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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI R.S. SYAL & SHRI S.S. VISWANETHRA RAVI
आदेश / ORDER PER R.S. SYAL, VP : This appeal by the assessee is directed against the order passed by the CIT(A)-4, Pune on 31-01-2020 confirming the penalty of Rs.5,07,650 imposed by the Assessing Officer u/s 271(1)(c) of the Income-tax Act, 1961 (hereinafter also called `the Act’) in relation to the assessment year 2011-12. 2. Briefly stated, the facts of the case are that the assessee was subjected to survey action u/s.133A of the Act on 22-03-2011, during the course of which it transpired, inter alia, that the assessee was having excess stock of silver of 30,423.95 grams with value at Rs.16,42,893/-. Neither any surrender was made on this score nor such an income was offered in the return filed. The addition was made by the AO for such sum along with that on account of excess Gold found during the survey and Cash difference. Eventually, the Assessing Officer (AO) imposed penalty of Rs.5,07,650 on the addition towards difference in silver stock amounting to Rs.16,42,893/-. Such penalty came to be affirmed in the first appeal.
Having heard both the sides and gone through the relevant material on record, it is seen that there is only one addition constituting the foundation for the imposition of penalty, being, that of excess stock of silver found during the course of survey.
Notice u/s.274 r.w.s. 271(1)(c) was initially issued on 07-03-2014 at the time of completion of the assessment by keeping both the limbs intact, namely, “concealed the particulars of income and furnishing of inaccurate particulars of income”.
After the passing of the order by the ld. CIT(A) in quantum proceedings, the AO issued notice u/s.274 r.w.s. 271(1)(c) dated 05-03-2018 before imposing the penalty. A copy of such notice is also available on record. This notice also talks of both the limbs of section 271(1)(c), namely, “concealing the particulars of income and furnishing of inaccurate particulars of income”.
Thus, it is apparent that as against the sole addition of excess stock of silver, the AO issued notice u/s.274 by keeping both the limbs of penalty u/s.271(1)(c) alive. Here, the question arises as to whether penalty u/s 271(1)(c) of the Act in such circumstances is sustainable? The full Bench of Hon‟ble Bombay High Court in Mohd. 4.
Farhan A. Shaikh Vs. Dy.CIT (2021) 125 taxmann.com 253 (Bom) has considered this very issue. Answering the question in affirmative, the Full Bench held that a defect in notice of not striking out the irrelevant words vitiates the penalty even though the AO had properly recorded the satisfaction for the 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, it was vitiated. The SLP of the Department against this judgment has since been 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 legal 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 the inapplicable limb, the penalty order gets vitiated. Turning to the facts of the extant case, we find from the notice u/s 274 of the Act that the AO retained both the limbs, whereas penalty was imposed only with reference to one of them. Respectfully following the above Full Bench judgment of the Hon‟ble jurisdictional High Court, we overturn the impugned order on this legal issue and direct to delete the penalty imposed by the AO.
In the result, the appeal is allowed. Order pronounced in the Open Court on 09th June, 2022.
Sd/- Sd/- (S.S.VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 09th June, 2022 Satish
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order is forwarded to: