M/S. D.N. ASSOCIATES,LUCKNOW vs. ASSISTANT COMMISSIONER OF INCOME TAX, RANGE-V, LUCKNOW

PER: A.D. JAIN, VICE PRESIDENT:

This is assessee’s appeal for Assessment Year 2014-15, against the order of the ld. CIT(A)-II, Lucknow dated 22.10.2018, taking the following grounds:

“1. The Ld. CIT(A)-II, Lucknow erred while sustaining the penalty order of Assessing Officer imposing penalty of Rs.1,19,000.00. 2. The Ld. CIT(A)-II, Lucknow failed to adjudicate the ground that the Assessing Officer initiated the penalty on both the limbs “concealment of particulars of income and furnishing of inaccurate particulars of income.”

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2 The grievance of the assessee is against imposition of penalty

under section 271(1)(c) of the I.T. Act, which has been confirmed by

the learned CIT(A).

invited our attention to the show cause notice for penalty under section

271(1)(c) of the Act. It was submitted that from a perusal of this

notice, it is crystal clear that the charge, for which the penalty is

proposed to be levied under section 271(1)(c) of the Act, is not

specific, as to whether it is for concealment of income or for furnishing

of inaccurate particulars of income. The ld. A.R. of the assessee

vehemently argued that it is a settled position of law that if the notice

under section 274 is not specific about the charge or limb under which

penalty is being levied under section 271(1)(c) of the Act, any penalty

levied on the basis of such a notice is bad in law and it is liable to be

cancelled.

authorities below.

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From a perusal of this notice, it is crystal clear that the charge for

which penalty is proposed to be levied under section 271(1)(c) of the

Act, whether for concealment of income, or for furnishing of inaccurate

particulars of income, is not specific. The law mandates that the

authority who is proposing to impose penalty shall be certain as to the

basis on which the penalty is being levied and the notice must reflect

that specific reason, so that the assessee, to whom such notice is

given, can prepare himself regarding the defence which he would like

to take to support his case. This is even enshrined in the principles of

natural justice and as has been upheld by Hon'ble Apex Court and

other High Courts. We place reliance on the following cases:-

‘CIT SSA’s Meadows’, 1. vs. Emerald [2016] 73 Taxmann.com 248 (SC). In this case the Hon'ble Apex Court looked into the facts before them that Tribunal relying on the decision of Division Bench of Hon'ble Karnataka High Court in the case of CIT and Another vs. Manjunath Cotton & Ginning Factory (supra) allowed the appeal of the assessee holding that notice issued by the Assessing Officer under section 274 read with section 271(1)(c) of the Act was bad in law as it did not specify under which limb of 271(1)(c) penalty proceedings has been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. When the matter travelled upto the High Court, it supported the judgment of Hon'ble Karnataka High Court in the case of CIT and Another vs. Manjunath Cotton & Ginning Factory (supra) and decided that there was therefore no substantial question of law to be decided. Thereafter

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an SLP was filed before the Hon'ble Apex Court and the Apex Court dismissed the SLP of the Revenue finding no merit therein and confirming the issue in favour of the assessee. ‘CIT and Another vs. Manjunath Cotton & Ginning 2. Factory’, [2013] 359 ITR 565 (Karn.). In this case, it has been held by the Hon'ble High Court that notice under section 274 read with section 271(1)(c) of the Act should specifically state the grounds mentioned in 271(1)(c) i.e. whether it is for concealment of income or for furnishing of inaccurate particulars of income. Sending printed form where all the grounds mentioned would not satisfy the requirement of law. Assessee should know the grounds which he has to meet specifically. Otherwise, the principles of natural justice is offended. On the basis of such proceedings no penalty could be imposed to the assessee. Penalty proceedings are distinct from assessment proceedings though it emanates from the assessment proceedings still it is separate and independent proceedings all together. ‘Meherjee Cassinath Holdings Pvt. Ltd vs. ACIT (ITAT 3. Mumbai)’, ITA NO. 2555/MUM/2012, order dated 28/04/2017 wherein the observation of the Bench was that penalty proceedings under section 271(1)(c) of the Act are "quasi-criminal" proceedings and ought to comply with the principles of natural justice. The non- striking of the irrelevant portion in the show-cause notice means that the Assessing Officer is not firm about the charge against the assessee and the assessee is not made aware as to which of the two limbs of s. 271(1)(c) he has to respond. ‘Chandra Prakash Bubna vs. Income Tax Officer, Ward 4. 27(3), Kolkata’, (ITAT Kolkata Bench) [2015] 64 taxmann.com 155 wherein it was held that when the Assessing Officer levied penalty without bringing out any specific charge for which penalty had been imposed, penalty was liable to be deleted.

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‘Sachin Arora vs. ITO’ and other cases, order dated 5. 19.12.2017 passed by the Agra Bench of the Tribunal in ITA No.118/Agra/2015 etc.

aforesaid cases, is apparent and we arrive at the considered view that

the show cause notice, which has not specified the charge and limb

under which the penalty is proposed to be levied, is void ab initio and

the consequent penalty imposed on the basis of such notice is,

therefore, illegal and bad in law and liable to be deleted. We,

therefore, direct deletion of the penalty.

(Order pronounced in the open court on 25/10/2019)

Sd/- Sd/- (T.S. Kapoor) (A.D. Jain) Vice President Accountant Member

Aks – Dtd. 25/10/2019 Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant Registrar