KORBUSIER KINEMA PRIVATE LIMITED,JUHU MUMBAI vs. NFAC ACIT CIR 15(1) (2), MUMBAI

In the instant case, the case of the Assessee was reopened u/s 147 of the Act by issuing notice dated 29.03.2018 u/s 148 of the Act, by which the Assessee was asked to file its return of income. The Assessee, in response to notice u/s 148 of the Act filed its return of income on dated 23.04.2018 declaring income of Rs.13,96,586/-. Thereafter, the Assessing Officer (AO) by considering the total receipt amounting to Rs.23,39,857/- from the business, rent and interest income and accepting the deduction of Rs.11,24,572/- as expenditure claimed by the Assessee on account of salary and administrative expenses, computed the total taxable income of the Assessee to the tune of Rs.13,96,586/- vide assessment order dated 27.12.2018 u/s 143 r.w.s. 147 of the Act.

The AO also initiated penalty proceedings u/s 271(1)(c) of the Act for furnishing of inaccurate particulars and concealment of income.

Thereafter, the Assessee filed an appeal challenging the setting of inter head losses of Rs.13,96,586/- before the then Ld. CIT(A) who vide impugned order dated 03.06.2019 affirmed the decision of the AO in not allowing the set off of inter head losses.

Thereafter, the AO issued a show cause notice dated 27.12.2008 for concealment of the particular of income or/and furnishing of inaccurate particulars of such income and ultimately vide penalty order dated 18.01.2022 u/s 271(1)(c) of the Act imposed the penalty to the tune of Rs.9,97,234/- being 200% of the tax sought to be evaded on the income of Rs.14,95,851/-. M/s. Korbusier Kinema Private Limited

The Assessee, being aggrieved, challenged the said levy of penalty before the Ld. Commissioner, however, of no avail, as the Ld. Commissioner vide impugned order dated 17.12.2024 affirmed the levy of penalty.

The Assessee, being aggrieved, challenged the decision of the Ld. Commissioner on various aspects including notice issued u/s 274 of the Act dated 27.12.2018 and by relying on the judgment passed by the Hon’ble Juri ictional High Court in the case of Md. Estate (P.) Ltd. vs. CIT (2024) 461 ITR 483 (Bom.) passed by the Hon’ble Juri ictional High Court, concerning the identical issue, wherein it was held that if an Assessee does not challenge the validity of notice during the penalty or appellate proceedings but instead responds substantially to the allegations, such objections are barred at a later stage.

We have heard the parties and perused the material available on record. As the issue/ground raised by the Assessee qua notice u/s 274 of the Act, goes to the root of the case, hence for the sake of brevity, we are inclined to decide this ground first. Admittedly, the AO issued the penalty notice dated 27.12.2018 u/s 274 of the Act which is reproduced herein below: M/s. Korbusier Kinema Private Limited

Coming to the judgment relied on by the Ld. D.R. in the case of Veena Estate (P.) Ltd. (supra), we observe that in that particular case the notice u/s 274 of the Act was challenged after 23 years for the first time before the Hon’ble High Court by raising additional ground, which was not admitted and rejected by the Hon’ble High Court by interim order. Here it is not the case so, as in the instant case the Assessee has challenged the notice u/s 274 r.w.s. 271 of the Act before the second appellate authority and within a reasonable time and therefore the judgment referred to by the Ld. D.R. is factually dissimilar.

Even otherwise, the Hon’ble Juri ictional High Court in the Full Bench case in the case of Md. Farhan A Shaikh (supra) has elaborately dealt with the issue and the relevant judgments and therefore respectfully following the said judgment, we are inclined to delete the penalty imposed by the AO and affirmed by the Ld. Commissioner. Thus, the penalty is deleted. M/s. Korbusier Kinema Private Limited

In the result, the appeal filed by the Assessee is allowed.