BLACKROCK SECURITIES PVT LTD,NEW DELHI vs. ACIT CIRCLE-5(1), NEW DELHI

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.

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:

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.

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:

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:

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.