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Facts
The assessee challenged the penalty imposed under Section 271(1)(c) of the Income Tax Act, confirmed by the CIT(A) to the extent of Rs. 2,32,23,158/-. The Assessing Officer had made significant additions to the assessee's total income. The primary issue was the validity of the penalty notice.
Held
The Tribunal held that the show cause notice for penalty was vague as it did not specify which limb of Section 271(1)(c) was being invoked. Following the Bombay High Court's Full Bench decision, the Tribunal found that such a defect vitiates the penalty proceedings.
Key Issues
Whether a penalty notice under Section 271(1)(c) is vitiated if it fails to specify the specific limb (concealment of income or furnishing inaccurate particulars) under which the penalty is proposed to be levied.
Sections Cited
271(1)(c), 68, 10(33)
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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: JUSTICE (RETD.) C.V. BHADANG & SHRI B.R. BASKARAN
PER JUSTICE (RETD.) C.V. BHADANG, PRESIDENT :
By this appeal, the appellant-assessee is challenging the order dated 31.12.2024 passed by the Commissioner of Income Tax (Appeals)-49, Mumbai (‘CIT(A)’ for short) by which the imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961 (‘Act’ for short) to the extent of the quantum addition of Rs.2,32,23,158/- has been confirmed. The appeal relates to assessment year 1999-2000.
The impugned order shows that the Assessing Officer vide order dated 31.10.2002 had computed the total income of the assessee at Rs.419,69,67,050/- as against the returned income of Rs.1,37,38,650/-. The Assessing Officer had made the following additions :-
N H Securities Ltd. Sr. No. Description Amount (Rs.) 1 Unexplained investment u/s 69 3,97,57,29,214 2 Undisclosed profit 5,62,58,741 3 Unexplained Cash Credit u/s 68 14,84,14,624 4 Dividend u/s 10(33) 27,66,827 5 Unexplained investment u/s 69 56,000
A further perusal of the impugned order shows that out of the quantum addition of Rs.14.84 crores as unexplained cash credit under Section 68 of the Act, only an addition to the extent of Rs.2,32,23,158/- has been sustained by the Tribunal by deleting the balance addition of Rs.12,51,94,466/-. The additions under other heads have also been deleted. The CIT(A) has, therefore, directed the Assessing Officer to recompute the penalty accordingly. To that extent, the appeal has been partly allowed by the learned CIT(A).
The assessee has filed this appeal feeling aggrieved by the sustenance of penalty on the quantum addition of Rs. 2,32,23,158/-.
We have heard parties. Perused record.
The only contention raised on behalf of the appellant is that the show cause notice dated 31.10.2002 does not specify as to under which clause/limb of Section 271(1)(c) of the Act, the Assessing Officer, was proposing to proceed. In other words, it is submitted that the notice is vague as it does not specify the limb under which the penalty was proposed to be imposed, as none of the two clauses, viz. concealment of particulars of income or furnishing of inaccurate particulars of income, have been scored out. Reliance in this regard is placed on the Full Bench decision of Bombay High Court in Mr. Mohd. Farhan A. Shaikh vs DCIT, 434 ITR 1 (Bombay).
The learned AR has produced details of addition under Section 68 of the Act on which the penalty is levied by the Assessing Officer by order dated 30.03.2019. It is submitted that out of the addition in relation to nine parties, only four relating to (i) Raj Mittal, (ii) Sushil C. Choksi, (iii) Adinath Textiles and (iv) Fortune Financial Services (I) Ltd. have been confirmed. It is pointed out that the quantum addition on which the penalty is deleted by the learned CIT(A) is to the extent of Rs.13,02,19,124/-. The balance quantum addition is only to the extent of Rs.1,81,98,500/-.
The learned DR has supported the impugned order. It is submitted that the learned CIT(A) has rightly concluded that in the facts of the case the Assessing Officer could not have ticked any of the limbs as the penalty proceedings were initiated on both the counts. It is pointed out that apart from the notice dated 31.12.2002, there was yet another notice dated 12.01.2006 which finds mention in the order of the Assessing Officer, which the assessee has not produced.
We have considered the submissions made. At the outset, it is necessary to note that although the order of the Assessing Officer imposing penalty refers to a subsequent notice dated 12.01.2006, a copy of the same has not been produced by the Revenue. A perusal of the impugned order shows that the learned CIT(A) vide letter dated 25.10.2021 had asked the Assessing Officer to clarify whether any notice subsequent to notice dated 31.10.2002 was issued in the matter. The order records that the report of the Assessing Officer was not received and, therefore, the contents of the notice dated 12.01.2006 are not known. The appellant has contended that no such notice of 2006 was ever received and the only notice received was the one dated 31.12.2002. It is trite that in the absence of the Revenue producing copy of the notice dated 12.01.2006, the contents of the same cannot be ascertained and the benefit, if any, has to go to the assessee. Admittedly, the notice dated 31.12.2002 is a notice which is only a printed format without any of the particulars being filled up except the name and address of the assessee, date and the assessment year. The Full Bench of N H Securities Ltd. Bombay High Court in the case of Mr. Mohd. Farhan A. Shaikh (supra) in the context of a difference of opinion between two sets of co-ordinate benches had framed three questions for determination, out of which question no. 1 is relevant for the purpose, which reads thus :-
“Question No. 1 : If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(1)(c), does a mere defect in the notice — not striking off the irrelevant matter — vitiate the penalty proceedings?”
The Full Bench has answered the question in the affirmative. We are bound by the decision of the jurisdictional High Court.
In the result, the appeal is allowed. The Assessing Officer is directed to delete the penalty.
Order pronounced in the open court on 10/03/2025.