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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI AMARJIT SINGH & SHRI RAHUL CHAUDHARY
आदेश / O R D E R Per Amarjit Singh (AM):
The present appeal filed by the assessee is directed against the order passed the NFAC, dated 27.05.2022 for A.Y. 2008-09. The assessee has raised the following grounds before us:
2 M/s D.R. Plastics Vs.ITO, Ward-21(1)(4)
“Ground No. 1: Striking Off The learned Assessing Officer & CIT (A) erred in levying penalty u/s 271(1)(c) when in the show cause Notice or in the Assessment the charge of concealment or filing of inaccurate particulars was not struck off or ascertained by the AO & hence the AO & CIT (A) did not apply their mind before levying and confirming the concealment penalty, as under what charge the penalty was being initiated was not ascertained
Ground No. 2: Penalty u/s. 271(1)(c) of 2,17,095/- The learned CIT(A) erred in confirming penalty u/s. 271(1)(c) of Rs.2,17,095/- with respect to an estimated addition to the sale consideration as per section 50C.”
Fact in brief is that assessment u/s 143(3) of the Act was completed on 15.02.2016 determining nil income. During the course of assessment the A.O noticed that assessee firm had sold a property for a consideration of Rs.35 lac as against the fair market value of Rs.42.90 lacs assessed by the stamp valuation authority for the purpose of levying stamp duty and registration charges. The assessee had computed long term capital gain of Rs.6,49,134/- on sale of land and short term capital gain of Rs.12,01,586/- on sale of building considering sale consideration of Rs.35 lacs. The A.O had taken Rs.42.90 lacs as full value of consideration and calculated long term capital gain of Rs.9,11,414/- on sale of land and short term capital gain of Rs.17,29,306/- on sale of building. Accordingly, A.O had made addition of Rs.790,000/- of capital gain and also levied penalty u/s 271(1)(c) of the Act of Rs.2,17,095/-.
Aggrieved, the assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 4. During the course of appellate proceedings before us at the outset the ld. Counsel contended vehemently that the A.O has issued notice u/s 274 r.w.s 271(1)(c) dated 15.02.2016 without specifying whether the 3 M/s D.R. Plastics Vs.ITO, Ward-21(1)(4)
penalty is levied for concealment of income or furnishing of inaccurate particulars of income. In this regard the ld. Counsel has placed reliance on the decision of coordinate bench of ITAT Mumbai in the case of ACIT, Circle-9(3)(1) Vs. M/s Future E-Commerce Infrastructure Ltd. wherein after following the decision of Hon’ble jurisdictional Bombay High Court in the case of Mohd. Farhan A. Shaikh Vs. DCIT (2021) 434 ITR 1 (Bom) held that if there is a defect in notice of not striking off irrelevant matters the penalty cannot be levied. On the other hand, the ld. Departmental Representative is supported the order of lower authorities.
Heard both the sides and perused the material on record. With the assistance of the ld. representative we have gone through the notice u/s 274 r.w.s 271(1)(c) dated 15.02.2016. The relevant part of notice is reproduced as under: “Whereas in the course proceedings before me for the assessment year 2008-09 it appears to me that you:- have concealed the particulars of your income or Furnished inaccurate particulars of such Income. You are hereby requested to appear before me at WITHIN SEVEN DAYS FROM THE RECEIPT OF THIS NOTICE and show cause why an order imposing a penalty on you should not be made under section 271(1C) of the Income tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative you may show cause in writing on or before the said date which will be considered before any such order is made under section 271(1)(C).” On perusal of the aforesaid notice it is clear that A.O has not specified that penalty is being levied on account of concealment of particulars of income or of furnishing of inaccurate particulars of income. In this regard we have gone through decision of the jurisdictional High Court in 4 M/s D.R. Plastics Vs.ITO, Ward-21(1)(4)
the case of Mohd. Farhan A Shaikh as referred supra wherein the relevant part of the head not is reproduced as under: “Section 271(1)(c), read with section 274 of the Income-tax Act, 1961 Penalty For concealment of income (Recording of satisfaction) Whether where assessment order clearly records satisfaction for imposing penalty on one or other, or both grounds mentioned in section 271(1)(c), a mere defect in notice-not striking off irrelevant matter would vitiate penalty proceedings-Held, yes- Whether since penalty proceedings culminate under a different statutory scheme that remains distinct from assessment proceedings, therefore, assessee must be informed of grounds of penalty proceedings only through statutory notice Held, yes Whether even if notice contains no caveat that inapplicable portion be deleted, it is in interest of fairness and justice that notice must be precise, it should give no room for ambiguity-Held, yes [Paras 181 and 188]In favour of assessee]”
Further we have perused the decision of coordinate bench of ITAT in the case of M/s Future E-Commerce Infrastructure Limited Vs. ACIT, Circle 9(3)(2) wherein after following the decision of Hon’ble jurisdictional High Court in the case of Mohd Farhan A. Shaikh as supra the penalty levied was deleted on the ground that A.O had not struck off the irrelevant portion in the notice issued u/s 274 r.w.s 271(1)(c) of the Act. Similarly, in the various other decision of the coordinate bench of the ITAT, Mumbai, penalty levied without striking off the irrelevant portion in the notice u/s 274 r.w.s 271(1)(c) of the Act was deleted after following the decision of Hon’ble jurisdictional High Court as supra. Following the decision of Hon’ble High Court and the decision of coordinate bench as elaborated above the issue on hand being squarely covered in favour of the assessee as it is demonstrated from the notice issued by the A.O. u/s 274 r.w.s 271(1)(c) of the Act dated 15.02.2016 that same was issued without striking off the irrelevant portion. After following the decision of the Hon’ble jurisdictional High Court as supra, the notice issued u/s 274 r.w.s 271(1)(c) dated 15.02.2016 is bad in law. Therefore, the A.O is directed to delete the penalty. Accordingly, the appeal of the assessee is allowed. Since, we have deleted the penalty on account of invalid notice
5 M/s D.R. Plastics Vs.ITO, Ward-21(1)(4)