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Income Tax Appellate Tribunal, LUCKNOW BENCH “B”, LUCKNOW
Before: SHRI A.D JAIN & SHRI T.S. KAPOOR
PER: A.D. JAIN, VICE PRESIDENT:
These appeals are filed by the assessee for Assessment Years 2007-08 to 2010-11, involving common issues. As such, they are being disposed of by this composite order. Details, for convenience, are being taken from ITA No.502/Lkw/2018 in the case of Brahma Prakash Singh. The following grounds have been raised in ITA No.502/Lkw/2018:
“1. That Lower Authority erred to uphold penalty imposed under section 271(l)(c) of Income Tax Act, 1961. 2. That appellant accepted the additions in total income in assessment for the reasons that appellant was under prison and son of appellant, who looked after the income-tax proceedings was unaware of details of banking transactions made by appellant, hence, to buy peace of mind and to avoid litigation, family of appellant, which was under heavy stress accepted the addition in assessment, which was incorrect and against the facts.
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That appellant never concealed particulars of his income and never furnished inaccurate particulars of his income. 4. That AO could not point out single concealment of facts of furnishing of inaccurate of particulars of income, whefeas, she imposed penalty under section 271(l)(c) of the Act from the facts and records produced by appellant himself. 5. That the penalty order is void-ab-initio and bad in law as much as the notice issued under section 274 read with section 271 of the Income Tax Act, 1961 is not discernible as to whether the penalty proceedings are initiated for concealment of income or for furnishing of inaccurate particulars of income and neither the order passed under section 271(l)(c) is clear as to this aspect and, therefore, impugned order passed deserves to be cancelled.” 2. The grievance of the assessees is against imposition of penalty under
section 271(1)(c) of the I.T. Act, which has been confirmed by the learned
CIT(A).
At the time of hearing before us, the ld. A.R. of the assessee 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.
The ld. D.R., on the other hand, relied on the orders of the authorities below.
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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 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 vs. SSA’s Emerald Meadows’, [2016] 73 1. 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 an SLP was filed before the
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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, 4. Ward 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. ‘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.
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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, therefore, illegal and bad in
law and liable to be deleted. We, therefore, direct deletion of the penalty.
Facts being similar in the other appeals, i.e., ITA No.503 to
505/Lkw/2018, these appeals are also allowed, with the same observations
as given in ITA No.502/Lkw/2018
In the result, all the appeals are allowed.
(Order pronounced in the open court on 08/03/2019)
Sd/- Sd/- T.S. Kapoor (A.D. Jain) Accountant Member Vice President
Aks – Dtd. 08/03/2018 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