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Income Tax Appellate Tribunal, ‘B’ BENCH, PUNE
ORDER PER PARTHA SARATHI CHAUDHURY, JM These appeals preferred by the assessee emanates from separate orders of the CIT(A)-11, Pune, both dated 28-02-2020 for A.Y. 2007-08 and 2008-09 as per the grounds of appeal on record.
At the time of hearing, none appeared for the assessee. Submissions of the ld. D.R were recorded and the cases heard on merits as per the available material/documents on record.
3. That on perusal, we find that both these appeals have been preferred by the assessee against imposition of penalty u/s 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”). It is observed that in both these cases, the notices imposing penalty u/s 274 r.w.s. 271(1)(c) of the Act, the limb on which the penalty has been issued is not specified. The inappropriate portion of the notice has not been struck off. That, obviously the A.O has not arrived at any satisfaction while imposing penalty under the relevant section of the Act. Law of natural justice demands that the assessee should be made aware for which charge, penalty has been levied against it so that it can prepare its defence. In both these cases, since the notices issued were vague and general in nature without mentioning the specific charge for levy of penalty, in such scenario the assessee was definitely deprived of proper opportunity of making its defence,
We find that on identical set of facts, Pune Tribunal in for A.Y. 2013-14 for A.Y. 2013-14 in the case of ACIT Cir. 3, Aurangabad Vs. Shri Vithalrao Rangnathrao Ambarwadikar, order dated 26- 04-2021 has placed reliance on Hon‟ble Full Bench decision of Jurisdictional High Court in the Mohd. A. Shaikh Vs. Dy. Dy. CIT (2021) 125 taxmann.com 253 (Bom) and another decision of Hon‟ble Jurisdictional High Court in the case of Pr. CIT Vs. Golden Peace Hotels and Resorts (P) Ltd. (2021) 124 taxmann.com 248 (Bom) and has held that in the notice issued u/s 274 of the Act, if the inapplicable portions were not struck off in such penalty notice, the penalty was vitiated. That even SLP filed by the Department against the judgment of Hon‟ble Bombay High Court in the case of Golden Peace Hotels and Resorts (P) Ltd. (supra) was dismissed by the Hon‟ble Supreme Court in the case of Pr. CIT Vs. Golden Peace Hotels and Resorts (P) Ltd. (2021) 124 taxmann.com 249 (SC). The relevant paragraph of the Tribunal order is extracted as follows:
“2. Briefly stated, the facts of the case are that the assessee is an individual engaged in the business of petrol pump. A return was filed declaring certain income. During the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee earned remuneration of Rs.4 lakh from a firm, M/s. Ambarwadikar and Co., which was credited to the capital but not offered for taxation. On being called upon to explain the reasons for such non-disclosure of income in the return, the assessee offered the said amount for taxation. In the same manner, the assessee earned capital gain of Rs.9,92,38,664 on the transfer of certain lands to the Deogiri Nagari Sahakari Bank Ltd., but did not offer any capital gain in the return of income. When the assessee‟s attention was drawn to this fact, he again agreed for the addition. Thus, the AO made additions, inter alia, for the above amounts on the basis of admission by the assessee. Subsequently, penalty was imposed u/s 271(1)(c) of the Act after issuing notice u/s 274 of the Act. The ld. CIT(A) observed that the notice issued by the AO u/s 274 contained both the limbs viz., concealment of income and furnishing of inaccurate particulars of income and none of the two was struck off, as against the penalty order having been passed only for concealment of income. Relying on certain decisions, he deleted the penalty of Rs.2.26 crore imposed by the AO, against which, the Revenue has approached the Tribunal.
We have heard the rival submissions through Virtual Court and scanned through the relevant material on record. A copy of the notice issued u/s 274 of the Act has been placed in the appeal folder, from which it is discernible that the AO did not strike off either of the two limbs viz., concealment of the particulars of income; and furnishing of inaccurate particulars. However, the penalty order came to be passed by holding that the assessee concealed his income. Recently, a full Bench of Hon‟ble Bombay High Court in Mohd. Farhan A. Shaikh Vs. Dy.CIT (2021) 125 taxmann.com 253 (Bom) considered this very issue. Answering the question in affirmative, the Full Bench held that a defect in notice of not striking the relevant words vitiates the penalty even though the AO had properly recorded the satisfaction for imposition of penalty in the order u/s 143(3) of the Act. In another judgment, the Hon‟ble Bombay High Court in Pr.CIT Vs. Golden Peace Hotels and Resorts (P.) Ltd. (2021) 124 taxmann.com 248 (Bom) also took similar view that where inapplicable portions were not struck off in the penalty notice, the penalty was vitiated. SLP of the Department against this judgment has been recently dismissed by the Hon'ble Supreme Court in Pr.CIT Vs. Golden Peace Hotels and Resorts (P.) Ltd. (2021) 124 taxmann.com 249 (SC). In view of the overwhelming position, it is clear that where the charge is not properly set out in the notice u/s 274 viz., both the limbs stand therein without striking off of the inapplicable limb, but the penalty has been, in fact, levied for one of the two, such a penalty order gets vitiated.
4. Turning to the facts of extant case, we find from the notice u/s 274 that the O did not strike out one of the two limbs though the penalty was imposed with reference to the first one only, namely, concealment of particulars of income. In such a panorama, the penalty order is bad in law. We, therefore, countenance the view taken by the Ld. CIT(A) in deleting the penalty”.
Respectfully following the aforesaid judicial pronouncements even without going into merits of the case just on the very legal premise that the notice issued u/s 274 r.w.s. 271(1)(c) of the Act i.e. in the penalty notice the inapplicable portions were not struck off the entire levy of penalty, therefore, is vitiated and is bad in law. We therefore, set aside the orders of the ld. CIT(A) and direct the A.O to delete the penalty from the hands of the assessee for both the years.
In the result, both the appeals of the are allowed. Order pronounced in the open Court on this 13th day of June 2022.