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Facts
The assessee, engaged in land trading, had declared income of Rs.4.71 crore for AY 2010-11. During assessment, income was increased to Rs.9.27 crore. Subsequently, penalty proceedings were initiated under Section 271(1)(c) for Rs.1.40 crore.
Held
The Tribunal held that the show cause notices issued for penalty proceedings did not specify the exact charge (inaccurate particulars or concealment of income), rendering the proceedings invalid. Relying on the jurisdictional High Court's decision in Mohd. Farhan A. Shaikh (supra), the penalty was quashed.
Key Issues
Whether penalty proceedings initiated under Section 271(1)(c) are valid when the show cause notice does not specify the exact charge against the assessee (inaccurate particulars vs. concealment of income).
Sections Cited
271(1)(c), 143(3), 274
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “B”, PUNE
Before: DR.MANISH BORAD & SHRI VINAY BHAMORE
आदेश / ORDER
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The captioned appeal at the instance of assessee pertaining to A.Y. 2010-11 is directed against the order dated 02.04.2024 framed by National Faceless Appeal Centre, Delhi which in turn is arising out of Penalty order dated 29.03.2016 passed u/s.271(1)(c) of the Act.
Brief facts of the case are that the assessee is an individual and is engaged in the business of land trading and also partner in Sahane Constructions. Income of Rs.4.71 crore declared in the return for A.Y. 2010-11 furnished on 30.09.2010. Assessment u/s.143(3) of the Act was passed on 12.03.2013 making certain additions assessing the income at Rs.9.27 crore as against the returned income of Rs.4.71 crore. Ld. AO initiated penalty proceedings u/s.271(1)(c) of the Act and levied penalty of Rs.1.40 crore. Aggrieved assessee preferred appeal before the ld.CIT(A) against the levy of penalty which came to be dismissed.
Aggrieved assessee is now in appeal before this Tribunal challenging the impugned order by raising the following grounds:
“1. On the basis of the facts and circumstances of the case, the Commissioner of Income-tax (Appeal) is not justified in confirming the levy of penalty of Rs.1,40,87,934/- u/s. 271(1)(c) of the Act.
2. On the basis of the facts and circumstances of the case, the Commissioner of Income-tax (Appeal) is not justified in confirming the levy of penalty of Rs. 1,40,87,934/- u/s. 271(1)(c) of the Act particularly when the notice U/s. 274 r.w.s. 271(1)(c) of the Act dated 11/03/2016 issued by the AO does not specify the specific charge framed against the appellant i.e., whether the notice was issued for furnishing of inaccurate particulars of income or for concealment of income.
3. On the basis of the facts and circumstances of the case, the Commissioner of Income-tax (Appeal) is not justified in confirming the levy of penalty u/s. 271(1)(c) of the Act without addressing the submissions made by the appellant.
The appellant craves for the addition to, deletion, alteration, modification of the above grounds of appeal.”
4. At the outset, ld. Counsel for the assessee referring to the decision of Coordinate Bench in the case of Shri Ambrish Manoj Dhupelia vs. DCIT and two others in to order dated 13.12.2024 wherein the Coordinate Bench has referred to the Full Bench judgment of Hon’ble Jurisdictional High Court in the case of Mohd. Farhan A. Shaikh Vs. DCIT reported in (2021) 434 ITR 1 and held that since the AO has not levelled specific charge against the assessee in the show cause notice issued for initiating the penalty u/s.271(1)(c) of the Act, such proceedings are invalid and the impugned penalty deserves to be deleted.
5. On the other hand, ld. Departmental Representative referring to the judgment of Hon’ble Jurisdictional high Court in the case of Veena Estate (P) Ltd. vs. CIT reported in (2024) 158 taxmann.com 341 (Bombay) where also specific limb was not ticketed but Hon’ble Court decided in favour of the Revenue observing that since the assessee’s objection regarding any defect in notice could not be entertained in appeal, as such an objection could never be a question of law in assessee’s case as it was purely a question of fact. He accordingly submitted that the ld. CIT(A)/NFAC was right in upholding the penalty levied u/s.271(1)(c) of the Act.
We have heard the rival contentions and perused the record placed before us. The legal issue raised by the assessee is that ld.CIT(A)/NFAC erred in confirming the levy of penalty u/s.271(1)(c) of the Act without considering the notice issued u/s.274 r.w.s.271(1)(c) of the Act dated 11.03.2016 issued by the AO which does not specify the charge framed against the assessee, i.e. whether the notice was issued for furnishing of ‘inaccurate particulars of income’ or for ‘concealing the particulars of income’. We observe that the assessee is an individual and had declared income of Rs.4,71,14,700/- in the return of income filed on 30.09.2010 was subjected to scrutiny and the assessment order was framed u/s.143(3) of the Act on 12.03.2013 assessing the income at Rs.9,27,06,722/-. During the course of assessment proceedings penalty proceedings u/s.271(1)(c) of the Act were initiated. Thereafter on 13.03.2013, ld. AO issued show cause notice 274 r.w.s.271(1)(c) for A.Y. 2010-11 and the same is reproduced below :
“Notice u/s.274 r.w.s.271(1)(c) of the Income Tax Act, 1961, dated 13.03.2013
Whereas in the course of proceedings before me for the A.Y. 2010-11 it appears to me that you- o have without reasonable cause failed to furnish me return of income which you were required to furnish by a notice under section 22(1)/22(2)/34 of the Indian Income-tax Act, 1922 or which you were required to furnish under Section 139(1) or by a notice given under Section 139(2)/148 of the Income-tax Act, 1961, No. Dt. or have without reasonable cause failed to furnish it within the time allowed and the manner required by the said section 139(1) or by such notice. o have without reasonable cause failed to comply with a notice under section 22(4)/23(2) of the Indian Income-tax Act, 1922 or under section 142(1)/143(2) of the Income-tax Act, 1961. o have concealed the particulars of your Income or particulars of such income. Furnished inaccurate You are hereby requested to appear before me at 3.00 P.M./ on 30.04.2013 and show cause why an order imposing a penalty on you should not be made under section 271 of the Income-tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative, you may show cause in writing on or before the said date which will be considered before any such order is made under Section 271(1)(c) of the Income-tax Act, 1961.”
Subsequently, ld. AO again issued following notice dated 11.03.2016 because the proceedings initiated by the notice dated 13.03.2013 were kept in abeyance awaiting the decision of ld.CIT(A), Nashik on the quantum additions.
“Notice u/s.274 r.w.s.271(1)(c) of the Income Tax Act, 1961, dated 11.03.2016
Please refer to the show cause notice u/s 274 r.w.s. 271(1)(c) of the Income Tax Act, 1961 dated 13 03.2013. The penalty proceedings in your case for the A.Y. 2010-11 initiated u/s 271(1)(c) of the Act was kept in abeyance till the decision of the CIT(A), Nashik. The Hon'ble CITA-II, Nashik has confirmed the addition of Rs. 4,55,56,722/- in this case vide order No. Nsk/ CIT(A)-2/51/13-14 dated 05.02.2015.
02 Hence, a final opportunity of being heard is given to you. You are hereby requested to appear before me on or before 11.00 Α.Μ. 16.03.2016 and show cause as to why an order imposing penalty u/s 271(1)(c) of the Act should not be passed in your case for the A.Y. 2010-11. If you do not wish to avail yourself of this opportunity of being heard in person or through authorised representative, you may make your submission in writing on or before the said date which will be considered before any such order is made under section 271(1)(c). 03 If you fail to avail of this opportunity, it will be presumed that you have no more say in this regard and appropriate action will be taken as per law.”
From perusal of the above two notices, we find that in the first notice issued on 13.03.2013 ld. AO has referred to both the limbs, i.e. ‘inaccurate particulars of income’ or for ‘concealing the particulars of income’ as are referred in section 271(1)(c) of the Act. However, specific charge as to whether the assessee has furnished ‘inaccurate particulars of income’ or for ‘concealing the particulars of income’ is lacking in the show cause notices issued on 13.03.2013 as well as notice dated 11.03.2016. Under similar set of facts and circumstances, the Coordinate Bench in the case of Shri Ambrish Manoj Dhupelia (supra) placing reliance on the Full Bench judgment of Hon’ble Jurisdictional High Court in the case of Mohd. Farhan A. Shaikh (supra) decided this legal issue of non issuance of show cause notice u/s.274 r.w.s.271(1)(c) without levelling specific charge against the assessee by observing as follows :
So far as the judgment of Hon’ble Jurisdictional High Court in the case of Veena Estate (P) Ltd. (supra) referred by ld. DR we find that the issue before the Hon’ble Court was regarding the admission of the legal ground which has been raised almost after 20 years and Hon’ble Court held that it is not permissible for the asessee that after a period of almost 20 years from the date of admission of this appeal by this Court, to raise an issue which was never raised, thought about or taken before any of the lower authorities or even in the appeal before this Court. Hon’ble Court has further referred to the decision of Full Bench in the case of Mohd. Farhan A. Shaikh (supra) and has observed that “the decision of the Full Bench cannot be read to mean that it does not recognize the principles of law as laid down by the Supreme Court that in accepting any plea of breach of principles of natural justice, such plea would be required to be tested on the aspect of prejudice. Hon’ble Court further held that the law as laid down by the Hon’ble Supreme Court is law of the land and it is binding on all Courts. In this view of the matter, it would be unfounded for the assessee in the facts of the present case to contend that the test of prejudice was not attracted”.
Going through the above contents of the judgment of Hon’ble High court in the case of Veena Estate (P) Ltd. (supra), we note that the issue in that case was about the admission of legal issue raised by the assessee after almost 20 years of admission of the appeal and the Hon’ble Court has not accepted the assessee’s plea on legal issue. However, the issue raised in the instant appeal is similar to the facts and issue mentioned in the case of Mohd. Farhan A. Shaikh (supra) and therefore we hold that the said judgment of Hon’ble Jurisdictional High Court shall on the facts of the instant case apply with full force and therefore respectfully following the same, we hold that valid notice u/s.274 r.w.s.271(1)(c) of the Act has not been issued by the ld. AO as specific charge has not been levelled against the assessee in the said show cause notice. Thus, penalty proceedings carried thereafter are invalid and deserves to be quashed. Thus effective Grounds of appeal raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed. Order pronounced on this 21st day of April, 2025.