DCIT 9(3)(2), MUMBAI vs. GENTECH LABORATORIES LTD, MUMBAI

The only issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in deleting the levy of penalty u/s.271(1)(c) of the Act in the facts and circumstances of the instant case.

We have heard rival submissions and perused the materials available on record. We find that return of income for A.Y.2009-10 was electronically filed by the assessee company on 26/09/2010 declaring total income of Rs.7,60,76,388/- consisting of long term capital gains for transfer of development rights. The assessee is engaged in the business of marketing of pharmaceutical healthcare products. Originally the assessment was completed u/s.143(3) of the Act on 24/05/2011 determining total income of the assessee at Rs.7,66,64,200/-. Later, the assessment was sought to be reopened and re-assessment was completed u/s.143(3) r.w.s. 147 of the Act on 22/09/214 determining total income of the assessee at Rs.7,68,67,940/-. In the said re- assessment, addition has been made on account of bogus purchases to the tune of Rs.2,03,736/-. Penalty proceedings u/s.271(1)(c) of the Act were initiated and penalty was levied by the ld. AO on the said addition made on account of bogus purchases. The assessee also raised the ground before the ld.CIT(A) that in the notice issued for initiating penalty proceedings issued by the ld. AO, there was no clarity with regard to specific mistake committed by the assessee as to whether the assessee has concealed the particulars of income or furnishing inaccurate particulars of income. The ld. CIT(A) had granted relief to the assessee on the said legal ground by placing reliance on addition of various High Courts. We find that the very same issue is no longer res integra in view of the Full Bench decision of the Hon’ble Jurisdictional High Court in the case of Mohd. Farhan A Shaikh vs. DCIT reported in 434 ITR 1 (Bom). The relevant head notes of the said judgement is reproduced below:- “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

M/s. Gentech Laboratories Ltd., 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]”

In the result, appeal of the Revenue is dismissed.