NNA CRE PROPERTIES LLP,MUMBAI vs. ACIT 20(2), MUMBAI

O R D E R

PER ABY T. VARKEY, JM:

of the assessee are as under: - “1. Learned AO erred in law as well as on facts in issuing notice u/s 274 r.w.s 271(1)(c) without application of mind, as the same is issued without mentioning that whether it is levied for concealment of the particulars of income or furnishing inaccurate particulars of income. It is note know to appellate as to under which ground the penalty is proposed to be levied. Hon. CIT(A) has also erred in not considering the same.

2. Learned AO erred in law as well as on facts in levying penalty u/s 271(1)(c) of Rs.1,29,503/- on disallowance of interest of Rs.4,19,102/- NNA CRE Properties LLP under ‘Income From House Property’. The Hon. CIT(A) has erred in confirming the same.

3. Learned AO erred in law in levying penalty u/s 271(1)(c) before finalizing of the quantum proceedings as per the provisions of section 275 of the Act. The Hon. CIT(A) has erred in confirming the same.”

3. None appeared on behalf of the assessee. The ground no. 1 of the assessee is against the action of the AO issuing an invalid/defective show cause notice proposing penalty which according to the assessee was vague; and the assessee was not aware as to what was the fault/charge for which the AO was proposing to levy penalty on the assessee. And the show cause notice proposing the penalty for the assessee dated 07.06.2017 is found place at page no. 2 of the Paper Book and from perusal of which we note that the AO has not specified as to what specific fault as envisaged u/s 271(1)(c) of the Act has been committed by the assessee i.e. “concealment of income” or “furnishing inaccurate particulars of such income”. Rather the show cause notice reveals that the AO has asked the assessee as to why the penalty u/s 271(1)(c) of the Act should not be levied against the assessee. Thus, we note that the show cause notice omits to specify the fault/charge against the assessee. So, the assessee was in the dark as to what fault for which he is being proceeded against pursuant to the penalty notice. Therefore, in the aforesaid facts and circumstances of the case, we hold that the show cause notice issued by AO vide letter dated 07.06.2017 is bad in law and therefore the penalty levied is vitiated. For that, we rely on the decisions of the Full bench of the Hon’ble Jurisdictional High Court in the case of Mohd. Farhan A. Shaikh Vs.

NNA CRE Properties LLP 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 against 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 an 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. Further, we take note of the decision of the Hon’ble Karnataka High Court in the case of CIT vs Manjunatha Cotton and Ginning Factory reported in (2013) 359 ITR 565 (Kar) and the Department’s SLP against it has been dismissed by the Hon’ble Supreme Court. We also find that Hon’ble Karnataka High Court in the case of CIT Vs. SSA’s Emerald Meadows, reported in (2016) 73 taxmann.com 241 (Kar) endorsed the same view in Manjunatha Cotton and Ginning Factory (supra) and held as under:- “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 CIT Vs. Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565/218 Taxman 423/35 taxmann.com 250(Kar).