GORAKH NATH YADAV,VARANASI vs. ITA, WARD - 3(4), VARANASI
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Income Tax Appellate Tribunal, ‘VNS‘ BENCH
आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 21/11/2022 passed by NFAC Delhi in relation to the penalty proceedings u/s.271(1)(c) for the A.Y.2004-05. 2. At the outset, we find that the appeal of the assessee is barred by limitation. The assessee has given the following reasons for the delay in filing of the appeal:
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“1. That due date for submitting the appeal was 20.01.2023 but the appellant was suffering from Typhoid & Viral Hepatitis Fever since 10.01.2023 to 26.02.2023 and was advised to bed rest. A Medical Certificate in this regard is attached. 2 That since the appellant has been prevented by sufficient cause in not presenting the appeal before your honour within due date.” 3. After considering the aforesaid reason, we find that there was reasonable cause for delay in filing the appeal, therefore, the delay in filing of the appeal is condoned and the appeal is admitted for hearing. 4. The assessee is aggrieved by penalty of Rs.3,50,162/- on account of addition made under the head long term capital gain of Rs.16,10,438/-. Before us, ld. Counsel for the assessee at the outset submitted that, firstly while initiating the penalty proceedings ld. AO has not specified the charge under which limb penalty is to be imposed in the assessment order. Even in the show-cause notice issued u/s. 274 r.w.s. 271,. AO has not strike off as to under which charge assessee has to give explanation whether for concealing the particulars of income or furnishing inaccurate particulars of such income. Accordingly, initiation of levy of penalty itself is bad in law. On the other hand ld. DR submitted that the ld. AO has levied penalty finally for concealment of income and mere specifying the charge does not invalidate the proceedings. 5. From the perusal of the assessment order which has been passed in pursuance of order of the ITAT, setting aside the quantum issue of determination of capital gain before the ld. AO,
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has not specified any charge as to under which limb he is initiating the penalty u/s 271(1)(c). Even in the show-cause notice, the charge has not been specified. Now, it is a well settled law that the ld. AO has to specify the charge in the show-cause notice, whether he intends to impose the penalty for concealment of income or for furnishing of inaccurate particulars of income. This issue is now squarely covered on the decision of the Hon’ble full Bench of the Bombay High Court in the case of Mr. Mohd. Farhan A. Shaikh wherein the Hon’ble High Court after considering the various judgments has observed and held as under:- “177. That is, even if the assessment order does not contain a specific finding that the assessee has concealed income or he is deemed to have concealed income because of the existence of facts which are set out in Explanation 1, if a mere direction to initiate penalty proceedings under clause (c) of sub-section (1) is found in the said order, by legal fiction, it shall be deemed to constitute satisfaction of the Assessing Officer for initiation of penalty proceedings under the said clause (c). In other words, the Assessing Officer’s satisfaction as to be spelt out in the assessment order is only prima facie. Even if the assessment order gives no reason, a mere direction for penalty proceedings triggers the legal fiction as contained in the Explanation (1). 178. Therefore, in every instance, it is a question of inference whether the assessment order contained any grounds for initiating the penalty proceedings. Then, whenever the notice is vague or imprecise, the assessee assails it as bad; the Revenue defends it by saying that the assessment order contains the precise charge. Thus, it becomes a matter of adjudication, opening litigious floodgates. The solution is a tick mark in the printed notice the Revenue is used to serving on the assessees.
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Besides, the prima facie opinion in the assessment order need not always translate into actual penalty proceedings. These proceedings, in fact, commence with the statutory notice under section 271(1)(c) read with section 274. Again, whether this prima facie opinion is sufficient to inform the assessee about the precise charge for the penalty is a matter of inference and, thus, a matter of litigation and adjudication. The solution, again, is a tick mark; it avoids litigation arising out of uncertainty. 180. One course of action before us is curing a defect in the notice by referring to the assessment order, which may or may not contain reasons for the penalty proceedings. The other course of action is the prevention of defect in the notice—and that prevention takes just a tick mark. Prudence demands prevention is better than cure. Answers: Question No.1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(l)(c), does a mere defect in the notice—not striking off the irrelevant matter—vitiate the penalty proceedings? 181. It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(1)(c), read with section 274 of IT Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness.
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More particularly, a penal provision, even with civil consequences, must be construed strictly. And ambiguity, if any, must be resolved in the affected assessee’s favour. 183. Therefore, we answer the first question to the effect that Goa Dourado Promotions and other cases have adopted an approach more in consonance with the statutory scheme. That means we must hold that Kaushalya does not lay down the correct proposition of law.”
Accordingly, following the ratio and principle laid down in the aforesaid judgment the initiation and levy of penalty is hereby quashed, as no charge has been specified by the AO while issuing show cause notice u/s. 274 r.w.s. 271, that under which limb he intended to levy the penalty. Accordingly, appeal of the assessee is allowed. 7. In the result, appeal of the assessee is allowed.
Order pronounced on 16th October, 2023.
Sd/- Sd/- (B.R.BASKARAN) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 16/10/2023 KARUNA, sr.ps
