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Income Tax Appellate Tribunal, DELHI BENCH “A”: NEW DELHI
Before: SHRI N. K. BILLAIYA & SHRI ANUBHAV SHARMA
O R D E R PER ANUBHAV SHARMA, J. M.:
1. 1. This appeal has been preferred by the Assessee against the order dated 24.09.2018 of ld CIT(A)-1, New Delhi (hereinafter referred as the First Appellate Authority “FAA”) in appeal No. 537/17-18 arising out of an appeal before it against the penalty order dated 26.03.2018 passed u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred as „the Act‟) by the ld AO, ITO, Ward-3(2), New Delhi (hereinafter referred as the Ld. AO).
2. The appellant company had filed return of income on 30.09.2012 declaring gross total income of Rs. Nil and the case was selected for scrutiny. An assessment order u/s 144 of the Act was passed making an ad hoc addition of Rs. 2 crores. In appeal before Ld. CIT(A), the same Page | 1 was reduced to Rs. 46,46,217/- while deleting Rs. 1,53,53,783/-. Thereafter, vide penalty order dated 28.02.2018, the ld AO had imposed penalty of Rs. 14,35,681/-@100% of the tax sought to be evaded u/s 271(1)(c) of the Act and the same was sustained by the ld CIT(A) by impugned order dated 11.09.2018. 3. The Assessee is in appeal before the Tribunal raising following grounds of appeal:- “1. That the learned CIT (Appeals) has erred both in law and on facts by confirming the penalty order passed by the AO under section 271(l)(c) amounting to Rs. 14,35,680/-, without appreciating the fact that the AO has not made any distinction between the two charges i.e. concealment of income and furnishing the inaccurate particulars of income thus violated the rules laid down by the Honorable Karnataka High Court in case of Maniunatha Cotton and Ginning Factory (2013) 359 ITR 565. (Karnataka), where in it was held that the notices under challenge are not in conformity with the law and they are void ab initio. Accordingly the said notices and all proceedings based thereon, culminating in the impugned order and quashed. This verdict was also followed by the jurisdictional ITAT recently, in case of PSB Industrial (India) Private Limited vs ACIT (ITA No. 2002.2003.2004. and 2005/Del/2011), order pronounced on 09-11-2017.
2. That the learned CIT (Appeals) has erred both in law and on facts by confirming the penalty order passed by the AO under section 271(l)(c) that no penalty may be imposed in case the income is assessed on estimation basis. The learned CIT (Appeals) completely failed to appreciate the vital fact that against the quantum order, CIT (Appeals) has restricted the additions of the order of AO, passed under section 144/143(3) of the Act, from Rs. 2,00,00,000/- to Rs.
46,46,217/-, by just using the three (3) different tools, confirmed the rejection of books of accounts and accordingly re-estimation of the Income has been made.
That the learned CIT (Appeals) has erred both in law and on facts by confirming the penalty order passed by the AO under section 271(l)(c) without appreciating the fact that Learned CIT (Appeal) while passing the order, against the quantum of appeal, estimation of income has been made, by using the three (3) different tools as under: a. Estimation of income due to negative cash Rs. 27,52,695/- b. Estimation of expenses incurred while cash was negative Rs. 4,00,000/- c. Estimation of income due to reduction of GP Ration From 8.84% to 7.31% Rs. 14,93,522/- Thus, alternatively the imposition of the penalty under section 271(l)(c) of the act must be made on the basis of each tool adopted by the CIT (Appeal) on the amount of addition confirmed and not at all on the total amount confirmed in the quantum of appeal.”
Heard and perused the record.
The basic argument of the ld AR of the Assessee was that the penalty proceeding notice issued u/s 274 read with section 271 of the Act is defective as same does not disclose as to if the penalty has been levied for concealment of the income or for furnishing inaccurate particulars of income. In this context judgment of the Hon'ble Delhi High Court in case of Pr. CIT Vs. Sahara Life Insurance Company Ltd (2019) 108 Taxmann.com 597 (Delhi) was relied. On merit it was also submitted that as assessment order was passed u/s 144 on the basis of estimate of profits therefore, there can be no case of concealment of income or submitting inaccurate particulars. Reliance in this regard was placed on the judgment of Hon'ble Delhi High Court in CIT Vs. Aero Traders (P) Ltd (2010) 322 ITR 316 (Delhi). 6. On the other hand the ld Sr. DR submitted that in the assessment order the AO had observed specifically in para No. 7 that there was concealment of income. It was submitted, in the penalty order also the ld AO had mentioned that there was concealment of income and accordingly he defended the orders of the ld Tax Authorities below. 7. Appreciating the matter in record and the submissions, it can be observed that there is no dispute to the fact that the notice u/s 274 read with section 271 of the Act dated 27.03.2015, did not categorically specify if the penalty proceeding u/s 271(1)(c) have been initiated on finding of concealment of particulars of income or furnishing inaccurate particulars of such income. It can be further appreciated that in the assessment order dated 27.03.2015 the Ld. AO had though observed that there is concealment of income and accordingly Assessee company is liable for penalty proceeding u/s 271(1)(c) of the Act. However, when the notice was issued on 27.03.2015 there was no specific indication of the limb of the default. Further during the penalty proceeding while making the conclusion the Ld. AO observed “in view of the above discussions and decided case laws, I hold that the Assessee had concealed/ furnished inaccurate particulars of its income and is liable for imposition of penalty u/s 271(1)(c) of the Act as follows”. Thus, inspite of giving observation in the assessment order that there is concealment of income. The Notice issued and the penalty order makes it ambiguous as to under which limb, the penalty order has been passed. Para 7 of the order of Ld FAA shows that this argument was specially raised and relevant precedents were cited but Ld. CIT(A) has failed to make any discussion on this aspect. Thus, following the settled proposition of law recognized in Pr. CIT Vs. Sahara Life Insurance Company Ltd (supra) that where there is failure on the part of the AO to indicate and specify under which limb of section 271(1)(c) penalty proceedings has been initiated, the penalty order cannot be sustained. Page | 4