PRADEEP SOOD,FARIDABAD vs. DCIT, CENTRAL CIRCLE- I, FARIDABAD

This appeal is filed by the assessee against the order dated 30/11/2017 passed by CIT(A)-3, Gurgaon, for assessment year 2004-05.

The Ld. AR submitted that the notice issued under 274 read with 271(1)(c) of the Act was not proper notice as the Assessing Officer has not specified the exact limb of Section 271(1)(c). The Ld. AR further submitted that in assessment order also the addition of unexplained jewellery was not an issue before the Assessing Officer and the penalty was initiated on the afterthought which is not justifiable under the law. The Ld. AR relied upon the decision of Hon’ble High Court Reliance Petro Product, Sahara Insurance.

The Ld. DR relied upon the assessment order, penalty order and the order of the CIT(A). The Ld. DR submitted that in this case, addition of Rs. 1,70,000/- was made by the AO on account of undisclosed profits on sale of shares which was duly confirmed by the Ld. CIT (A). AO imposed penalty of Rs. 51,000/-. This was duly confirmed on merits by the Ld. CIT(A). Assessee is contending in additional ground of appeal that charge on penalty notice was not specified. In other words, non-striking of one limb in penalty notice does not make it valid penalty proceedings. The appellant has relied upon the decision of the Hon'ble Supreme Court in the case of Commissioner of Income-tax v. SSA'S Emerald Meadows [2016] 73 taxmann.com 248 (SC) and many other decisions. However, this contention of the assessee is not valid as it was clear from page 5 of the assessment order that penalty is being initiated for concealment of income. Penalty notice dated 7.03.2016 is not found in the pa per book submitted by the assessee and assessee has raised the issue on the basis of earlier notice dated 26.12.2008. Assessee had at no earlier point of time raised the plea that on account of a defect in the notice, they were put to prejudice. It can also be seen that no prejudice per se is caused to the assessee merely because one limb of the notice is not struck off by the AO because adequate opportunity would be granted in the proceedings and also the satisfaction about the nature of the default was arrived at in the assessment proceedings itself. Assessee was well aware about the penalty provisions which are to be used against him”. The Ld. DR relied upon the decision of the Hon’ble Supreme Court of India in the case of Sundaram finance Ltd.[2018] 99 taxmann.com 152(SC). The Ld. DR further submitted that there are number of judicial decisions in the favour of the revenue where it is held that the non- striking .of one limb in penalty notice does not make it invalid. The Ld. AR submitted that initiation of penalty is based on satisfaction arrived at by the AO during assessment proceedings. For initiation of penalty, the Assessing Officer should be satisfied during the course of assessment proceedings that the assessee had concealed the particulars of its income or deliberately furnished inaccurate particulars of income. The Hon’ble Supreme Court examined this matter way back in 1962 in the case of S.V Angidi Chettiar (44 ITR 739 (SC). Through the penalty notice, the AO only informs the assessee that penalty is being initiated against him. The Ld. DR relied upon the decision in the case of Madhusudanan K. P. [2001] 118 taxmann324 (SC). The Ld. DR further submitted that no prejudice is caused to the assessee by not striking off one limb (whether the penalty is initiated on account of concealment of income or furnishing of inaccurate particulars). The Ld. DR pointed out that no prejudice per se is caused to the assessee merely because one limb of the notice is not struck off by the AO because adequate opportunity would be granted in the proceedings and also the satisfaction about the nature of the default was arrived at in the assessment proceedings itself. The Ld. DR relied upon the following decisions:  Sundaram finance ltd [2018)403 II R 407, it was held by Hon’ble High Court of Madras.  SLP against this decision was dismissed by the Hon’ble Supreme Court as reported in [2018] 99 taxmann.com 152(SC).  Kausalya[1995] 216 ITR 600 (Bombay).  Earthmoving Equipment Service Corporation [2017] 166 ITD 113 (Mumbai -Trib.) The Ld. DR submitted that it is not correct on part of the assessee to raise the technical matter in appellate proceedings after having participated in the penalty proceedings without raising the issue and raising the issue for the first time in appellate proceedings. This matter was examined by ITAT, Cochin Bench also in the case of Sinkaram Chettiar in its decision dated 02/08/2018 in I.T.A. Nos.368-373/Coch/2017. The Tribunal examined various decisions including that of Hon’ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565. The Ld. DR relied upon the decision of Chandulal (152 ITR 238), as well as the decision of the Tribunal in case of Shilov Sharrna vs. ITO, W-l(4), Noida, A.Y. 2009-10 Date of order 31.07.2017. In this ease the assessee relying upon the case of Munjunatha Cotton took additional ground that the show cause notice issued did not spell out any specific charge whether penalty proceedings were being initiated for concealment or for furnishing in accurate particulars of income (para 2 & 7). The Tribunal also reliedupon the Supreme Court decision in the case of MAK Data. In view of the above case laws, facts of the case and decision of the Hon’ble Supreme Court of India in the case of Sundaram finance Ltd [20181 99 taxmann.com 152(SC), thus, the Ld. DR requested that appeal of the assessee may be dismissed.

We have heard both the parties and perused the material available on record. First of all, in the notice issued u/s 274 r.w.s 271(1)(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 04.03.2016 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. The notice issued u/s 271 (1)(c) read with Section 274 was not as per the prescribed provisions of penalty envisaged in Income Tax Act. This issue is squarely covered by the decision of the Hon’ble 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 Hon’ble 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(1)(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 the result, appeal of the assessee is allowed. Order pronounced in the Open Court on this 16th Day of August, 2021.