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Income Tax Appellate Tribunal, DELHI ‘A’ BENCH,
Before: SHRI H.S. SIDHU, & SHRI N.K. BILLAIYA
PER N.K. BILLAIYA, ACCOUNTANT MEMBER,
With this appeal, the assessee has challenged the correctness of the order of the CIT(A) - 2, New Delhi dated 28.02.2019 pertaining to A.Y 2014-15.
The sum and substance of the grievance of the assessee is that the ld. CIT(A) erred in confirming the penalty of Rs. 7,99,90,570/- levied by the Assessing Officer u/s 271(1)(c) of the Income tax Act, 1961 [hereinafter referred to as 'The Act' for short] and, in particular, ground relating to clarity in the notice issued u/s 271(1)(c) of the Act.
The roots for levy of penalty lie in the assessment order dated 28.12.2016 framed u/s 143(3) of the Act wherein, inter alia, addition of Rs. 23.53 crores was made by the Assessing Officer by invoking the provisions of section 56(2)((vii)(b) of the Act r.w.r. 11UA of the I.T.
Rules.
Before us, the ld. counsel for the assessee strongly drew our attention of the notice issued u/s 274 r.w.s 271(1)(c) of the Act, which is as under:
Notice Under Section 274 Read With Section 271(l)(c) of the Income Tax Act-1961 LTD. 101, KRISHNA APARA BUSINESS SQU, NETAJ1 SUBHASH PLACE, PITAMPURA, DELHI-110034.
Where in the course of proceeding before me for the assessment year 2014-16 it appears to me that you:- have without reasonable cause failed to comply with a notice under section 42(1)/143(2) of the Income Tax Act, 1961 dated
*have concealed the particulars of your income or furnished inaccurate particulars of such income n terms of explanation 1,2,3,4 and S.
You are requested to appear before me at 11:30 A.M./P.M. on 16.01.2017 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 authorised 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.
It is the say of the ld. counsel for the assessee that the notice is not clear as to whether the proceedings have been initiated for concealment of income or furnishing of inaccurate particulars of income. The ld. counsel for the assessee stated that the issue is squarely covered in favour of the assessee and against the revenue by the decision of the Hon'ble High Court of Delhi in the case of Sahara India Life Insurance Company Ltd of 2019 order dated 02.08.2019.
Per contra, the ld. DR vehemently stated that in the assessment order itself, while making addition of Rs. 23.53 crores, filing of inaccurate particular of income was detected and penalty has also been levied for filing of inaccurate particulars of income as is evident from the concluding para of the penalty order.
We have given thoughtful consideration to the orders of the authorities below. Notice u/s 274 of the Act is exhibited elsewhere.
There is no dispute that while issuing notice, the Assessing Officer did not make his intention clear whether the penalty is going to be levied for concealing particulars of income or furnishing of inaccurate particular of income. This is further fortified at para 4 of the penalty order which reads as under:
“Since, the above additions were treated as concealment of income/furnishing inaccurate particulars of income by the assessee, a notice u/s. 274 r.w.s. 271 (1 )(c) of the Income Tax Act 1961 dated 28.12.2016 and 14.06.2017 were issued and duly served upon the assessee company. 'The AR of the assessee company filed its reply to the notice vide letter dated
23.06.2016. The penalty proceedings u/s 271(1) (c) are decided on the basis of the income tax provisions, judicial pronouncements & the material available on record and the submission of the assessee”.
The contention of the ld. DR that while making additions, the Assessing Officer had made his intention very clear is ill-founded, in as much as, in para 5.8, the Assessing Officer says, “For the above mentioned reason, I am satisfied that the assessee company concealed the income/filed inaccurate particulars, hence penalty proceedings u/s 271(1)(c) of the Act are initiated”.
Moreover, the penal proceedings are separate from assessment proceedings and while initiating penalty proceedings u/s 271(1)(c) of the Act, it is incumbent upon the Assessing Officer to demonstrate under which limb he is proposing levy of penalty.
On identical circumstances, the Hon'ble High Court of Delhi [supra] has held as under:
“21. The Respondent had challenged the upholding of the penalty imposed under Section 271(1)(c) of the Act, which was accepted by the ITAT. It followed the decision of the Karnataka High
Court in CIT v. Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar) and observed that the notice issued by the AO would be bad in law if it did not specify which limb of Section 271(1) (c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of inc me or for furnishing of inaccurate particulars of income. The Karnataka High Court had followed the above judgment in the subsequent order in Commissioner of Income Tax v. SSA's Emerald Meadows (2016) 73 Taxman.com 241 (Kar) , the appeal against which was dismissed by the Supreme Court of India in SLP No. 11485 of2016 by order dated 5th August, 2016.”
If the notice is read with the decision of the Hon'ble High Court of Delhi [supra], in our considered opinion, the penalty will not survive. It would not be out of place to refer to the decision of the Hon'ble High Court of Delhi in the case of Virgo Marketing Pvt Ltd [2008] 171 Taxmann 156 [Delhi] wherein the Hon'ble High Court held as under:
“We are unable to discern from a reading of the assessment order why the Assessing Officer chose to initiate penalty proceedings against the assessed and under which part of Section 271(1)(c) of the Act. In other words, we are unable to discern from the assessment order the reason for initiating penalty proceedings. Therefore, the concurrent view held by both the authorities below must be accepted.”
Further, the Hon'ble Supreme Court in the case of SSA’s Emerald Meadows Pvt Ltd [2016] 8 TMI 1145 – The Hon'ble Apex Court held that the High Court order confirmed in [2015] (11) TMI 1620 – Karnataka High Court. Notice issued by the Assessing Officer u/s 274 r.w.s 271(1)(c) of the Act to be bad in law as it did not specify which limb of section 271(1)(c) of the Act the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The issue was decided in favour of the assessee.
Considering the facts of the case in totality, in the light of judicial decisions referred to hereinabove, we set aside the findings of the ld. CIT(A) and direct the Assessing Officer to delete the penalty of Rs. 7,99,90,570/-.
In the result, the appeal of the assessee in is allowed.
The order is pronounced in the open court on 05.05.2020.