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Order PER GAGAN GOYAL, A.M: This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-50, Mumbai, [hereinafter referred to as ‘the CIT (A)’] through National Faceless Appeal Centre (NFAC) vide order dated 25.08.2021 for the Assessment Year (AY) 2011-12. The assessee has raised the following grounds of appeal: “Your appellant being aggrieved by the Order passed by the learned Commissioner of Income tax, (Appeals), National Faceless Appeal Centre, u/s 250 of the Income Tax Act presents this appeal against the same on the following grounds.
1. The learned CIT (A) has erred in confirming the penalty levied of Rs. 1, 00,000/- u/s 271B of the Income Tax Act, 1961. It is submitted that on the facts and (A.Y. 2011-12) circumstances of the case, the provisions of Section 271B of the Act are just not applicable in case of Appellant and therefore the penalty confirmed by incorrect application Section 271B of Rs. 1, 00,000/- be deleted. The same be held now.
2. The learned CIT (A) has failed in appreciating the facts of the case and detailed submission made during the course of appellate proceeding for not getting the books of accounts audited u/s 44AB of Income Tax Act, 1961 for the year. It is submitted that the total turnover of the Appellant company did not exceed threshold limit for the year as provided u/s 44AB of the Act and therefore was not liable to get its books of audited under the provisions of Income tax Act,1961. On facts and circumstances of the case, the incorrect penalty levied of Rs 1, 00,000/- wrongly invoking the provisions of Section 271B of the Act be deleted in the interest of justice.
3. The order passed by the learned CIT (A) is bad in law and contrary to the provisions of law and facts. It is submitted that the same be held so now.
4. Your appellant craves leave to add, alter and/or to amend all or any of the grounds before the final hearing.”
Brief facts of the case are that the assessee filed its return of income under section 153C of the Income Tax Act, 1961 (for short ‘the Act’) declaring a loss of Rs. 47,022/-. A search was conducted on 04.02.2011 in the case of M/s JIK Industries Ltd. And at the premises of CMD Shri R.G. Parikh, the assessee company is a subsidiary of the JIK Industry Ltd. In the search, documents and computer backup was found and seized which pertains to the assessee company as well, therefore, the case of the assessee was covered under section 153C of the Act. Accordingly, notice under section 153C of the Act was issued on 30.04.2012 for filing return of income.
Before any finding on ground no.2 pertaining to the merits of the case, after going through the record of the appeal as produced before us i.e. assessment order, appeal order of Ld. CIT (A), copy of penalty notice issued and penalty order, we observed that there is a substantial legal issued involved which needs to be decided first as raised through ground no.1 and 3 by the assessee, keeping in view the decision of the Hon’ble Jurisdictional High Court of Mumbai in (A.Y. 2011-12) the case of Mohd. Farhan A. Shaikh Vs. DCIT (2021) 434 ITR 1 (Bombay) dated 11.03.2021.
We have heard both the parties and perused the records. At the outset, the Ld. AR assailing the action of the AO levying penalty u/s 271B of the Act brought to our notice that the show cause notice issued by AO u/s 274 r.w.s 271B of the Act dated 22.03.2013 & 08.07.2013 has not spelled out specifically the fault/charge for which the assessee was being proceeded against with the proposed penalty i.e. whether the assessee has “is liable for penalty under section 271F, 271(1)(b), 271A, 271B & 272A(1)(c) of the Act”. Having not done so, according to him, the assessee was in the dark as to what fault it has to defend against the proposed penalty. Therefore, according to him, since the show cause notice itself is bad in law, the resultant penalty levied is vitiated. For that, he relied on the decisions of the Full bench of the Hon’ble Jurisdictional High Court in the case of Mohd. Farhan A. Shaikh Vs. DCIT (2021) 434 ITR 1 (Bombay) dated 11.03.2021 wherein their Lordships has held that the show cause notice issued prior to levy of penalty without specifying the fault/charge against which the assessee is being proceeded, would vitiate the penalty itself. And thus the Hon’ble Court upheld the view of the division bench order in the case of PCIT Vs. Goa Dourado Promotions (P.) Ltd. (Tax Appeal No.18 of 2019, dated 26.11.2019) and held that the contrary view taken by another division bench in the case of CIT Vs. Smt. Kaushalya (1995) 216 ITR 660 (Bom) does not lay down the correct proposition of law.
As noted earlier, we find that the penalty notice dated 22.03.2013 & 08.07.2013 did not explicitly convey to the assessee the specific fault/charge the assessee is being proceeded for levy of penalty. Resultantly, the show cause notice is found to be defective/invalid, and therefore it is held to be bad in law.