Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH “D”: NEW DELHI
Before: SHRI G.S. PANNU, HON’BLE & SHRI C.N. PRASAD
PER C.N. PRASAD, JM
This is an appeal by the assessee against the order of the Ld. CIT (A)- 31, New Delhi dated 24.2.2017 pertaining to the assessment year (“AY”) 2007-08 whereby he confirmed the penalty imposed by the Assessing Officer (“AO”) u/s 271(1)(c) of the Income Tax Act, 1961 (the “Act”).
Briefly stated, it is a search case. Search u/s 132 of the Act was conducted at the Bakshi Group of cases and the assessee was also covered. In response to notice u/s 153A the assessee filed return for the AY 2007-08 declaring income of Rs. 11,97,20,118/- surrendering an amount of Rs. 9.50
Kanwaljit Singh Bakshi vs. ACIT 2 crore under the head “long term capital gain”. Assessment was completed on 31.03.2015 on total income of Rs. 12,45,65,094/- including therein addition of Rs. 48,44,976/- on account of unexplained investment in paintings. Penalty u/s 271(1)(c) was levied on 29.9.2015. On appeal, the Ld. CIT(A) confirmed the penalty and directed the AO to restrict the penalty in respect of unexplained investment in paintings to the addition upheld by him in quantum appeal. The assessee is before us challenging the levy of penalty.
The assessee has raised following grounds:
1. “The Ld. CIT(A) has erred in confirming the penalty u/s 271(1)(c) levied by the AO. The penalty levied is wrong and bad in law and should be deleted.
2. Whether the penalty is for concealment of income or furnishing of inaccurate particulars of income is not evident from the notice nor from the penalty order. Penalty provisions being quasi-judicial, unless there is specific charge, there cannot be any levy of penalty. Therefore the order levying penalty is wrong and bad in law.
3. The Ld. CIT(A) has failed to appreciate that the appellant has voluntarily declared the income and paid taxes thereon. Hence the penalty should be deleted.
4. The appellant contends that addition resulting due to valuation of paintings cannot lead to penal consequences as this is a subjective assessment of the paintings.
The above grounds are independent to each other.
6. The appellant may be allowed to add, amend, alter or forgo any of the above ground.”
4. Before us, the Ld. AR submitted that in the identical case of the wife of the assessee (Minu Bakshi) the Tribunal, Bench E, New Delhi vide order
Kanwaljit Singh Bakshi vs. ACIT 3 dated 11.12.2019 in for the AY 2007-08 set aside the order of the Ld. CIT(A) and directed the AO to cancel the penalty levied. A copy of the said order of the Tribunal was submitted before us. According to him the matter is covered in favour of the assessee and against the Revenue. The Ld. AR further submitted that concealment penalty due to addition on account of valuation of paintings is unwarranted.
5. The Ld. DR had nothing to say. He placed reliance on the Ld. CIT(A)’s order and supported it.
We have perused the order of the Tribunal, Bench E, New Delhi dated 11.12.2019 in the case of Minu Bakshi, wife of the assessee before us wherein the Tribunal observed and held as under :-
“7. We have heard both the parties and perused all the relevant materials available on record. First of all, in the notice issued u/s 274 r.w.s 271(l)(c) of the Income Tax Act, 1961, there was no specific charges as relates to concealment of income or furnishing of inaccurate particulars of income. From the notice dated 27/3/2015 produced by the Ld. AR during the hearing, it can be seen that the Assessing Officer was not sure under which limb of provisions of Section 271 of the Income Tax Act, 1961, the assessee is liable for penalty. Besides that the Assessment Order also did not specify the charge as to whether there is concealment of income or furnishing of inaccurate particulars of income in assessee’s case. Besides this, the present case is relating to search conducted by the Revenue in the premises of the assessee, while the decision relied by the Assessing Officer as well as CIT (A) that of Hon’ble Supreme Court in case of Mak Data P. Ltd. vs. CIT 358 ITR 593 is relating to survey and there is no issue involved about the notice issued u/s 271(l)(c) r.w.s. 274 of the Act. This case relied by the Revenue is not applicable in the present case due to the distinguishing facts. Similarly, the decision of the Hon’ble Delhi High Court in case of CIT vs. Zoom Communication Pvt. Ltd. 327 ITR 510 will also not be applicable in the present case as the said case is not that of search
Kanwaljit Singh Bakshi vs. ACIT 4 case. There is separate provision for penalty in search cases given under the statute after 01.07.2012 that of Section 271AAB of the Act which was totally ignored by the Assessing Officer. While dealing with this contention, the CIT(A) has taken the due date that of filing of return of income i.e. 31.08.2007 which is contrary to Section 271AAB of the Income Tax Act, 1961. Thus, the penalty itself is based on incorrect Section. Therefore we are taking up the contention of the assessee that there is no particular limb mentioned in the notice issued under Section 271(l)(c) r.w.s. 274 of the Act. This issue is squarely covered by the decision of the Hon hie Supreme Court in case of M/s SSA’ Emerald Meadow. The extract of the decision of the Hon’ble Karnataka High Court in M/s SSA’ Emerald Meadows are as under which was confirmed by the Honhle Apex Court:
"3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(1 )(c) of the Income Tax Act, 1961 (for short 'the Act') to be bad in law as it did not specify which limb of Section 271(l)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565.
In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court. The appeal is accordingly dismissed."
Thus, Additional Ground No. (ii) of the assessee's appeal is allowed. Since the inception of the notice issued u/s 271(l)(c) has Kanwaljit Singh Bakshi vs. ACIT 5 become null and void, there is no need to comment on merit of the case. The Penalty u/s 271(l)(c) of the Act is quashed. ”
Since in the instant case also the inappropriate words in the penalty notice has not been struck off and the notice does not specify as to under which limb of the provisions, the penalty u/s 271(l)(c) has been initiated, therefore, we are of the considered opinion that the penalty levied u/s 271(l)(c) is not sustainable and has to be deleted. Although the Ld. DR submitted that mere non-striking off of the inappropriate words will not invalidate the penalty proceedings, however, the decision of the Hon’ble Karnataka High Court in the case of SSA’S Emerald Meadows (supra) where the SLP filed by the Revenue has been dismissed is directly on the issue contested herein by the Assessee. Further, when the notice is not mentioning the concealment or the furnishing of inaccurate particulars, the ratio laid down by the Honble High Court in case of M/s. Sahara India Life Insurance Company Ltd. (supra) will be applicable in the present case. The Hon’ble Delhi High Court held as under:
“21. The Respondent had challenged the upholding of the penalty imposed under Section 271(l)(c) of the Act, which was accepted by the ITAT. It followed the decision of the Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar) and observed that the notice issued by the AO would be bad in law if it did not specify which limb of Section 271(l)(c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. The Karnataka High Court had followed the above judgment in the subsequent order in Commissioner of Income Tax v. SSA’s Emerald Meadows (2016) 73 Taxman.com 241 (Kar), the appeal against which was dismissed by the Supreme Court of India in SLP No. 11485 of 2016 by order dated 5th August, 2016.
Kanwaljit Singh Bakshi vs. ACIT 6 22. On this issue again this Court is unable to find any error having been committed by the ITAT. No substantial question of law arises. ”
Thus, notice under Section 271(l)(c) r.w.s. 274 of the Act itself is bad in law.”
The facts and circumstances of the case of the assessee being identical with those in the case of his wife (Minu Bakshi), we, following the decision of the coordinate Bench (supra) hold that the penalty levied upon the assessee is unsustainable. It may be added that we agree with the submission of the Ld. AR that penalty due to addition on account of valuation of paintings is a matter of subjective assessment. It cannot result in levy of penalty for concealment of income. Accordingly, the order of the Ld. CIT(A) is set aside and the AO is directed to cancel the penalty.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 8th February, 2022.