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Income Tax Appellate Tribunal, DELHI BENCHES “A” : DELHI
Before: SHRI BHAVNESH SAINI & SHRI O.P. KANT
This appeal by Assessee has been directed against the Order of the Ld. CIT(A), Ghaziabad, Dated 29.06.2015, for the A.Y. 2008-2009, challenging the levy of penalty under section 271(1)(c) of the I.T. Act, 1961.
In this case, the assessee filed return of income declaring loss of Rs.5.75 crores. The A.O. noted that provision for bad debt of Rs.1,01,81,411/- was debited to P & L account. The A.O. noted that such provision is not allowable unless it is ascertained liability. The A.O. accordingly made addition of the amount and assessed the net loss at Rs.4.74 crores. The A.O. on the aforesaid addition levied the penalty under section 271(1)(c) of the I.T. Act, 1961. The Ld. CIT(A) dismissed the appeal of assessee.
Learned Counsel for the Assessee referred to the chart to show that assessee has been suffering loss continuously. Learned Counsel for the Assessee referred to 5 ITA.No.6427/Del./2017 Shri Abhit Sud, Delhi. several replies filed with the Income Tax Authorities as well as to the concerned Department of the Government of India for release of the amount in question. He has referred to PB- 79 which is show cause notice issued before levy of the penalty, in which A.O. has not mentioned anything as to for which limb of Section 271(1)(c) of the I.T. Act, penalty have been proposed against the assessee. He has also referred to show cause notice dated 27.12.2010 under section 274 read with section 271(1)(c) of the I.T. Act issued prior to levy of the penalty, in which the A.O. has stated as under :
“have concealed the particulars of your income or …… furnished inaccurate particulars of such income.”
3.1. Learned Counsel for the Assessee, therefore, submitted that A.O. has not pointed-out as to for which limb of Section 271(1)(c) of the I.T. Act penalty have been initiated. Therefore, levy of penalty is illegal and bad in law and in support of the contention relied upon several decisions of the Tribunal and Judgment of the Hon’ble Supreme Court in the 6 ITA.No.6427/Del./2017 Shri Abhit Sud, Delhi. case of CIT & Another vs. M/s. SSAs Emerald Meadows reported in 73 taxmann.com 248.
4. On the other hand, Ld. D.R. relied upon the Orders of the authorities below.
5. After considering the rival submissions, we are of the view that penalty is not leviable in the matter. The A.O. issued show cause notice dated 27th December, 2010 before levy of the penalty against the assessee. However, the A.O. in its show cause notice failed to specify in 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 inaccurate particulars of income, as rightly pointed-out by the Learned Counsel for the Assessee. The entire penalty proceedings are, therefore, vitiated and no penalty is leviable. On this score itself similar view is taken by Hon’ble Karnataka High Court in the case of CIT vs. M/s. SSAs Emerald Meadows 73 taxmann.com 241. This decision is confirmed by the Hon’ble Supreme Court reported in 73 taxmann.com 248. In this view of the matter, the orders of the authorities below are set aside and penalty is cancelled.
7 ITA.No.6427/Del./2017 Shri Abhit Sud, Delhi. 5. In the result, appeal of assessee is allowed.”
3.2. He has further submitted that Hon’ble Delhi High Court also in the case of Pr. CIT vs., M/s. Sahara India Life Insurance Company Ltd in Group cases reported in 2019- (8)-TMI-409-(Del.)-(HC) in Para-21 following the same decision held as under :
“21. The Respondent had challenged the upholding of the penalty imposed under Section 271(1) (c) of the Act, which was accepted by the ITAT. It followed the decision of the Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory 359ITR 565 (Kar) and observed that the notice issued by the AO would be bad in law if it did not specify which limb of Section 271(1) (c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. The Karnataka High Court had followed the above judgment in the subsequent order in Commissioner
8 ITA.No.6427/Del./2017 Shri Abhit Sud, Delhi. of Income Tax vs. SSA’s Emerald Meadows (2016) 73 Taxman.com 241 (Kar), the appeal against which was dismissed by the Supreme Court of India in SLP No. 11485 of 2016 by order dated 5th August, 2016.”
3.3. Learned Counsel for the Assessee, therefore, submitted that penalty order may be set aside and penalty order may be cancelled in both the appeals.
On the other hand, Ld. D.R. relied upon the Orders of the authorities below.
After considering the rival submissions, we are of the view that the issue is covered by the Order of ITAT, Delhi Bench in the case of M/s. Bharat Immunological & Biological Corporation Ltd., Bulandshahr vs., The DCIT, Circle, Bulandshahr (supra) and Judgment of Hon’ble Delhi High Court also in the case of Pr. CIT vs., M/s. Sahara India Life Insurance Company Ltd., (supra). It is not in dispute that in both the appeals the A.O. has issued an identical show cause notice Dated 10.12.2010 mentioning the fact as 9 ITA.No.6427/Del./2017 Shri Abhit Sud, Delhi. reproduced above in which A.O. has not pointed-out as to for which limb of Section 271(1)(c) of the I.T. Act, 1961, penalty proceedings are initiated i.e., whether for concealment of particulars of income or for furnishing inaccurate particulars of income. Therefore, the penalty notice is invalid and bad in Law and as such the entire proceedings are vitiated and no penalty is leviable against the assessee. The same issue have been considered by ITAT, Delhi Bench in the case of M/s. Bharat Immunological & Biological Corporation Ltd., Bulandshahr vs., The DCIT, Circle, Bulandshahr (supra) and penalty have been cancelled. The same view have been taken by Hon’ble Delhi High Court also in the case of Pr. CIT vs., M/s. Sahara India Life Insurance Company Ltd., (supra). Following the above decisions, we set aside the Orders of the authorities below and cancel the penalty in both the appeals. Accordingly, both the appeals of the assessee are allowed.
In the result, both the appeals of the Assessee are allowed.
10 ITA.No.6427/Del./2017 Shri Abhit Sud, Delhi. Order pronounced in the open Court.