INCOME TAX OFFICER, WARD 1 NANDED, NANDED vs. SATYAWAN ARJUNRAO SHINDE, OSMANABAD

Facts of the case, in brief, are that the assessee is an individual and a doctor by profession and furnished his return of income on 31.10.2018 declaring total income of Rs.17,86,810/-. Prior to filing return of income, a survey action u/s 133A of the IT Act was carried out on 05.04.2018 at the premises of the assessee. During the course of survey, while recording the statement of the assessee, the assessee admitted to disclose and declare an amount of Rs.1,11,00,000/- over and above his regular income for the period under consideration. This admission was made due to certain discrepancies found in the IPD Register and due to the fact that the money bills were not issued to the patients whose names were 3 recorded in the IPD Register and which resulted in suppression of processional receipts, the assessee has admitted to declare additional amount as his professional income. However, during the course of assessment proceedings, the Assessing Officer found that this additional income was not declared by the assessee neither in the return of income nor in his books of accounts. On query it was submitted by the assessee that due to the mistake of his Chartered Accountant, this additional income could not be disclosed in the books of accounts and also could not be shown in his return of income. However, it was submitted that the tax on this additional income admitted during the course of survey has already been paid by him as self-assessment tax prior to filing the return of income and it was only due to an inadvertent error committed by the Chartered Accountant and due to pressure of audit work and return filing work in the month of September & October, this mistake has occurred and there was no intention to avoid the tax or retract from his admission made during the survey. It was also submitted by the assessee that the bona-fides of his above statements are proved in the light of the fact that due income tax was already paid by him before filing the return of income and the same income tax has not been claimed by him in his income tax return, hence it was claimed to be a bonafied mistake. The Assessing Officer being not satisfied 4 added the above income along with other additions to the income of the assessee and completed the assessment by determining the total income of the assessee at Rs.1,93,51,810/- as against the income returned by the assessee at Rs.17,86,810/-. The above assessed income includes addition of Rs.1,11,00,000/- u/s 69A subject to special rate of tax u/s 115BEE and also other additions amounting in all to Rs.64,65,000/-. The Assessing Officer in the above assessment order also initiated penalty u/s 274 r.w.s. 271AAC(1) of the IT Act. 4. The assessee preferred appeal against the above assessment order and Ld. CIT(A), Pune-12 partly allowed the appeal of the assessee and directed the Assessing Officer not to tax the additional income of Rs.1,11,00,000/- u/s 115BEE since the income represents professional income only. The Assessing Officer then wrote a letter to Ld. CIT(A), Pune-12 and asked the permission to levy penalty u/s 270A of the IT Act. Ld. CIT(A), Pune-12 replied on 02.01.2023 that : “penalty proceedings u/s 270A of the IT is consequential to the direction of taxing the said income under the different head. Therefore, if required penalty proceedings u/s 270A of the IT Act may be initiated by the Assessing Officer at the time of giving effect to the appeal order dated 28.11.2022 as deemed fit”. 5 5. The Assessing Officer then issued show-cause notice u/s 274 r.w.s. 270A on 10.01.2023 on the basis of above letter received from Ld. CIT(A), Pune-12 and since the assessee has not replied, the Assessing Officer imposed penalty u/s 270A(9)(e) of the IT Act. After considering the reply of the assessee, Ld. CIT(A) deleted the penalty u/s 270A(9)(e) by observing as under :- “In this connection, the appellant has submitted that the Ld. AO had not specified any limb out of the 7 limbs, that are listed in Section 270A(2) in his notice u/s 274 r.w.s. 270A dated 10.01.2023 and 26.06.2023. Hence, the penalty order is bad in law. 3.4 In this regard, the appellant has relied upon the following decisions of the Hon'ble High Court and Hon'ble ITAT, wherein it is held that "without specifying the limb within which the penalty is imposed is unsustainable". a) Kasat Prakash M (HUF) Latur Vs ITO Ward-1 Nanded (ITA No. 1328/PUN/2023 for A.Y. 2020-21, wherein it was held that, the impugned penalty proceedings stand vitiated on account of the Assessing Officer's failure to pin point the relevant clauses (a) to (f) to sub section (9); while initiating the proceedings herein u/s 270A(8) of the act, thereby alleging under reporting of income as a sequence of misreporting b) Having gone through the relevant material on record and the decisions of above judicial authorities relied upon by the appellant, I am of the view that the above stated judicial precedents regarding the "limb theory" would squarely apply even in case of failure of the Assessing Officer to quote any of the seven sub-limbs as well prescribed in Section 270A(2) (a) to (g) of the Act introduced by the legislature in order “to rationalize and bring objectivity, certainty and clarity in the penalty provisions". And that his non compliance to this clinching effect would not only defeat the legislative mandate but also it renders the amending provisions an otiose. I accordingly hold in these peculiar facts and circumstances that the impugned penalty notice issued by the Ld. AO deserves to be quashed as not sustainable in the eye of law. In view of the above, penalty levied u/s 270A of the Act is 6 bad in law. Hence, the Ld. AO is directed to delete the impugned penalty. As the penalty order u/s 270A is held to be bad in law based on the limb theory, the grounds No. 1 to 10 are not separately adjudicated, Ground No. 11: 4. Under this ground of appeal the appellant has sought to reserve the right to add/alter/ amend / withdraw any of the grounds of appeal. Since no such request has been made by the appellant during appellate proceedings, this ground is hereby dismissed. Ground No. 12: 5. The ground No. 12 raised by the appellant is of general nature and has not been exercised during the appellate proceedings. The ground No. 12 is accordingly dismissed. 6. With the result, appeal is partly allowed.”

It is this order against which the Revenue is in appeal before this Tribunal. 7. Ld. DR appearing from the side of the Revenue submitted before us that the order passed by Ld. CIT(A) deleting the penalty imposed u/s 270A is unjustified. Ld. DR submitted before us that the Revenue has raised total four effective grounds and in all the grounds, the Revenue has challenged the deletion of penalty of Rs.80,71,754/-, imposed by the Assessing Officer u/s 270A(9)(e) of the IT Act. Ld. DR in support of his contention relied on the order passed by Hon’ble Bombay High Court in the case of Veena Estate (P.) Ltd. vs. CIT order dated 11.01.2024 and requested to set-aside the order passed by Ld. CIT(A) and further requested to confirm the imposition of penalty by the Assessing Officer. 7 8. Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT(A) is justified and should be confirmed. In support of his contention, Ld. AR furnished a paper book consisting of various decisions in support of his case. 9. We have heard Ld. Counsels from both the sides and perused the material available on record including the case laws furnished by both the parties. We find that Ld. CIT(A) has deleted the penalty on the basis of limb theory. In this regard, we find that Ld. CIT(A) has mentioned that the Assessing Officer failed to quote any of the seven sub-limbs prescribed u/s 270A(2)(a) to (g) of the IT Act and due to this non-compliance the legislative intent has been defeated. In this regard, we further find that the assessee has declared additional income during the course of survey but due to the mistake of his Chartered Accountant, the above disclosed amount could not be included either in the books of accounts or in the income tax return. But at the same time, we also find that the amount of income tax was admittedly deposited by the assessee on this additional income admitted during the course of survey and income tax was deposited as self-assessment tax prior to furnish return of income. Even the above self-assessment tax was not claimed in the income tax return furnished by the assessee. This itself proves the bona-fides of the assessee that neither income was 8 included in the return nor the income tax paid on related income was claimed by the assessee, though it was deposited well in time prior to return filing. Therefore, we are of the considered opinion that the statement of the assessee that due to the mistake of his Chartered Accountant neither income could be shown nor the income tax was claimed which was already deposited by the assessee as admitted by him during the course of survey. We further find that the penalty u/s 270A was not initiated in the original assessment order. Even in first appeal proceedings, Ld. CIT(A) himself has not initiated the penalty u/s 270A of the IT Act. It was only when the Assessing Officer asked from Ld. CIT(A) that penalty u/s 270A can be initiated or not, Ld. CIT(A) only guided him that the penalty u/s 270A may be initiated and no such specific direction was given by Ld. CIT(A). Accordingly, we find that the penalty u/s 270A was not initiated in the first appeal order which was filed against the quantum assessment order but it was initiated while giving effect to the first appellate order in the quantum case. It is also one of the submission of the assessee that the penalty order needs to be passed within six months from the date of order of assessment dated 19-04-2021 or order of appeal dated 28-11-2022 whichever is later, but in the instant case the penalty order was passed in the month of July 2023 and, therefore, the same is time 9 barred. In this regard, we find that the assessee has not filed any cross appeal and this appeal has been filed by the Department. We further find that the Co-ordinate Bench of this Tribunal in various decisions is of the view that if no specific clause has been mentioned in the notice the imposition of penalty is not correct. Ld. AR in this regard relied on the decision passed by the Co-ordinate Bench of this Tribunal in the case of Kasat Prakash M (HUF) vs. ITO in ITA No.1328/PUN/2023 order dated 19.06.2024 wherein penalty u/s 270A was deleted under identical facts on limb theory. We also find that Ld. CIT(A) also deleted the penalty u/s 270A(9)(e) by relying on the above decision of the Tribunal (supra). Ld. DR in this regard relied on the judgement of Hon’ble Bombay High Court in the case of Veena Estate (P.) Ltd. (supra) but we find that the facts of the above case and the facts of the instant case is different and therefore the same is not applicable to the instant case. Ld. DR also submitted before us that ITBA portal does not permit to mention any particular limb, therefore, it was not possible for the Assessing Officer to mention any specific limb. In this regard, we find that in the section, it is not specifically mentioned to right any particular clause or sub-section in the notice before imposing any penalty but it is the intent of various Hon’ble High Courts and Tribunals that the Assessing Officer is required to mention clause or 10 sub-section in the notice before imposing the penalty. We further find that Ld. AR as well as Ld. CIT(A) while deleting the penalty u/s 270A has relied on the order passed by Co-ordinate Bench of this Tribunal in the case of Kasat Prakash M (HUF) (supra) wherein penalty was deleted by observing as under :- “4. We have given our thoughtful consideration to the assessee’s forgoing legal issue raised in the instant appeal that the impugned penalty proceedings stand vitiated on account of the Assessing Officer’s failure to pinpoint the relevant clauses (a) to (f) to sub-section (9); while initiating the proceedings herein u/s. 270A(8) of the Act, thereby alleging under reporting of income as a sequence of misreporting. Faced with this situation, we find no merit in Revenue’s arguments placing reliance on M/s. Veena Estate Pvt. Ltd. (supra) once the issue before their lordships was that of the concerned appellant seeking to frame an additional substantial question of law in section 260A proceedings whereas the law regarding the tribunal’s juri iction to entertain such a pure question of law, not requiring any further detailed investigation on facts, is already settled in NTPC Ltd. Vs. CIT (1998) 229 ITR 383 (SC). That being the case, we are of the considered view that going by the foregoing judicial precedent, this tribunal is very much entitled to entertain and decide such a pure legal plea for the first time in section 254(1) proceedings. We accordingly reject the Revenue’s instant technical arguments to conclude in light of section 270A (8) & (9) r.w. clauses (a to f) that the learned Assessing Officer’s failure to pinpoint the corresponding default of assessee’s part indeed vitiates the entire proceedings as per (2022) 443 ITR 186 (Del) Schneider Electric South Asia Ltd. Vs. ACIT (in the new scheme) and Md. Farhan S.A. Vs. ACIT (2021) 434 ITR 1 (Bom.) in section 271(1)(c) old penal provision. We order accordingly. The impugned penalty of Rs.15,54,736/- stands deleted in very terms.”

From the perusal of the order passed by Ld. CIT(A) we find that Ld. CIT(A) has simply followed the above order passed by Juri ictional Co-ordinate Bench of this Tribunal. Ld. DR could not bring any adverse material before us. Therefore respectfully following the above decision passed by Juri ictional Tribunal in 11 the case of Kasat Prakash M (HUF) (supra), we find that there is no infirmity in the order passed by Ld. CIT(A) wherein the penalty u/s 270A was deleted on the ground of non-mentioning of any particular clause or sub-section in the notice. Therefore, we uphold the order passed by Ld. CIT(A). Accordingly, the grounds of appeal raised by the Revenue are dismissed. 11. In the result, the appeal filed by the Revenue is dismissed. Order pronounced on 21st day of February, 2025. (MANISH BORAD) JUDICIAL MEMBER

गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER,