RAJIV JAIN,DELHI vs. ACIT CIRCLE-35(1), NEW DELHI

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ITA 7273/DEL/2019Status: DisposedITAT Delhi15 September 2020AY 2010-1111 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty notices issued under Section 274 read with Section 271(1)(c) of the Act are bad in law and deserve to be quashed. The reasoning is based on the established legal position, as affirmed by the Hon'ble High Court of Delhi in M/s. Sahara India Life Insurance Company and the Hon'ble Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory. These judgments clearly state that a notice under Section 274 must specify the limb of Section 271(1)(c) under which penalty proceedings are initiated, whether it be for concealment of particulars of income or for furnishing inaccurate particulars of income. The practice of issuing a printed form that mentions all grounds without striking off the inappropriate ones indicates a non-application of mind and offends the principles of natural justice, as the assessee is not clearly informed of the case they need to meet. Consequently, the Tribunal quashed the penalty notices and allowed the assessee's appeal.

What were the facts?

The assessee, Rajiv Jain, filed an appeal against the order of the CIT(A)-12, New Delhi, for Assessment Year 2010-11. The appeal challenges the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961. The penalty originated from an assessment order dated March 25, 2013, under Section 143(3), which determined the assessee's total income at Rs. 35,83,235/- after making additions for understatement of insurance commission, unexplained cash deposits in Standard Chartered Bank, and unexplained cash deposits in Axis Bank. The CIT(A) partly allowed the appeal, and subsequent appeals to the Tribunal and High Court led to certain additions being deleted or restored. The core issue for the Tribunal is the validity of the penalty notice.

What were the issues?

1. Whether the penalty levied under Section 271(1)(c) is bad in law due to the penalty notice failing to specify whether it was for concealment of particulars of income or for furnishing inaccurate particulars of income, thereby violating principles of natural justice? Assessee's Contention: The assessee argued that the penalty levied under Section 271(1)(c) is unsustainable because the notice issued by the Assessing Officer (AO) did not specify under which limb of the section the penalty proceedings were initiated. The assessee relied on the decisions of the Hon'ble High Court of Delhi in M/s. Sahara India Life Insurance Company and the Hon'ble Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory. Revenue's Contention: The judgment does not record any specific arguments made by the revenue on this issue.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274,Section 143(3),Section 68

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI ‘SMC-2’ BENCH,

Before: SHRI N.K. BILLAIYA

For Respondent: Ms. Rakhi Vimal, Sr. DR
Hearing: 14.09.2020Pronounced: 15.09.2020

PER N. K. BILLAIYA, AM:

1.

This appeal by the assessee is preferred against the order of the CIT(A)-12, New Delhi dated 28.06.2019 pertaining to A.Y. 2010-11.

2.

The sum and substance of the grievance of the assessee is that the CIT(A) erred in upholding the penalty levied u/s. 271 (1) (c) of the Act on this strength of a notice which did not specify under which limb the penalty has been levied.

3.

Briefly stated the facts of the case are that the roots for the levy of the penalty lie in the assessment order dated 25.03.2013 framed u/s. 143 (3) of the Act.

4.

The returned income was assessed as under :- Rs. Total Income as declared 1,00,603/- Add :-

(i) Addition on a/c of understatement of insurance Commission receipts (as discussed) 8,22,390/- (ii) Addition on a/c of unexplained cash deposit is Standard Chartered Bank A/c (as discussed) 16,42,592/- (iii) Addition on a/c of unexplained cash deposit in Axis Bank A/c (as discussed) 10,17,650/-

Total Income 35,83,235/-

Rounded Off u/s. 288 A of the I. T. Act to Rs.35,83,230/-

5.

At the very outset let us understand the status of the quantum addition which is as under :-

6.

The first notice u/s. 274 of the Act was issued on 25.03.2013 and which is as under :-

7.

The second notice was issued on 07.03.2018 which is as under :-

8.

A perusal of the aforementioned notices show that nowhere these notices state as to whether the assessee has concealed particulars of income or furnish inaccurate particulars of income.

9.

The fate of such notice have been decided by the Hon’ble High Court of Delhi in the case of M/s. Sahara India Life Insurance company in order dated 02.08.2019. The relevant findings read as under :-

10.

A similar view was taken by the Hon’ble Karnataka High Court in the case of Manjunath Cotton and Ginning Factory reported in 359 ITR 565. The relevant findings read as under :-

11.

In the light of the aforementioned decisions of the Hon’ble High Courts I have no hesitation to hold that the penalty notices issued u/s. 274 r.w.s 271 (1) (c) of the Act are bad in law and deserves to be quashed. Accordingly the appeal filed by the assessee is allowed.

12.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 15.09.2020.

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