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Facts
The Revenue filed an appeal against the CIT(A)'s order deleting a penalty levied on the assessee for AY 2011-12. The penalty was imposed for furnishing inaccurate particulars of income after the assessee was found to have made bogus purchases from a hawala operator. The assessee had declared Nil income and was assessed on book profit under Section 115JB.
Held
The Tribunal held that the penalty notice issued by the Assessing Officer was invalid because it did not clearly specify under which limb (concealment of income or furnishing inaccurate particulars) the penalty was being imposed. Following a coordinate bench's decision, the penalty was deleted.
Key Issues
Whether the penalty under Section 271(1)(c) was rightly deleted by the CIT(A) due to an invalid show cause notice and where tax sought to be evaded was Nil under Section 115JB.
Sections Cited
271(1)(c), 274, 250, 148, 115JB, 292B
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Before: MS. KAVITHA RAJAGOPAL & SMT.RENU JAUHRI
आदेश / O R D E R
PER RENU JAUHRI [A.M.] :-
This appeal is filed by the Revenue against the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] dated 21.02.2025 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2011-12. The assessee has also filed cross objection to the revenue’s appeal.
The grounds of appeal are as follows:
“1) "Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) was correct in deleting the penalty u/s 271(1)(c) ignoring the fact that the penalty was levied on the additions made on accommodation entries for concealment of income?"
2. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty u/s 271(1)(c) ignoring the fact that the penalty was levied by the Assessing Officer after recording his satisfaction and concluding that assessee had furnished inaccurate particulars of income.
3 "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was correct in holding that the penalty u/s 271(1)(c) of the Act is null and void due to the non striking of the one of the limb in the show cause notice u/s 274 r.w.s 271(1)(c) of the Act, dated 02.03.2016 which being a typographical mistake. The Ld. CIT(A) has not considered/ taken into account the Provisions of Section 292B of the Act which was introduced in the statute from A.Y 2008-09.
4. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was correct in mentioning the amount of bogus purchase for the year 2011-12 amounting to Rs. 1,23,02,354/-instead of the correct amount of bogus purchase for current year amounting to Rs.13,00,076/-.” Grounds taken in CO are as under: “1. On the facts and in the circumstances of the case, and in law, the show cause notice u/s. 274 r. ww. s. 271(1)(c) of the Act dated 08.02.2016 issued by the Ld. AO is bad in law, having been issued without specifying the precise charge for which the penalty proceedings were initiated. The Respondent, therefore, prays that Ld. AO's order imposing penalty u/s. 271(1)(c) of the Act be quashed. 2. On the facts and in the circumstances of the case, and in law, penalty u/s. 271(1)(c) is not imposable since the tax sought to be evaded' under Explanation-4 to Section 271 (1)(c) is 'Nil' because the Respondent was assessed to tax on the 'book profit' u/s.1 15JB, which remained unchanged even after the addition was made as per the normal provisions of the Act in its case. The Respondent, therefore, prays that the pen alty levied u/s. 271(1)(c) of the Act be cancelled.”
At the outset, it is seen that the appeal filed by the revenue is delayed by 47 days. Ld. AO has furnished an application for condonation of delay wherein it has been explained as under:
“3. In this connection on perusal of the records it is found that the order of Ld. CIT(A) was against the penalty order levied by the AO for the A.Y. under consideration. On perusal of the penalty order it was observed by the then AO that the findings of the Ld. CIT(A) it appeared that the issue discussed in the order did not pertain to the A.Y under consideration. There was a mismatch in the date and figures mentioned in the order. Accordingly a rectification application before the Ld. CIT(A) through PCIT-6, Mumbai was made. It is also submitted that due to administrative procedures, processing of records and delay in obtaining necessary approvals, the appeal could not be filed within the prescribed time and was ultimately filed on 16.06.2025, resulting in a delay of 47 days. The delay was neither deliberate nor intentional, but occurred due to bona fide and unavoidable circumstances connected with official functioning.” After hearing the parties, we are of the view that the delay in filing of appeal was bonafide and is, therefore, being condoned.
The appeal has been filed against the order of ld. CIT(A) deleting the penalty u/s. 271(1)(c) of Rs. 4,01,723/- levied by the ld. AO. Brief fact of the case are as under:
The assessee company filed return for A.Y. 2011-12 on 26.09.2011 declaring Nil income. Based on information received from the DGIT
(Inv.) regarding accommodation entries taken by the assessee from a Hawala Operator, M/s. Mumbai Trading Company, amounting to Rs.
13,0,076/-, the case was reopened and a notice u/s. 148 was issued.
Assessment was finalized after making an addition of Rs. 13,00,076/- treating it as bogus purchases shown by the assessee from M/s. Mumbai
Trading Company and penalty proceedings u/s. 271(1)(c) were also initiated for furnishing inaccurate particulars of income. Subsequently, vide order dated 30.08.2016, penalty of Rs. 4,01,723/- computed @100% on the amount of tax sought to the evaded was levied u/s. 271(1)(c) of the Act. Aggrieved, the assessee preferred an appeal before ld. CIT(A). Vide order dated 21.02.2015, ld. CIT(A) allowed the appeal of the assessee. Aggrieved, the revenue has filed an appeal against the order of ld. CIT(A) on which a CO has been filed by the assessee.
Before us, ld. DR has submitted that the penalty had been rightly imposed as the assessee had failed to establish the genuineness of impugned purchases and there was credible information received by the department that the party from whom the impugned purchases had been shown, was a hawala operator. Accordingly, the bogus purchases amounting to Rs. 13,00,076/- were disallowed and penalty proceedings u/s. 271(1)(c) were initiated for furnishing inaccurate particulars of income. Since the assessee did not file any appeal against the assessment order, ld. AO proceeded to impose the penalty of Rs. 4,01,723/- @100% of tax sought to be evaded. Referring to the facts and circumstances discussed in the penalty order, ld. DR argued that the penalty u/s. 271(1)(c) deserves to be upheld.
On the other hand, ld. AR has placed on record a copy of the penalty notice dated 08.02.2016, from which it is not clear as to under which of the two limbs, penalty was sought to be imposed. Ld. AR has also placed on record an order of the co-ordinate bench in assessee’s own case for A.Y. 2010-11 in vide which the penalty u/s. 271(1)(c) has been deleted under similar circumstances for non-striking of the limb in the penalty notice.
We have heard the rival submissions. Admittedly, the notice u/s. 271(1)(c) dated 08.02.2016 does not specify as to under which of the limbs viz. concealment of income or furnishing of inaccurate particulars of income the penalty was sought to be imposed. On similar facts, the co- ordinate bench in assessee’s own case for A.Y. 2010-11 has held as under:
“09.We have carefully considered the rival contentions and perused the orders of the lower authorities. On verification of notice under section 274 read with 271(1)(c) of the Act, dated 2/3/2016, it is clear that the Assessing Officer has not struck off any of the twin charges, such as concealment of particulars of income or furnishing of inaccurate particulars of such income. We find that if one of the irrelevant matters is not struck off, it would mean that the Learned Assessing Officer was not sure while issuing the show cause notice whether he had proceeded on the basis that the assessee has concealed his income or he had furnished inaccurate particulars of income. If without being so sure about the charge on which he intends to impose penalty on the assessee, such a notice clearly shows non-application of mind and such notice is not valid. Such is the mandate of the Hon'ble Bombay High Court in the case of Mohd. Farhan A Shaik vs. ACIT, 434 ITR 1 and Ganga Iron and Steel Trading Co. Vs. CIT, 135 taxmann.com 244 and PCIT vs. Jahangir in IT Appeal No.805 of 2018 dated 6/9/2013. In view of the above judicial binding precedents, we quash the penalty order passed by the Learned Assessing Officer and reverse the order of the Learned CIT-A confirming the penalty partly. In the result, ground No.1 of the appeal is allowed.” Respectfully following the decision of the co-ordinate bench, we hereby delete the penalty u/s. 271(1)(c) levied by the ld. AO.
Accordingly, appeal of the, revenue is dismissed and the CO of the assessee is allowed.
Order Pronounced in Open Court on 11.11.2025.