MRS CHHAYA HIMMAT JAGDA,MUMBAI vs. INCOME TAX OFFICER-32(1)(2), MUMBAI

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ITA 968/MUM/2022Status: DisposedITAT Mumbai24 August 2022AY 2014-155 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty notice issued by the AO was defective as it did not specify the charge under which penalty was intended to be levied, vitiating the penalty order. The penalty was quashed based on High Court judgments.

What were the facts?

The assessee claimed long-term capital gains on share transactions, which the AO treated as bogus and initiated penalty proceedings. The penalty was levied for concealment of income and furnishing inaccurate particulars.

What were the issues?

Whether a penalty under Section 271(1)(c) is vitiated if the notice issued under Section 274 does not clearly specify the charge for which the penalty is being levied.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI

Before: SHRI AMIT SHUKLA, JM & SHRI PRASHANT MAHARISHI, AM

For Appellant: Shri M. Subramanian, Shri Praveen Shekhar, DR सुनवधईकीतधरीख/
For Respondent: Shri Praveen Shekhar

O R D E R

Per Amit Shukla, Judicial Member:

1.

The aforesaid appeal has been filed by the assessee against the impugned order dated 21.04.2022, passed by National Faceless

Mrs. Chhaya Himmat Jagda Appeal Centre (NFAC), Delhi in relation to penalty proceedings u/s 271(1)(c) for AY 2014-15.

2.

Assessee is aggrieved by levy of penalty of Rs. 4,90,000/- on account of sale consideration of Rs. 17,17,275/- treating it as business income instead of capital gain.

3.

The facts in brief are that assessee has claimed long term capital gain on some share transactions of Rs. 16,22,890/- on sale of shares of M/s Sunrise Asia Ltd. The said long term capital gain was treated as exempt u/s 10(38). Ld. AO after detail discussion has held it to be bogus long term capital gain on the basis of certain information received from Kolkata investigation directorate. The penalty has been levied by the AO holding it to be concealment of income as well as furnishing inaccurate particulars of income.

4.

Ld. CIT(A) has too confirmed the penalty.

5.

Before us, Ld. Counsel for the assessee submitted that here in this case AO while issuing notice u/s 274 r.w.s. 271 has not specified the charge under which limb, he intended to impose penalty. In support of it, he filed copy of notice dated 15.12.16 and submitted that penalty levied by AO is not sustainable in law.

Mrs. Chhaya Himmat Jagda 6. On the other hand, Ld. DR strongly relied on the order of Ld. CIT(A).

7.

After considering the aforesaid submissions and perused the material placed on record, we find that AO though in his assessment order made addition of Rs. 17,17,275/- and stated that penalty proceedings is initiated separately for furnishing inaccurate particulars of income. However, while issuing notice u/s 274 r.w.s. 271, he has not specified the charge under which limb, he intends to impose the penalty. Even in the penalty order, he has mentioned both the charges which are not in accordance with law.

8.

The full Bench of Hon’ble Bombay High Court in Mohd. Farhan A. Shaikh Vs. Dy.CIT (2021) 125 taxmann.com 253 (Bom) has considered this very issue. Answering the question in affirmative, the Full Bench held that a defect in notice of not striking the relevant words vitiates the penalty even though the AO had properly recorded the satisfaction for imposition of penalty in the order u/s 143(3) of the Act. In another judgment, the Hon’ble Bombay High Court in Pr.CIT Vs. Golden Peace Hotels and Resorts (P.) Ltd. (2021) 124 taxmann.com 248 (Bom) also took similar view that Mrs. Chhaya Himmat Jagda where inapplicable portions were not struck off in the penalty notice, the penalty was vitiated. The SLP of the Department against this judgment has recently been dismissed by the Hon’ble Supreme Court in Pr.CIT Vs. Golden Peace Hotels and Resorts (P.) Ltd. (2021) 124 taxrnann.com 249 (SC). In view of the overwhelming position, it is clear that where the charge is not properly set out in the notice u/s 274 viz., both the limbs stand therein without striking off of the inapplicable limb, but the penalty has been, in fact, levied for one of the two, such a penalty order gets vitiated.

9.

Thus, the aforesaid propositions are squarely applicable to this case. Accordingly, the penalty levied by AO is bad in law and the same is quashed.

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