RAMGOPAL OCHHAVLAL MAHESHWARI vs. THE DEPUTY COMMISSIONER OF INCOME TAX

Facts

The assessee, Ramgopal Ochhavlal Maheshwari, is in appeal before the Gujarat High Court against an order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year 2013-14. A search under Section 132 was conducted on the assessee's premises on August 23, 2012, leading to the declaration of stock as income amounting to Rs. 2,99,33,955.00, against which the assessee disclosed Rs. 3,00,00,000.00. The Assessing Officer (AO) initially initiated penalty proceedings under Section 271AAA of the Income Tax Act, 1961, issuing a notice on February 13, 2015. Subsequently, a corrigendum was issued on July 3, 2015, modifying the penalty proceedings to be under Section 271AAB instead of Section 271AAA, and stating that the penalty notice under Section 274 stood modified. The AO levied a penalty of Rs. 30,00,000.00 under Section 271AAB. The CIT(A) and the ITAT upheld the penalty.

Held

The High Court held that the ITAT's order was not perverse. The court found no merit in the assessee's contention that a fresh notice under Section 274 was required. It reasoned that the correction from Section 271AAA to Section 271AAB via a corrigendum was a rectification of a human error to enforce the correct provision and was within the AO's statutory competence, especially since Section 271AAA and Section 271AAB are similar in nature, differing primarily in the date range for searches. The court noted that the penalty order was passed with the approval of the Joint Commissioner of Income Tax, fulfilling the requirement under Section 274(2). The court also clarified that no prior approval of a superior authority is shown to be needed for the mere initiation of penalty proceedings under Section 271AAB, unlike proceedings under Section 271(1)(c). Therefore, the subsequent notice under Section 271AAB was not marred by any substantive irregularity. The appeal was dismissed.

Key Issues

1. Whether the order passed by the ITAT is perverse, confirming a penalty of Rs. 30,00,000/- under Section 271AAB of the Act which was levied without the issue of a proper notice under Section 274 read with Section 271AAB of the Act? Assessee's Contentions: - The ITAT erred in holding that a show cause notice dated July 3, 2015, was issued under Section 274 read with Section 271AAB. No such notice was issued; the document dated July 3, 2015, was a corrigendum to the assessment order under Section 143(3). - The AO did not intend to issue a fresh show cause notice under Section 274 when the corrigendum was issued. - The penalty notice could not be corrected by way of a corrigendum, and the assessee should have been heard before the issue of the corrigendum. - The penalty proceedings were vitiated due to non-compliance with Section 271(1B) of the Act, as no prior sanction was obtained for initiating penalty proceedings under Section 271AAB. Revenue's Contentions: - The initial notice under Section 271AAA was corrected by a corrigendum to Section 271AAB, which was a correction of a typographical error and did not vitiate the proceedings. - The penalty order was passed with the approval of the Joint Commissioner of Income Tax as provided under Section 274(2) of the Act. - There is no statutory requirement for prior approval for the mere initiation of penalty proceedings under Section 271AAB.