furnished inaccurate particulars of such income. It is also a well- accepted proposition that the aforesaid two limbs of section 271(1)(c) of the Act carry different meanings. Therefore, it was imperative for the Assessing Officer to strike- off the irrelevant limb so as to make the assessee aware as to what is the charge made against him so that he can respond accordingly. The Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Kar) observed that the levy of penalty has to be clear as to the limb under which it is being levied. As per Hon'ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon'ble High Court held that the standard proforma of notice under section 274 of the Act without striking of the irrelevant clauses would lead to an inference of non- application of mind by the Assessing Officer. The Hon'ble Supreme Court in the case of Dilip N. Shroff vs. JCIT, 291 ITR 519(SC) has also noticed that where the Assessing Officer issues notice under section 274 of the Act in the standard proforma and the inappropriate words are not deleted, the same would postulate that the Assessing Officer was not sure as to whether he was to proceed on the basis that the assessee had concealed the particulars of his income or furnished inaccurate particulars of income. According to the Hon'ble Supreme Court, in such a situation, levy of penalty suffers from non-application of mind. In the background of the aforesaid legal position and, having regard to the manner in which the Assessing Officer has issued notice under section 274 r.w.s. 271(1)(c) of the Act dated 30.12.2010 without striking off the irrelevant words, the penalty proceedings show a non- application of mind by the Assessing Officer and is, thus, unsustainable. 11. The facts of the present appeal are identical to the facts of the case before the Hon'ble Supreme Court in the case of SSA's. Emarld Meadows(supra) and, therefore, the decision of Hon'ble Supreme Court squarely applies to the case of the assessee. Hence, respectfully following the same, we set aside the order passed by the CIT(A) dated 30.08.2018 and cancel the order of the Assessing Officer dated 30.06.2012 in all the three appeals levying penalty of Rs.1,42,290/- for A.Y.2005-06, Rs.18,360/- for A.Y.2006-07 and Rs.30,600/- for A.Y.2007- 08/-, respectively and allow the grounds of all the three appeals of the assessee.”

I.T.A. No.53/Ran/2019 Assessment Year: 2013-14 Shri Navneet Modi

9.

In view of the above discussion, we do not find justification on the part of the lower authorities in levying the impugned penalty and the same is accordingly ordered to be deleted.

10.

In the result, the appeal of the assessee stands allowed. Kolkata, the 28th April, 2023. Sd/- Sd/- [Rajesh Kumar] [Sanjay Garg] Accountant Member Judicial Member Dated: 28.04.2023. RS Copy of the order forwarded to: 1. Shri Navneet Modi 2. DCIT, Circle-2, Ranchi 3. CIT(A)- 4. CIT- , 5. CIT(DR),

//True copy// By order Assistant Registrar, Kolkata Benches

SHRI NAVNEET MODI,RANCHI vs DCIT,CIRCLE-2, RANCHI | BharatTax