JOSEPH ABRAHAM PETER JOSEPH,MADURAI vs. INCOME TAX OFFICER, CENTRAL REVENUE BUILDING,MADURAI

आदेश / O R D E R

PER ABY T. VARKEY, JM:

4. In respect of the aforesaid legal issue, first of all we perused the impugned show cause notice (SCN) issued by the AO u/s 271(1)(c) r.w.s.

1. 274 of the Act dated 27.12.2019 for AY 2014-15 by virtue of which the AO gave notice to the assessee ‘as to why’ the penalty should not be levied u/s.271(1)(c) of the Act ‘for furnishing inaccurate particulars of income’. However, the AO while passing the penalty order is noted to have found the assessee liable to penalty for “concealment of income for an amount of ₹8,57,905/- and levied penalty of ₹4,47,806/-. Thus, we find substance in the assertion made by assessee that the assessee was put on notice for a specific fault u/s.271(1)(c) viz “furnishing of inaccurate particulars of income” but the AO while passing the penalty order has found the assessee at fault for another fault stated u/s.271(1)(c) i.e. “concealing the particulars of income”. Therefore, the impugned action of the AO issuing notice for furnishing inaccurate particulars in the facts stated supra is found to be bad in law. The reason being, the assessee was not put on notice for the fault on which he was ultimately found to have been penalized, which resulted in him not able to defend properly the charge/fault, against which the AO was proposing to levy penalty. In such factual background, the Tribunal has consistently held such notices to be bad in law for not specifying the specific fault for which the assessee was being proceeded against for levy of penalty. And such actions of the Tribunal has been upheld by several judgments of the various High Courts including the Hon’ble jurisdictional High Court of Madras in the case of Babuji Jacob v. ITO reported in (2021) 430 ITR 259 (Mad). We also note that the Full bench of the Hon’ble Bombay High Court in the case of Mohd. Farhan A. Shaikh v. DCIT reported in [2021] 434 ITR 1 (Bombay) dated 11.03.2021 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 High 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.

“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).

However, we find the decision in Gangotri Textiles (supra) is distinguishable, since it was on the peculiar facts of that case. In the case of Gangotri Textiles, it is noted that the defect in the notice was raised for the first time before the Hon’ble Madras High Court, which was also a fact, the Hon’ble High Court noted to refuse admission of the same; and secondly, the Hon’ble High Court took note of the distinguishing facts of the case, wherein the assessee didn’t disclose about the sale of its land & windmill in its RoI filed u/s.139(1) of the Act on 26.09.2012 and after ‘13’ months of issuance of statutory notice u/s.143(2) of the Act, the assessee by letter dated 03.03.2015, admitted that due to oversight, it didn’t offer the capital gains in its return and attached a summary of total income adjusting profit on the LTCG & STCG; and even at that stage, didn’t bother to file revised return. Considering the aforesaid facts, the Hon’ble High Court wondered as to how the assessee while responding to the penalty notice dated 12.03.2015, could have asserted that there was no concealment of income or furnishing of inaccurate particulars of income as envisaged, sec.271(1)(c) of the Act. The Hon’ble High Court took note of the fact that, the assessee [Gangotri Textiles] first of all didn’t disclose about the sale of the land & windmill in its return which fact/omission was clearly discernable from the perusal of the RoI/ITR, wherein, at the relevant column, it is stated as ‘nil’. In such factual back ground, the Hon’ble High Court held that “it will not only be a case of filing of inaccurate particulars, but also a case of concealment of income” meaning in the peculiar facts both faults are attracted. Therefore, in the aforesaid factual back ground, the assessee having understood the ingredients of the penalty proposed to be levied against it, coupled with the omission on the part of the assessee of not raising the invalidity/legal issue pertaining to the notice before the Ld.CIT(A)/Tribunal, refused to entertain the legal issue regarding defect in the notice, and was of the view that there was no substantial question of law against the action of the Tribunal confirming the penalty u/s.271(1)(c) of the Act. Therefore, the decision rendered in Gangotri Textiles Ltd., is noted to be distinguishable on the peculiar facts of that case and therefore, dismissal of the SLP refusing leave to appeal, would not come to the aid of the Revenue to wipe out the stare-decisis/judicial precedent of ratio laid down by the Hon’ble jurisdictional High Court in the case of Babuji Jacob (supra). Therefore, we don’t find any merits in the contention of the Ld DR for Revenue and respectfully following the binding decision of the Hon’ble jurisdictional High Court in the case of Babuji Jacob (supra) and a host of other decisions cited supra, we hold the impugned notice issued dated 27.12.2019 for AY 2014-15 to be bad in law and consequently, direct the deletion of the penalty levied in this case.