CARRYMORE HOISTS PVT. LTD.,FARIDABAD vs. ACIT, FARIDABAD

The present appeal has been filed by the assessee against the order of ld. CIT (A), Faridabad dated 26.05.2016.

Following grounds have been raised by the assessee:

The assessee further filed revised grounds of appeal

Heard the arguments of both the parties and perused the material on record.

The brief facts of the case are that the appellant filed its return of income declaring total income of Rs.1,09,38,181/-. As per order u/s 143(3) of the Act dated 29.12.2011, the income was assessed at Rs.1,99,41,790/- after making addition on account of sundry creditor. We find that at the conclusion of assessment proceedings, the Assessing Officer has held at para 7 that “penalty proceedings u/s 271(1)(c) have been initiated and penalty notice is issued separately which is enclosed.”

We also find that the penalty notice issued on 09.02.2015 by the ACIT, Circle-II, Faridabad in connection with the proceedings u/s 271(1)(c) of the Act r.w.s. 274 of the Act for relevant assessment year has not specified under which limb of the provision u/s 271(1)(c) of the Act, the penalty is being initiated. For ready reference, the relevant portion of the notice issued u/s 274 is reproduced as under:

Further, while levying penalty u/s 271(1)(c), the Assessing Officer at para no. 7 held that “I impose minimum penalty of Rs.1,50,660/- upon the assessee u/s 271(1)(c) of the Income Tax Act, 1961”.

The ld. AR brought to our notice, the judgment of the Hon’ble Jurisdictional High Court in the case of Sahara India Life Insurance Company Ltd. in dated 02.08.2019 wherein the Hon’ble High Court 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 income 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 of 2016 by order dated 5th August, 2016. 22. On this issue again this Court is unable to find any error having been committed by the ITAT. No substantial question of law arises.”

He also relied on the judgment of SSA’s Emerald Meadows 73 Taxman 248.

Against the arguments of the ld. AR, the Departmental Representative heavily relied on the judgment of Sundaram Finance Ltd. Vs CIT (2018) 403 ITR 407 (Madras) and argued that the Hon’ble High Court held that where notice did not show the nature of default, it was a question of fact. The assessee has understood purport and import of the notice, hence, no prejudice was caused to the assessee.

We have gone through the facts of the case and find that the Assessing Officer has not made it clear under which limb of the provisions of Section 271(1)(c) of the Act, the penalty is being levied. There is 5 Carrymore Hoists Pvt. Ltd. glaring discrepancy between initiation of the penalty and levy of penalty. Hence, respectfully following the judgment of the Hon’ble Jurisdictional High Court, we hereby hold that the penalty levied by the Assessing Officer cannot be held be valid in the eyes of law.

In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 04/02/2020.