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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
order u/s 271(1)(c) of the Income Tax Act 1961(In short the ‘Act’) dated 02.03.2016 framed by ACIT-3(1), Indore.
Assessee has raised following grounds of appeal;
1.That, the learned CIT(A) erred, both on facts and in law, in confirming the Order of Penalty passed u/s. 271(1)(c) of the Income-Tax Act, 1961 by the AO imposing penalty of Rs. 1 ,00,000/-. 2.That, the learned CIT(A) grossly erred in not considering the material fact that in the instant case, the AO imposed the penalty without first issuing a proper and valid show-cause notice to the appellant.
3(a) That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the order of penalty passed u/s. 271 (1 )( c) of the Act, without considering the material fact that the appellant had neither concealed nor furnished inaccurate particulars of her income for the year under consideration and therefore she was not liable for any penalty u/s. 271(l)(c) of the Act.
(b) That, the learned CIT(A) grossly erred in not considering the material fact that penalty proceedings are different from assessment proceedings and merely on the basis of certain finding in assessment proceedings, penalty u/s. 271 (l)( c) cannot be imposed automatically.
4.That, without prejudice to the above, the learned CIT(A) erred in confirming the penalty without considering the material fact that the addition qua which the penalty has been imposed, itself was not sustainable in view of the decision of the Hon'ble ITAT, Special Bench, Mumbai, in the case of All Cargo Global Logistics Ltd. & Ors. vs. DCIT, as reported in (2012) 74 DTR (Mumbai) (SB) (Trib) 89 and also as per the ratio laid down by many judicial authorities including by the Hon'ble ITAT Indore Bench. 5.That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the penalty imposed by the AO, Pragnesh Neema without considering the settled position of the law that merely because certain additions were made under s. 68 of the Act on account of unexplained cash deposits would not automatically give rise to imposition of penalty under s. 271 (1 )( c).
6.That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the penalty imposed by the AO qua the claim of deduction for MCX expenses, without considering the settled position of the law that penalty under s.271(1)(c) of the Act cannot be imposed for a mere wrong claim of the appellant in the return of income as held by the Hon'ble Supreme Court in the case of CIT vs. Reliance Petro Products (P) Ltd. (2010) 36 DTR (SC) 449.
7.That, the appellant further craves leave to add, alter and/or amend any of the foregoing grounds of appeal as and when considered necessary.
3. Briefly stated facts as culled out from the records are that the assessee is an individual and derives income from salary and business from trading in NCDX/MCS transactions under a proprietary concern M/s. Pragnesh Neema.. The assessee had furnished original return of income u/s 139(1) of the Act on 28.07.2008 declaring income of Rs.19,27,699/-. A search was conducted at the residential premises of the assessee and also at various premises of the group on 25.11.2010. A notice u/s 153A of the Act was served upon the assessee for furnishing his return of Pragnesh Neema total income. In response to the notice, the appellant furnished his return of income on 20.01.2012 declaring the same income of Rs.19,27,699/- which was declared in the original return of income.
The case was selected for scrutiny. Notices u/s 143(2) & 142(1) along with questionnaires were issued and the assessee complied with. The assessment u/s 153A r.w.s. 143(3) of the Act was completed determining the total income at Rs.21,55,298/- making addition of Rs.2,27,599/-. The Ld. A.O also initiated penalty proceedings u/s 271(1)(c) of the Act in respect of additions of Rs.2,27,599/-.
Aggrieved assessee preferred appeal against the levy of penalty before Ld. CIT(A) but could not succeed.
Now the assessee is in appeal before the Tribunal against the penalty of Rs.1,00,000/- imposed u/s 271(1)(c) of the Act.
Ld. Counsel for the assessee raising legal issue relying on the decision of judgment of Hon'ble Apex Court in the case of National Thermal Power Company Limited 229 ITR 383(SC) submitted that as per provisions of Section 271(1)(c) of the Act the penalty can be initiated either for concealing the particulars of income or for furnishing inaccurate particulars of income, whereas the Ld.A.O 4 Pragnesh Neema has not recorded any charge on the assessee, as to whether penalty is to be levied for ‘furnishing inaccurate particulars of income or concealing the particulars of income’. Placing reliance on the judgments mentioned in the written submission which mainly includes judgment of Hon'ble Jurisdictional High Court in the case of PCIT Vs Kulwant Singh Bhatia of 2018 dated 9.5.2018, the Ld. Counsel for the assessee contended that the Ld.A.O has failed in comply the provisions of section 271(1)(c) of the Act by initiating the penalty proceedings with no specific charge. Reliance was also placed on Indore Tribunal decision in the case of Varad Mehta ITA No.693/Ind/16 dated 06.12.2018.
Per contra Departmental Representative vehemently argued supporting the orders of lower authorities.
We have heard rival contentions and perused the records placed before us. The issues raised by the assessee on both legal and merits revolves around the levy of penalty at Rs.1,00,000/- levied by the Ld. A.O and confirmed by Ld.CIT(A). Ld. Counsel for the assessee pleaded that Ld. A.O has wrongly initiated the penalty proceedings by not specifying the charge for levy of penalty i.e. 5 Pragnesh Neema whether the penalty proceedings has been initiated for concealing particulars of income or for furnishing the inaccurate particulars of income. It was also pleaded by the Ld. Counsel for the assessee that though the Ld. Assessing Officer has made proper satisfaction on record in the assessment order for initiating penalty proceedings but in the notice issue u/s 274 r.w.s. 271(1)(c) of the Act, Ld. A.O remained silent by not specifying as for which charge the penalty proceedings have been initiated.
To examine this fact we have gone through the impugned notice issued on 06.01.2016 for initiating the penalty proceedings u/s 271(1)(c) of the Act for Assessment Year 2008-09. For reference we reproduce below the notice u/s 271(1)(c) of the Act for Assessment Year 2008-09;
F.No.ACIT-3(1)/Ind/2015-16/Penalty fixation Date: 06.01.2016 PAN ABZPN8695E To Shri Pragnesh Neema, 61/L. Keshar Bagh Road, Lal Buag, Indore Sub: Penalty fixation u/s 271(1)(c) of the Income Tax Act, 1961 for the A.Y. 2008-09 – reg.
Pragnesh Neema Please refer to the penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 for the A.Y. 2008-09 in the above mentioned case, you are requested to appear before the undersigned 18.01.2016 at 11.45 A.M in my office at Room No.306, Aaykar Bhawan Annexe, Opp. White Church, Indore personally or through authorized representative to show cause as to why penalty u/s 271(1)(c) of the I.T. Act, 1961 be not levied against you. If you do not want to appear personally, you may send you written reply on or before above mentioned date, otherwise penalty proceedings shall be decided on merits. Sd/- (Vinita Dubey) Asstt. Commissioner of Income Tax 3(1) Indore
From perusal of the above show cause notices we find that the Ld.A.O has merely mentioned the section but the specific charge i.e. whether the penalty have been initiated for concealment of particulars of income or for furnishing inaccurate particulars of income has not been mentioned. Now whether such type of notice which does not speak about the specific charge leveled against the assessee is valid and tenable in the eyes of law needs to be examined.
We find that similar issue came up for adjudication before us in the case of Varad Mehta dated 06.12.2018 (supra) wherein we have decided the issue in favour of the assessee 7 Pragnesh Neema Hon'ble Jurisdictional High Court in the case of Shri Kulwant Singh Bhatia (supra) wherein the Hon'ble Court discussed the judgment of Hon'ble High Court in the case of CIT V/s Manjunatha Cotton Ginning Factory (supra) and CIT V/s SSA’s Emeralad Meadows (supra) held that “on due consideration of the arguments of the Ld. counsel for the appellant, so also considering the fact that the ground mentioned in show cause notice would not specify the requirement of law, as notice was not specific, we are of the view that Ld. Tribunal has rightly allowed the appeal of the assessee and set aside the order of penalty enforced by the authority”.
We therefore respectfully following above referred judgments and in the given facts and circumstances of the case are of the considered view that the alleged notice issued u/s 271(1)(c) of the Act dated 06.01.2016 is invalid, untenable and suffers from the infirmity of non application of mind by the Assessing Officer. We accordingly direct to delete the penalty of Rs.1,00,000/- levied u/s 271(1)(c) on this legal ground itself. We accordingly allow the ground raised by the assessee on the legality of the penalty Pragnesh Neema 271(1)(c) of the Act. Since the issue of penalty u/s 271(1)(c) also has been dealt on the preliminary 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 and thus the appeal of the assessee for the Assessment Year 2008-09 is allowed.
In the result appeals of the assessee is allowed.
The order pronounced in the open Court on 11.10.2019.