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Income Tax Appellate Tribunal, LUCKNOW BENCH “B”, LUCKNOW
Before: SHRI. A. D. JAIN & SHRI T. S. KAPOOR
IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH “B”, LUCKNOW BEFORE SHRI. A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA No.656/LKW/2018 Assessment Year: 2011-12 M/s Sitaram Computech Private v. ACIT Limited Central Circle-2 Faizabad Road Lucknow Lucknow TAN/PAN:AAECS7800F (Appellant) (Respondent) Appellant by: Shri Shubham Rastogi, FCA Respondent by: Shri C. K. Singh, D.R. Date of hearing: 16 07 2019 Date of pronouncement: 19 07 2019 O R D E R PER A. D. JAIN, V.P.: This is assessee’s appeal for Assessment Year 2011-12, against the order of the ld. CIT(A)-III, Lucknow, dated 6/9/2018, taking the following grounds: 1. The Ld. Ld. A.O. is not sure as to whether the assessee has concealed the income or has furnished inaccurate particulars of Income and without striking of any of the clauses of notice dated 26.03.2013 for initiation of penalty is invalid and the order passed consequent thereto deserve to be set aside. 2. That the penalty imposed on addition of Rs.3,67,008/- being excess stock of marble is barred by limitation as this issue had been finally concluded after the order of Ld. C.I.T. (Appeals)-3, Lucknow, and there is no 2nd. Appeal on this issue.
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The Ld. C.I.T. (Appeal) erred on facts and in law in upholding the penalty on estimated addition of Rs. 5,91,667/- on account of estimation of G. P. @ 11%. 4. The Ld. C.I.T. (A) did not appreciated that penalty has been imposed solely on estimated value of excess stock of marble and on estimated gross profit with respect to estimated short stock without bringing out any specific material. 5. That the penalty imposed is highly excessive, contrary to the facts, law and principle of natural justice and without providing sufficient time and opportunity to have its say on the reasons relied upon by her.
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). 3. At the time of hearing before us, the ld. A.R. of the assessee invited our attention to the show cause notice dated 26/3/2013 for levy of 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. 4. The ld. D.R., on the other hand, relied on the orders of the authorities below. 5. Heard. The show-cause notice in question is as follows:
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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
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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. 7. In ‘CIT vs. SSA’s Emerald Meadows’, [2016] 73 Taxmann.com 248, 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 section 271(1)(c) of the Act, 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, 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. 8. In ‘CIT and Another vs. Manjunath Cotton & Ginning Factory’, [2013] 359 ITR 565 (Karn.), it has been held by the Hon'ble High Court that notice under section 274 read with section 271(1)(c) of the Act
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should specifically state the grounds mentioned in section 271(1)(c) of the Act, 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. The 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. 9. In ‘Meherjee Cassinath Holdings Pvt. Ltd vs. ACIT (ITAT Mumbai)’, ITA No. 2555/MUM/2012, order dated 28/04/2017, 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 section 271(1)(c) he has to respond. 10. In ‘Chandra Prakash Bubna vs. Income Tax Officer, Ward 27(3), Kolkata’, (ITAT Kolkata Bench) [2015] 64 taxmann.com 155, 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. 11. The settled legal position on the issue, as enshrined in the 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,
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therefore, illegal and bad in law and liable to be deleted. We, therefore, direct deletion of the penalty. 12. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 19/07/2019.
Sd/- Sd/- [T. S. KAPOOR] [A. D. JAIN] ACCOUNTANT MEMBER VICE PRESIDENT DATED:19/07/2019 JJ:1607 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order Assistant Registrar