PANDA INFRATECH LIMITED,BHUBANESWAR vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, BHUBANESWAR

O R D E R Per Bench This is an This is an appeal filed by the assessee against the orde appeal filed by the assessee against the order of the ld CIT(A), Bhubaneswar CIT(A), Bhubaneswar-2 dated 10.8.2024 in Appeal No. in Appeal No.CIT(A), Bhubaneswar-2/10013/2018 2/10013/2018-19 against against the the penalty penalty order order passed passed u/s.271AAB of the Act u/s.271AAB of the Act for the assessment year 2015-16.

2. The assessee has raised the following grounds in this appeal: The assessee has raised the following grounds in this appeal: The assessee has raised the following grounds in this appeal:

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P a g e 3 | 14 Assessment Year : 2015-16 and distinct proceedings to the proceedings initiated u/s. 271AAB of the Act vide re-assessment order passed u/s.147/143(3) of the Act. The Assessing Officer must complete both of these penalty proceedings separately initiated by way of two separate orders. Since the penalty proceedings initiated vide order u/s.143(3) dated 28.12.2016 has not yet been concluded the same is barred by limitation as on date. He thus submit that therefore, no penalty can be leviable u/s. 271AAB of the Act on the addition of Rs.1 crore in the hands of the assessee initiated vide order u/s.143(3) of the Act dt.28.12.2016 through penalty order passed u/s.271AAB against the proceedings initiated in the reassessment order passed u/s.147 r.w.s 143(3) of the Act. He further submits that assessee has not challenged the order passed u/s.143(3) dated 28.12.23016 thus as provided in section 275(1)(a) of the Act, the penalty proceedings initiated u/s.271AAB in the said order must be concluded upto 30.9.2017 i.e. within six months from the end of relevant assessment in which the order initiating such proceedings was completed. Since no order is passed upto 30.9.2017 on such pending proceedings, the said proceedings are now barred by limitation.

P a g e 5 | 14 Assessment Year : 2015-16 undisclosed income, which is not declared by the assessee, then the assessee is liable to penalty u/s.271AAB of the Act.

The penalty proceedings u/s.271AAB which were initiated are also retained at the time of this reassessment u/s.147 of the I.T.Act, 1961

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11. From the perusal of the said notice, it is very much clear that though there is reference of initiation of proceedings u/s.271AAB, however, nowhere in the said order, the assessee was asked to explain as to which provisions of section 271AAB((1)(a)(b)& (c) is going to be invoked for levy of penalty and the Assessing Officer has show caused the assessee to explain as to why the penalty should not be levied for furnishing inaccurate particulars of income or concealment of particulars of income. Thus, the Assessing Officer without mentioning specific default of the assessee in terms of clause (a) or (b) or (c) of Section 271AAB, the show cause notice issued in routine manner charging the offences prescribed u/s.271(1)(c) of the Act cannot be considered a valid notice in the eyes of law and accordingly, the levy of penalty on the basis of such defective notice is liable to be held as void abinitio. Identical issue is dealt by the Kolkata ITAT in the case of Sushil Kumar Paul(supra), wherein, after considering the facts, the Co-ordinate bench vide paras 10 to 14 has observed as under:

“10. From going through the above notice issued to the assessee on 28.12.2017, we find that there is no mention about various conditions provided u/s 271AAB of the Act. The ld. AO has very casually used the proforma used for issuing notice before levying penalty u/s 271(1)(c) of the Act for the concealment of income or furnishing of inaccurate particulars of income. Except mentioning the section 271AAB of the Act in the notice, it does not talk anything about the provisions of section 271AAB. Therefore, certainly such notice has a fatal error and technically is not a correct notice in the eyes of law because it intends to penalize an assessee without spelling about the charge against the assessee.

P a g e 9 | 14 Assessment Year : 2015-16 “It is clear from the Sub Section (3) of Section 271 AAB that Sections 274 and Section 275 of the Act shall, so far as may be, apply. Sub Section (1) of Section 274 of the Act mandates that order imposing penalty has to be imposed only after hearing the assessee or giving a assessee opportunity of hearing. Opportunity that is to be given to the assessee should be a meaningful one and not a farce. Notice issued to the assessee reproduced (supra), does not show whether penalty proceedings were initiated for concealment of income or for furnishing inaccurate particulars of income or for having undisclosed income within the meaning of Section 271AAB of the Act. Notice in our opinion was vague. Hon'ble Karnataka High Court in the case of SSA's Emerald Meadows (supra) relying in its own judgment in the case of Manjunatha Cotton and Ginning Factory (supra) had held as under:- "2. This appeal has been filed raising the following substantial questions of law. 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(1)(c) is bad in law and invalid despite 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 274 without 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 (1 )(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 on the decision of the Division Bench of this Court rendered in the case of CIT 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

P a g e 10 | 14 Assessment Year : 2015-16 question of law arises in this appeal for determination by this Court. The appeal is accordingly dismissed". In the earlier case of Manjunatha Cotton and Ginning Factory (supra) their lordship had observed as under:- "Notice under section 274 of the Act should specifically state the grounds mentioned in section 271(1)(c) , i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy the requirement of law; The assessee should know the grounds which he has to meet specifically. Otherwise, the principles of natural justice are offended. On the basis of such proceedings, no penalty could be imposed on the assessee) taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law; penalty proceedings are distinct from the assessment proceedings : though proceedings for imposition of penalty emanate from proceedings of assessment, they are independent and a separate aspect of the proceedings; The findings recorded in the assessment proceedings in so far as "concealment of income" and "furnishing of incorrect particulars" would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the proceedings on the merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared invalid in the penalty proceedings". View taken by the Hon'ble Karnataka High Court in the above judgment was indirectly affirmed by the Hon'ble Apex Court, when it dismissed an SLP filed by the Revenue against the judgment in the case of SSA's Emerald Meadows (supra), specifically observing that there was no merits in the petition filed by the Revenue. Considering the above cited judgments, we hold that the notice issued ujs.274 r.w.s. 271AAB of the Act, reproduced by us at para 5 above was not valid. Exconsequenti, the penalty order is set aside.

P a g e 11 | 14 Assessment Year : 2015-16 DCIT (supra) and in the given facts and circumstances of the case wherein the matter written in the body of the notice issued u/s 274 of the Act does not refer to the charges of provision of section 271AAB of the Act makes the alleged notice defective and invalid and thus deserves to be quashed. Since the penalty proceeding itself has been quashed the impugned penalty of Rs. 83,02,410/- stands deleted. Thus the assessee succeeds on legal ground challenging the validity of notice issued u/s 274 r.w.s. 271AAB of the Act.

14. Since the penalty u/s 271AAB has been deleted on the preliminary legal points, other arguments of the assessee dealing with the merits of the levy of penalty are not been dealt with, as the same are rendered academic in nature. Thus grounds raised

on merits are dismissed as infructuous. Appeal of the assessee for the assessment year 2016-17 is allowed

15. In the result, the appeal of the assessee is partly allowed.”

12. This order of ITAT Kolkata in the case of Sushil Kumar Paul (supra) is followed by ITAT Delhi Benches in the case of Landcraft Developers Pvt ltd. (supra), wherein, the Tribunal vide its order dated 8.1.2024 in paras 8 to 9 has observed as under:

“8. From the above, it could be seen that there is a greater onus casted on the Revenue to specifically mention in the show cause notice itself as to what offence the assessee has committed and also to mention the rate of penalty that is sought to be levied by the Assessing Officer on the assessee i.e., 10% or 20% or 30% or 60% of undisclosed income, as the case may be. If none of these preliminary informations are mentioned in the show cause notice, then the show cause notice issued by the Ld. AO becomes completely defective and consequentially fatal and would vitiate the entire penalty proceedings. This issue, in any case, is no longer res integra in view of the decision of Kolkata Tribunal in the case of Sushil Kumar Paul vs. ACIT in for A.Y. 2016-17 dated 15/12/2022 wherein it was held as under:- “10. From going through the above notice issued to the assessee on 28/12/2017, we find that there is no mention about various conditions provided u/s 271AAB of the Act. The Id. AO has very casually used the proforma used for issuing notice before levying penalty u/s 271(1)(c) of the Act for the concealment of income or furnishing of inaccurate particulars of income. Except mentioning the section 271AAB of the Act in the notice, it does not talk anything about the provisions of section 271AAB. Therefore, certainly such notice has a fatal error and technically is not a correct notice in the P a g e 12 | 14 Assessment Year : 2015-16 eyes of law because it intends to penalize an assessee without spelling about the charge against the assessee.’ 9. In view of the aforesaid observations and respectfully following the judicial precedent relied upon herein above, we hold that the penalty notice issued on 31/03/2015 is defective and, accordingly, entire penalty proceedings gets vitiated. Hence, the penalty levied u/s 271AAB of the Act in the facts and circumstances of the instant case would have no legs to stand in the eyes of law. Accordingly, the grounds raised by the assessee are allowed on this technical aspect.”

13. Similarly, Hon’ble High Court of Calcutta in the case of Industrial Safety Products Pvt Ltd (supra) has held the issue of defect in the notice for initiation of penalty u/s.271AAB in favour of the assessee by observing as under:

Section 273, read with section 271 of the Income Tax act, 1961-Penalty – procedure for imposition of (scope of provision)-Assessment year 2015-16- Assessing Officer initiated penalty proceedings against assessee by issuance of notice under section 274 read with section 271-Whether since impugned notice did not furnish any particulars and all relevant columns had been left blank, notice was bad in law and initiation of penalty proceedings was vitiated-Held, Yes

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