M/S SOBHAGIA CLOTHING COMPANY,LUDHIANA vs. ACIT, CC-2, LUDHIANA

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ITA 98/CHANDI/2019Status: DisposedITAT Chandigarh27 September 2019AY 2014-156 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty order was void ab initio because it was passed before the mandatory prior approval from the Additional CIT was obtained. The Tribunal noted that the approval date was after the penalty order date and the relevant columns were filled manually.

What were the facts?

The Assessing Officer levied penalty under Section 271AAB of the Income Tax Act. The assessee argued that the penalty order was void ab initio as it was passed without obtaining prior approval from the Additional CIT, which is mandatory under Section 274(2).

What were the issues?

Whether a penalty order passed under Section 271AAB without obtaining prior approval from the Additional CIT as required by Section 274(2) is void ab initio.

Which sections of the Income-tax Act were involved?

Section 271AAB,Section 274(2)

AI-generated summary — verify with the full judgment below

आदेश/Order

Per Sanjay Garg, Judicial Member:

The captioned appeals have been preferred by the assessees against the separate orders dated 10.12.2018 of the Commissioner of

ITA Nos. 96 to 98-chd-2019 M/s Sobhagia Sales Pvt Ltd & Sobhagia Clothing Co., Ludhiana 2

Income Tax (Appeals)-2, Jalandhar [hereinafter referred to as CIT(A)]

agitating the levy of penalty u/s 271AAB of the Act and further

confirmed by the Ld. CIT(A) u/s 154 of the Income Tax Act, 1961 (in

short 'the Act').

2.

Since the appeals having common issue involved were heard

together, therefore, these are being disposed off by this

consolidated order for the sake of convenience and brevity.

3.

First, we shall deal with appeal in ITA No. 96/Chd/2019 for

the Assessment Year 2013-14, wherein, the only ground raised by

the assessee reads as under:-

That order passed u/s 154 of the Income Tax Act, 1961 by the Ld. Commissioner of Income Tax (Appeals)-2, Jalandhar is against law and facts on the file in as much as neither there was any mistake much less apparent mistake in the order dated 15.3.2018 passed by him against levy of penalty of Rs. 2.50 lacs u/s 271AAB by the Ld. Assessing Officer nor was he justified to uphold the penalty on merits.

4.

The assessee in this appeal has contested the conformation of

penalty levied by the Assessing officer @ 10% of the undisclosed

income under section 271AAB (1) of the Income Tax Act.

ITA Nos. 96 to 98-chd-2019 M/s Sobhagia Sales Pvt Ltd & Sobhagia Clothing Co., Ludhiana 3

5.

At the outset, the Ld. Counsel for the assessee has submitted

that the penalty u/s 271AAB of the Act levied by the Assessing

Officer was void abinitio because he has not taken the prior

approval under section 274(2) of the Act, which was accorded vide

letter no. 1026 dt. 30/09/2016 while the penalty order was passed

by the Assessing Officer on 29/09/2016 i.e prior to taking the

approval from the Additional CIT, Central Circle, Range Ludhiana.

That the said column of letter number and date have been hand

filled later on in the typed penalty order. The fact itself speaks

that the Assessing Officer passed the penalty order without taking

the requisite approval from the competent authority and later on

the blank column was filled after passing of the order in question.

The penalty u/s 271AAB of the Act levied by the Assessing Officer

was void abinitio.

6.

In his rival submissions the Ld. Sr. DR strongly supported the

order of the authorities below and further submitted that there may

be a typographical mistake in the order passed under section

271AAB(1) of the Act and by mistake the date was mentioned as

29/09/2016 while the DCR number was dt. 30/09/2016.

7.

We have considered the submissions of both the parties and

perused the material available on the record. To resolve the present

ITA Nos. 96 to 98-chd-2019 M/s Sobhagia Sales Pvt Ltd & Sobhagia Clothing Co., Ludhiana 4

controversy it is relevant to refer the provisions contained in

Section 274(2) of the Act which read as under:

“Section 274(1)………… (2) No order imposing a penalty under this Chapter shall be made- (a) by the Income-tax Officer, where the penalty exceeds ten thousand rupees; (b) by the Assistant Commissioner or Deputy Commissioner, where the penalty exceeds twenty thousand rupees, except with the prior approval of the Joint Commissioner.”

8.

From the above provisions contained in section 274 of the

Act, it is crystal clear that the penalty under section 271AAB of

the Act, which falls in Chapter XXI of the Act shall not be

imposed by the Assessing Officer until and unless prior approval is

taken from the concerned Joint Commissioner of Income Tax

(JCIT). The use of word “shall” make it mandatory to take the

prior approval of the JCIT / Additional CIT before passing the

order imposing the penalty under section 271AAB of the Act. In

the present case it is crystal clear from the penalty order was

passed by the Assessing Officer on 29/09/2016 while the approval

from the Additional CIT, Range Ludhiana was accorded vide letter

no. 1026 dt. 30/09/2016, which clearly established that the penalty

order was passed by the Assessing Officer on 29/09/2016 before

ITA Nos. 96 to 98-chd-2019 M/s Sobhagia Sales Pvt Ltd & Sobhagia Clothing Co., Ludhiana 5

taking the approval from the concerned Additional CIT / J.C.I.T.

The contention of the Ld. DR that the same may be a typographical

mistake is not tenable because the relevant column of ‘approval

letter No.’ and ‘Date’ had been left blank in the penalty order

which have been filled with pen on receipt of said approval letter

and the date mentioned falls after the date of pronouncement of

impugned penalty order. Therefore, the penalty order passed by the

Assessing Officer for levying the penalty under section 271AAB of

the Act is void abinitio. In that view of the matter the impugned

penalty levied u/s 271AAB of the Act by the Assessing Officer and

sustained by the Ld. CIT(A) is deleted.

ITA Nos. 97 & 98/Chd/2019

9.

In ITA Nos. 97 & 98/Chd/2019 for the A.Y. 2014-15, the

facts are identical as were involved in the ITA No. 96/Chd/2018 in

the case of Sobhagia Sales Private Limited, Ludhiana. The only

difference is in the amount of penalty u/s 271 AAB of the Act

levied by the Assessing Officer and sustained by the Ld. CIT(A),

therefore, our findings given in the former part of this order shall

apply mutatis mutandis. Accordingly the penalty levied by the

Assessing Officer under section 271AAB of the Act and sustained

by the Ld. CIT(A) in this appeal is also deleted.

ITA Nos. 96 to 98-chd-2019 M/s Sobhagia Sales Pvt Ltd & Sobhagia Clothing Co., Ludhiana 6

In the result, the captioned appeals of the assessees are

allowed.

Order pronounced in the Open Court on 27.09.2019

Sd/- Sd/- (संजय गग� / SANJAY GARG) (एन. के. सैनी / N.K. SAINI) उपा�य� /Vice President �या�यकसद�य/ Judicial Member Dated : 27. 09.2019 “आर.के.”

आदेशक���त�ल�पअ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकरआयु�त/ CIT 4. आयकरआयु�त (अपील)/ The CIT(A) 5. �वभागीय��त�न�ध, आयकरअपील�यआ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड�फाईल/ Guard File

आदेशानुसार/ By order, सहायकपंजीकार/ Assistant Registrar

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