NAYANKUMAR JAYANTILAL BALU,MUMBAI vs. NATIONAL FACELESS APPEAL CENTRE, DELHI

ITA 184/MUM/2025Status: DisposedITAT Mumbai28 April 2025AY 2009-108 pages
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What did the Tribunal hold?

The Tribunal held that the penalty order under section 271(1)(c) is liable to be quashed. The primary reason for this decision was that the penalty notice issued by the AO did not clarify whether the penalty was proposed to be imposed on the grounds of concealment of income or furnishing inaccurate particulars of income. The AO had not struck off the irrelevant charge in the standard proforma notice, which indicated a non-application of mind. The Tribunal relied on the jurisdictional Bombay High Court's decisions in CIT vs. Samson Perinchery and PCIT vs. Times Global Broadcasting Ltd., which followed the Karnataka High Court's decision in CIT v. Manjunatha Cotton & Ginning Factory. These judgments established that concealment of income and furnishing inaccurate particulars of income carry different connotations, and the AO must be clear about the specific limb under which penalty is imposable. The assessee must be given notice of the specific charge. Since the notice was ambiguous, the penalty order was quashed. Consequently, other legal contentions and contentions on merits raised by the assessee became academic and did not require separate adjudication. The appeal of the assessee was allowed.

What were the facts?

The assessee, Nayankumar Jayantilal Balu, engaged in the business of ferrous and non-ferrous metals, filed a return for AY 2009-10 declaring an income of Rs. 7,99,650. The Assessing Officer (AO) reopened the assessment based on information that the assessee obtained accommodation entries for bogus purchases from M/s Navratan Impex. The AO made an addition of Rs. 34,25,377, being 12.5% of alleged non-genuine purchases of Rs. 2,74,03,016. Subsequently, the AO initiated penalty proceedings under section 274 read with section 271(1)(c) of the Income Tax Act, 1961, and levied a penalty of Rs. 10,58,440. The Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC) confirmed the penalty. The assessee appealed this order to the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the penalty order passed under section 271(1)(c) of the Income Tax Act, 1961, is void ab initio, without jurisdiction, invalid, and bad in law due to the Assessing Officer (AO) failing to specify the exact charge (concealment of income or furnishing inaccurate particulars of income) in the penalty notice. - Assessee's contention: The AO did not strike off the irrelevant charge in the notice under section 271(1)(c), indicating a non-application of mind and rendering the penalty order bad in law. The AO mentioned initiating proceedings for furnishing inaccurate particulars in the assessment order but imposed penalty for concealment of income in the penalty order. - Revenue's contention: The AO clearly recorded in the penalty order that proceedings were initiated for inaccurate particulars of income, and there is no ambiguity. The AO issued notice under section 133(6) which was not responded to, thus the assessee failed to discharge the onus of proving genuineness of purchases. Reassessment proceedings were based on sales tax investigation, evidencing the charge of filing inaccurate particulars. 2. Whether the penalty of Rs. 10,58,440 levied under section 271(1)(c) is sustainable when additions were made on an estimated basis without clinching evidence, and the assessee had filed complete and accurate particulars of income. - Assessee's contention: Additions were sustained on estimation based on surmises and conjectures. The assessee produced all relevant details during assessment proceedings, meaning no concealment of income occurred. - Revenue's contention: (Not recorded in detail for this specific issue, but generally supported the lower authorities' orders). 3. Whether the penalty can be levied when the quantum appeal is admitted by the Hon'ble Jurisdictional High Court, indicating the issue is debatable. - Assessee's contention: The admission of the appeal by the Hon'ble High Court shows the issue is debatable, and therefore, penalty cannot be levied, relying on the decision in CIT v. Nayan Builders & Developers.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274,Section 133(6),Section 143(3),Section 147

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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY, VP &

For Appellant: Shri Rushabh Mehta, AR
For Respondent: Shri Leyaqat Ali Aafaqui- Sr. DR
Hearing: 22.04.2025Pronounced: 28.04.2025

Per Padmavathy S, AM: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC), Delhi [In short 'CIT(A)'] dated 10.12.2024 for AY 2009-10. The assessee raised the following grounds of appeal:

“1. (a) The penalty order passed u/s.271(1)(c) of the Act is void ab initio, without juri iction, invalid and bad in law. (b) The Id. CIT (A) erred in law in sustaining the penalty proceedings initiated by the ld. Assessing Officer u/s 271(1)(c) without specifying any particular charge thereby resulting into infirmity at the stage of i

The order continues below.

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