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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI N. K. BILLAIYA & SH. YOGESH KUMAR U.S.
These two appeals have been filed by the assessee against the order dated 29/01/2018 passed by CIT(A)-27, New Delhi for Assessment Year 2010- 11.
The assessment order came to be passed against the assessee by making disallowance on account of bogus purchase of Rs. 1,62,26,036/- vide assessment order dated 28/03/2013. A penalty order came to be passed u/s 271(1)(c) of the Act on 23/03/2016 by imposing 100% penalty of Rs.2,39,314/- u/s 271(1)(c) of the Act.
As against the penalty order, the assessee has preferred an appeal before the CIT(A). The Ld.CIT(A) vide order dated 29/01/2018 dismissed the Appeal by confirming the order of the A.O.
Aggrieved by the same, the assessee is before us on the following grounds:-
(A.Y 2007-08)
1. On the facts and circumstances of case and in law, the CIT(A) erred in not quashing the penalty order passed by assessing officer u/s 271(l)(c) of the Act inspite of the fact that notice issued u/s 274 r.w.s.271(l)(c) of the Income Tax Act, 1961 was legally untenable.
2. On the facts and circumstances of case and in law, the notice issued u/s 274 r.w.s. 271(l)(c) by the assessing officer was bad-in- law as the same was in a standard format without striking off the irrelevant clauses and ticking the applicable clause, which show the non-application of mind by ' the assessing officer and accordingly the CIT(A) erred in not quashing the entire penalty order and cancelling/ deleting the entire penalty imposed by the assessing officer u/s 271(l)(c) of the Act.
3. On the facts and circumstances of case and in law, the CIT(A) in confirming penalty of Rs.2,39,314/- imposed by the assessing officer u/s 271(l)(c) of the Act.
4. On the facts and circumstances of case and in law, requisite satisfaction has not been recorded by the Assessing Officer and therefore the penalty of Rs.2,39,314/- imposed by the Assessing Officer and confirmed by the CIT(A) is not sustainable.
The appellant craves leave to add one or more ground of appeal or to alter / modify the existing ground before or at the time of hearing of appeal.
The aforesaid grounds of appeal are without prejudice to each other.” (A.Y 2010-11)
5. The assessment order came to be passed against the assessee by making disallowance on account of bogus purchase of Rs. 14,44,111/- vide assessment order dated 28/03/2013. A penalty order came to be passed u/s 271(1)(c) of the Act on 23/03/2016 by imposing 100% penalty of Rs.54,290/-/- u/s 271(1)(c) of the Act.
6. As against the penalty order, the assessee has preferred an appeal before the CIT(A). The Ld.CIT(A) vide order dated 29/01/2018 dismissed the Appeal by confirming the order of the A.O.
Aggrieved by the same, order of CIT(A) dated 29/01/2018 the assessee is before us on the following grounds:-
1. On the facts and circumstances of case and in law, the CIT(A) erred in not quashing the penalty order passed by assessing officer u/s 271(l)(c) of the Act in spite of the fact that notice issued u/s 274 r.w.s.271(l)(c) of the Income Tax Act, 1961 was legally untenable.
2. On the facts and circumstances of case and in law, the notice issued u/s 274 r.w.s. 271(l)(c) by the assessing officer was bad-in- law as the same was in a standard format without striking off the irrelevant clauses and ticking the applicable clause, which show the non-application of mind by ' the assessing officer and accordingly the CIT(A) erred in not quashing the entire penalty order and cancelling/ deleting the entire penalty imposed by the assessing officer u/s 271(l)(c) of the Act.
3. On the facts and circumstances of case and in law, the CIT(A) in confirming penalty of Rs.54,290/- imposed by the assessing officer u/s 271(l)(c) of the Act.
4. On the facts and circumstances of case and in law, requisite satisfaction has not been recorded by the Assessing Officer and therefore the penalty of Rs. 54,290/- imposed by the Assessing Officer and confirmed by the CIT(A) is not sustainable.
The appellant craves leave to add one or more ground of appeal or to alter / modify the existing ground before or at the time of hearing of appeal.
The aforesaid grounds of appeal are without prejudice to each other.”
The Ld. Counsel for the assessee submitted that, in both the above penalty proceedings the notice issued u/s 274 read with Section 271(1)(c) of the act issued by the A.O was in a standard format without striking off the relevant clauses and ticking the applicable clause. The Ld. A.O has not applied his mind while initiating the penalty proceedings, therefore, contended that the entire penalty proceeding is vitiated. The Ld. Counsel for the assessee has relied on the judgment dated 02/08/2019 of Jurisdictional High Court in the case of Principal Commissioner of Income Tax Vs. Sahara India Life Insurance Company Ltd. in and connected matters.
Per contra, the Ld. DR has relied on the orders of the Lower Authorities.
We have heard the parties, perused the material on record and gave our thoughtful consideration. Pursuant to the assessment order for the Assessment Year 2007-08 and 2010-11, the notice u/s 274 read with Section 271 on Income Tax Act were issued to the assessee on 28/03/3013. Ld. Counsel for the assessee has made available all the copies of the same which are hereunder:-
On going through the above notices, it is clear that, the A.O has used the standard format for issuing the above notices without even striking off the relevant clauses and ticking the applicable clause. Pursuant to the said defective notice, the penalty proceedings have been initiated and penalty order has been passed, which has been confirmed by the CIT(A). Since, the show cause notice itself is defective which will vitiate entire penalty proceedings initiated by the Department.
The Jurisdictional High Court in the case of Pr. Commissioner of Income Tax Vs. Sahara India Life Insurance Company Ltd. (supra) in vide order dated 02/08/2019 while dealing with the similar issue held as under:-
“The Respondent had challenged the upholding of the penalty imposed under Section 271(1) (c) of the Act, which was accepted by the ITAT. It followed the decision of the Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar) and observed that the notice issued by the AO would be bad in law if it did not specify which limb of Section 271(1)(c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. The Karnataka High Court had followed the above judgment in the subsequent order in Commissioner of Income Tax v. SSA’s Emerald Meadows (2016) 73 Taxman.com 241 (Kar), the appeal against which was dismissed by the Supreme Court of India in SLP No.11485 of 2016 by order dated 5th August, 2016.
In view of the above ratio laid down by the Jurisdictional High Court in the case of Sahara India Life Insurance Company Ltd. (supra), we are inclined to delete the penalty imposed in both the Financial Year 2007-08 & 2010-11 by the Ld. A.O by allowing the grounds of Appeal in both the Appeal and the penalty orders passes by the A.O, which has been confirmed by the CIT(A) are hereby deleted.
In the result, the Appeal No. 1777/Del/2018 and 1778/Del/2018 of the assessee are allowed.
Order pronounced in the open court on 07th July, 2022.