GAURAV AJMERA,RATLAM vs. DCIT(CENTRAL)-2, INDORE

आदेश/ O R D E R Per B.M. Biyani, A.M.:

Acting thereon, the statements of all three persons (including assessee) were recorded u/s 131 on 14.11.2016 wherein all of them (including assessee) admitted that the entire cash belonged to assessee. Accordingly, a requisition dated 14.11.2016 u/s 132A was issued. The statements of assessee were again recorded u/s 132(4) on the very same date i.e. 14.11.2016 wherein the assessee accepted that the impugned cash was not recorded in his books and it was earned from undisclosed sources. The cash was seized. Thereafter, for the relevant AY 2017-18 under consideration, which relates to the previous year 2016-17 in which the requisition dated 14.11.2016 was executed, the assessee filed regular return on 09.01.2018 declaring total income of Rs. 54,25,260/-. In the income so declared in return, the assessee included income of Rs. 47,59,000/- out of the admitted undisclosed income of Rs. 49,99,000/-. Finally, the AO completed assessment u/s 143(3) whereby (i) he made a further addition of Rs. 2,40,000/- being the difference of Rs. 49,99,000/- surrendered but only Rs. 47,59,000/- declared in return; (ii) invoked higher rate of tax u/s 115BBE to the entire income of Rs. 49,99,000/-; (iii) charged interest u/s 234A, 234B and 234C; and (iv) also recorded to initiate penalty proceeding u/s 271AAB for concealment of income of Rs. 49,99,000/-. Thereafter, the AO issued show-cause notice to assessee for imposition of penalty u/s 271AAB. In response, the assessee merely submitted that he has filed an appeal against – AY 2017-18 the assessment-order and requested to keep the penalty proceedings in abeyance till decision of first-appeal. The assessee, however, did not make any effective or further participation. Ultimately, the AO passed penalty-order dated 26.06.2019 imposing a penalty of Rs. 6,19,900/- as per working made in Para 5 of penalty-order. Aggrieved by penalty so imposed, the assessee carried matter in first-appeal but did not get any success. Now, the assessee has come in next appeal before ITAT assailing the orders of lower authorities.

3. The assessee has raised following Grounds:

“1. The penalty levied by LAO and sustained by CIT(A) is illegal for various reasons.

2. Penalty is null and void as ld. JCIT approved it without application of mind.

3. The appellant reserves right to add amend or alter any or all the Grounds of Appeal as above.”

Ld. AR’s submission:

4. Ld. AR for assessee raised multiple contentions in an attempt to demonstrate that the penalty order passed by AO suffers from various legal infirmities and therefore illegal, non-sustainable. The first and foremost contention raised by Ld. AR is such that the entire penalty proceeding undertaken and the order passed therein by the AO, is a nullity since the show-cause notice issued by AO itself is bad. To show this, Ld. AR drew us to the copy of show-cause notice filed at Page 16 of Paper-Book; the same is scanned and re-produced below for an immediate reference: – AY 2017-18

have concealed the particulars of your Income or furnished inaccurate particulars of such Income.

6. Ld. AR then referred the provisions of two sections of Income-tax Act, 1961, viz. section 271(1)(c) and section 271AAB, to point out that there are different ingredients/defaults/charges prescribed in those two sections. He submitted that the ingredient/default/charge prescribed in section 271(1)(c) is that the assessee “has concealed the particulars of his income or furnished inaccurate particulars of such income” whereas the section 271AAB has two clauses (1) and (1A) and each clause has multiple sub- clauses/limbs for different types of ingredients/defaults/charges depending upon situation. Thus, he submitted that the charge made out by AO in the show-cause notice issued to assessee, as re-produced above, contains the ingredients/default/charge copied from section 271(1)(c) whereas the notice has been issued u/s 271AAB. In nutshell, Ld. AR argued that the AO has specified a wrong charge in the notice issued to assessee and thereby committed a grave illegality in initiating penalty-proceeding. Therefore, Ld. AR contended, the penalty proceeding initiated by AO is liable to be stuck down.

To support his contention, Ld. AR submitted that the Co-ordinate Bench of ITAT, Indore has already decided a case of identical facts in favour of assessee and against revenue in Shri Amit Tiwari Vs. DCIT (Central)-2, Indore, order dated 19.08.2020 for AY 2015-16. He carried us to the show-cause notice issued by AO in that case, available in Para 6 of ITAT’s order, the same is re-produced below: – AY 2017-18 Ld. AR compared the show-cause notice issued by AO to present assessee/appellant with the show-cause notice issued in Shri Amit Tiwari’s case and successfully demonstrated that both notices are identical in terms of 6 – AY 2017-18 contents and moreover both notices have been issued by the same officer of Income-tax Department.

“4. Ld. AR submitted that the assessee was having identical litigation for the assessment-year 2015-16 and 2016-17 and the appeal of assessment-year 2015-16 had already been decided by this Indore Bench of ITAT in favour of assessee and against revenue in vide order dated 19.08.2020. A few paras of the order are reproduced below for an immediate reference: “6. We have heard rival submissions and perused the material available on record and gone through the orders of lower authorities. The submissions of the assessee are that penalty proceedings u/s 271AAB as initiated is bad in law on account of firstly penalty notice so issued is defective as it does not disclose specific charge and secondly there is no concealed income as search took place prior to due date of filing of income-tax return. It is also contented that even otherwise the issue is squarely covered in favour of the assessee by the decisions of the Co-ordinate Benches of this Tribunal.

9. A conjoint reading of both these sections would suggest that where a search has been initiated the AO may direct payment of penalty in addition to tax if any payable by him. However, provisions of section 274 and 275 shall so far as may apply in relation to the penalty referred to in section 271AAB of the Act. As per section 274 of the Act no order imposing a penalty shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard. In this case the 7 – AY 2017-18 assessing officer has given notices and in response thereto the representative of the assessee appeared before the assessing officer. Now coming to the question whether notice so issued mention any specific charge. A bare reading of notice demonstrates that notice relate to ingredients of penalty u/s 271(1)(c) of the Act, it does not contain the ingredients of section 271AAB of the Act. Under these facts the notice is improper and is not in accordance with requirement of law. The assessing officer is expected to make his direction clear as to which clause of section 271AAB of the Act, he wishes to invoke. There is clear absence of such direction. Ld. counsel for the assessee has relied upon various judicial pronouncements in support of his contention that where the notice is being defective, therefore, no penalty can be levied or sustained.

14. In the light of the above binding precedent and coupled with fact that the Ld. CIT(A) observed that the impugned amount would not have been offered for taxation had there been no search and seizure operation, this observation goes to demonstrate that converse of such observation gives benefit of doubt to the taxpayer. In our considered view that is purely a guess work without being substantiated by any material evidence. The impugned penalty, therefore, cannot be sustained. The Assessing Officer is directed to delete the penalty.

5. Ld. AR argued that the total undisclosed income surrendered by the assessee u/s 132(4) was Rs. 8,00,00,000/- which had two components, viz. Rs. 68,34,975/- related to assessment year 2015-16 and Rs. 7,31,65,025/- related to assessment-year 2016-17. Ld. AR argued that the factual matrix of the surrender and assessment of both components is same and there is no difference whatsoever. Ld. AR further carried our attention to the Page No. 66 of the Paper- Book where a copy of the show-cause notice dated 30/11/2017 issued by Ld. AO u/s 274 read with section 271AAB for assessment-year 2016-17 under consideration is placed. Thereafter, Ld. AR carried our attention to the Page No. 133 of the Paper-Book where a copy of the show-cause notice dated 30/11/2017 issued by Ld. AO u/s 274 read with section 271AAB for assessment-year 2015- 16 is placed. Ld. AR compared these two notices and argued that both of the notices were issued on the same date i.e. 30/11/2017, by the same officer and the contents of the both notices are exactly same. The Ld. AR, therefore, argued that the aforesaid decision of this Indore Bench of ITAT in assessee’s own case in for the assessment-year 2015-16 applies with equal force to the assessment-year under 2016-17 under consideration. Therefore, the Ld. AR prayed to apply the same decision.

16 was deleted, the penalty for assessment-year 2016-17 is also not sustainable. Therefore, we uphold the deletion of penalty made by Ld. CIT(A). 7. In the result the appeal of revenue is dismissed.” [Emphasis supplied]

Ld. DR’s submission:

9. Per contra, Ld. DR for revenue defended the orders of lower-authorities.

He submitted that in Para 5.3 of assessment-order, the AO has categorically mentioned thus:

Further, I am satisfied that the assessee has concealed its income amounting to Rs. 49,99,000/- for A.Y. 2017-18. Therefore, penalty proceedings u/s 271AAB are attracted in his case. Hence, penalty proceedings are separately initiated u/s 271AAB for A.Y. 2017-18 for concealment of income by the assessee which was admitted u/s 132(4) of IT Act although the manner in which such income derived was not explained, nor it was explained in the return of income filed for A.Y. 2017-18 declaring such undisclosed income partly.

10. He submitted that the AO has made a clear-cut noting in above para of assessment-order that the assessee has concealed his income. He submitted that the AO has also mentioned that the penalty proceedings u/s 271AAB are attracted. He submitted that the penalty proceedings originate from assessment-order and the above noting made by AO in assessment-order leaves no doubt or ambiguity as to the default committed by assessee. He submitted that the notice issued by AO u/s 274 must be read in conjunction 9 – AY 2017-18 with the noting made by AO in assessment-order and when looked this way, it is quite clear that the AO has specified the charge of default committed by assessee which attracted penalty proceeding of section 271AAB. Ld. DR therefore prayed that the assessee’s contention that the charge is not spelled out or not made known, is meritless and must be rejected.

11. Ld. DR next drew us to the following decisions given by Hon’ble Courts in favour of revenue in which the similar contention as raised by present assessee was turned down and penalty was upheld:

(i) PCIT Vs. Thakur Prasad Sao & Sons (P) Ltd. (2024) 163 taxmann.com 449 (Calcutta) (ii) Veena Estate (P) Ltd. Vs. CIT (2024) 158 taxmann.com 341 (Bombay) (iii) Sundaram Finance Ltd. Vs. ACIT, Chennai (2018) 93 taxmann.com 250 (Madras) – Assessee’s SLP has been rejected by Hon’ble Supreme Court. (iv) DCIT Vs. Tapadiya Construction Ltd. (2025) 171 taxmann.com 810 (Pune – Trib.) Rejoinder by Ld. AR:

12. In rejoinder, Ld. AR relied upon a decision of Hon’ble Jurisdictional High Court of Madhya Pradesh in the case of Pr.CIT-I, vs. Kulwant Singh Bhatia, to 14 of 208, order dated 9th May 2018, wherein it was held as under:

“8. In the case of CIT V/s. Manjunatha Cotton Ginning Factory (supra), it was observed by the Karnataka High Court in para 59 that the practice of the Department sending a printed form where all the ground mentioned in Section 10 – AY 2017-18

271 are mentioned would not satisfy the requirement of law when the consequences of the assessee not rebutting the initiated presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the provisions have to be held to be strictly construed, notices issued under Section 274 should satisfy the grounds, which he has to meet specifically. Otherwise, principle of natural justice is offended if the show cause notice is vague. Even in the matter of search case where penalty is levied under Explanation 5A to Section 271(1)(c), it was held by the Karnataka High Court that the show- cause notice under Section 274 was defective as it does not spell out the ground on which the penalty is sought to be imposed and consequently penalty imposed was cancelled. The decision of CIT V/s. Manjunatha Cotton Ginning Factory (supra) was further followed by the Karnataka High Court in the case of CIT V/s. SSA'S Emerald Meadows, (2016) 73 taxman.com 248 (SC) / dated 23.11.2015 (ITA 380/2015), the High Court has dismissed the appeal of the revenue by observing that the Tribunal has allowed the appeal of the assessee holding that the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Act of 1961 was bad-in-law as it did not specify which limb of Section 271(1)(c) of the Act of 1961, the penalty proceedings had been initiated, i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars. The Tribunal while allowing the appeal of the assessee, had relied on the decision of the Division Bench of Karnataka High Court decision in the case of CIT V/s. Manjunatha Cotton Ginning Factory (supra). It is further pointed out that the SLP filed by the Deptt. before the Apex Court on 5.8.2016 in the matter of CIT V/s. SSA'S Emerald Meadows (supra) was dismissed. In the case of CIT V/s. Suresh Chandra Mittal (2000) 251 ITR 9 (SC), the Apex Court has upheld the decision of M.P. High Court wherein, in similar circumstances, it was held that the initial burden lies on the revenue to establish that the assessee had concealed the income or had furnished inaccurate particulars of such income. In the present case, in show-cause notice the Assessing Officer has not specified specifically charges, there was no such mention.

11. On due consideration of the arguments of the learned counsel for the appellant, so also considering the fact that the ground mentioned in show-cause notice would not satisfy the requirement of law, as notice was not specific, we are of the view that the learned Tribunal has rightly relying on the decision of CIT V/s. Manjunatha Cotton Ginning Factory (supra) and CIT V/s. SSA'S Emerald Meadows (supra) rightly allowed the appeal of the assessee and set aside the order of penalty imposed by the authorities. No substantial question of law is arising in these appeals. ITA.No(s). 9/2018, 10/2018, 11/2018, 12/2018, 13/2018 and 14/2018, filed by the appellant have no merit and are hereby dismissed.”

[Emphasis supplied]

Our adjudication:

15. At first, we find that the present case of assessee is fully covered by the orders of co-ordinate Benches of ITAT, Indore in Shri Amit Tiwari (supra)’s cases, both on facts and in law. We have already elaborated the facts of Shri Amit Tiwari and also re-produced the relevant portion of order of ITAT, Indore in those cases, in favour of assessee. Therefore, this bench carries the same view as taken by co-ordinate Benches and accordingly hold that the penalty imposed by AO in present case u/s 271AAB by mentioning a wrong charge of section 271(1)(c) in show-cause notice, is not valid and liable to be quashed. 12 – AY 2017-18

“8. Ld. DR next drew us to following three decisions given by Hon’ble Courts in favour of revenue in which the similar contention as raised by present assessee was turned down and penalty was upheld: (i) PCIT Vs. Thakur Prasad Sao & Sons (P) Ltd. (2024) 163 taxmann.com 449 (Calcutta) (ii) Veena Estate (P) Ltd. Vs. CIT (2024) 158 taxmann.com 341 (Bombay) (iii) Sundaram Finance Ltd. Vs. ACIT, Chennai (2018) 93 taxmann.com 250 (Madras) – Assessee’s SLP has been rejected by Hon’ble Supreme Court.

(i) PCIT Vs. Thakur Prasad Sao & Sons (P) Ltd. (2024) 163 taxmann.com 449 (Calcutta) – The order is dated 02.05.2024 but the Hon’ble High Calcutta High Court has not considered the decision of Kulwant Singh Bhatia (supra) dated 09.05.2018 decided by Hon’ble Jurisdictional High Court of Madya Pradesh. Further, in Para No. 6 & 38 of order, the Hon’ble Calcutta High Court has categorically noted that the assessee participated in response to the penalty proceedings initiated by AO through notice u/s 274. The Hon’ble High Calcutta High Court has also re-produced the submissions made by assessee to AO in response to notice. However, in present case of assessee, in Para No. 4 & 5 of penalty-order, the AO has clearly mentioned that the assessee did not participate in response to the notice dated 26.12.2017 issued by AO u/s 274. Therefore, the decision of Hon’ble Calcutta High Court is not applicable.

(ii) Veena Estate (P) Ltd. Vs. CIT (2024) 158 taxmann.com 341 (Bombay) – This case had unique facts. The assessee raised the legal plea of ‘absence of charge’ in the notice issued by AO after 30 years after filing appeal before Hon’ble High Court. Therefore, the Hon’ble High Court came heavily and rejected assessee’s contention. Ld. AR submitted that the ITAT, Mumbai has already distinguished this decision in – Lyka Labs Limited Vs. DCIT, order dated 06.06.2024, relevant para of ITAT’s order is re-produced below: – AY 2017-18

“10. From the perusal of the documents forming part of the paper book, we find that in the appeal against the penalty order dated 30/03/2016 passed under section 271(1)(c) of the Act before the learned CIT(A), the assessee specifically raised the submission regarding the defect in the notice issued under section 274 r/w section 271(1)(c) of the Act as the AO did not mention under which the limb penalty under section 271(1)(c) of the Act has been levied. Further, we find that the assessee also, inter-alia, placed reliance upon the decision of the Hon'ble jurisdictional High Court in Pr. CIT (Central) v. Goa Coastal Resorts and Recreation (P.) Ltd. [2020] 113 taxmann.com 574/272 Taxman 157 (Bom.) in support of its submission. However, we find that the learned CIT(A) vide order dated 28/02/2020 dismissed the appeal filed by the assessee and upheld the levy of penalty under section 271(1)(c) of the Act without dealing with the aforesaid submission of the assessee. In further appeal before the Tribunal, we find that the assessee again raised a ground that the penalty proceedings are bad in law on the basis that the show cause notice is defective. The coordinate bench of the Tribunal vide order dated 05/03/2021 passed in assessee's appeal in ITA No. 1682-1684/Mum./2020, for the assessment years 2010-11, 2011-12 and 2014-15, restored the matter to the file of the learned CIT(A) for fresh adjudication and for passing a speaking order on factual aspects. We find that being aggrieved by the Tribunal's order, the assessee filed an appeal before the Hon'ble jurisdictional High Court under section 260A of the Act, wherein again the assessee raised the legal issue and submitted that the same is squarely covered by the decision of the Hon'ble jurisdictional High Court. The Hon'ble High Court, vide order dated 08/11/2023, passed in ITA (L) No. 1009, 1014, and 1029 of 2022, permitted the assessee to withdraw its appeal and further directed the learned CTT(A) to dispose of the assessee's appeals as early as possible. We further find that even in the second round of proceedings before the learned CIT(A), the assessee made its submission on the aforesaid jurisdictional aspect. However, as evident from the record, the learned CIT(A), vide impugned order, rejected the submission of the assessee on the basis that this issue was never specifically pressed by the assessee in its grounds of appeal and the statement of facts. Therefore, from the aforesaid factual matrix, we find merit in the submissions of the assessee that the issue as regards the defect in the penalty notice has been raised since the first round of appellate proceedings against the initiation of penalty under section 271(1)(c) of the Act. Accordingly, we are of the considered view that the decision of the Hon'ble jurisdictional High Court in Veena Estate (P) Ltd. (supra) does not support the plea of the learned DR in the present case, as the same has been rendered in a completely different factual matrix, where after 30 years the taxpayer sought to raise ground as regards the defect in notice issued under section 274 r/w section 271(1)(c) of the Act before the Hon'ble High Court for the first time.”

(iii) Sundaram Finance Ltd. Vs. ACIT, Chennai (2018) 93 taxmann.com 250 (Madras) – We re-produce below Para 16 of this order: – AY 2017-18

“16. We have perused the notices and we find that the relevant columns have been marked, more particularly. when the case against the assessee is that they have concealed particulars of income and furnished inaccurate particulars of income. Therefore, the contention raised by the assessee is liable to be rejected on facts. That apart, this issue can never be a question of law in the assessee's case, as it is purely a question of fact. Apart from that, the assessee had at no earlier point of time raised the plea that on account of a defect in the notice, they were put to prejudice. All violations will not result in nullifying the orders passed by statutory authorities. If the case of the assessee is that they have been put to prejudice and principles of natural justice were violated on account of not being able to submit an effective reply, it would be a different matter. This was never the plea of the assessee either before the Assessing Officer or before the first Appellate Authority or before the Tribunal or before this Court when the Tax Case Appeals were filed and it was only after 10 years when the appeals were listed for final hearing, this issue is sought to be raised. Thus on facts, we could safely conclude that even assuming that there was defect in the notice, it had caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued under Section 274 r/w. Section 271 of the Act. Therefore, principles of natural justice cannot be read in abstract and the assessee, being a limited company, having wide network in various financial services, should definitely be precluded from raising such a plea at this belated stage.”

Thus, the assessee raised plea before Hon’ble High Court for the first time and that too after 10 years when the appeal was listed for final hearing. Therefore, this decision is also not applicable.

“Whereas in the course of proceedings before me for the assessment year 2013-14 it appears to me that you :- *Have without reasonable …. *Have without reasonable cause …. ✓*Have concealed the particulars of your income or ….. furnished inaccurate particulars of such Income. – AY 2017-18 Thus, the AO mentioned three points in the notice out of which first two points are not relevant and we are concerned with last point only which is ticked as “✓” by AO. In this last point which is relevant to us, the AO has noted both limbs of section 271(1)(c) i.e. the assessee has concealed the particulars of income or furnished inaccurate particulars of income without striking off any one. Clearly therefore, the AO has failed to specify the exact charge against assessee and in this situation, the decision of Hon’ble Jurisdictional High Court of Madhya Pradesh in Kulwant Singh Bhatia (supra) become applicable according to which the proceeding of penalty conducted by the AO is illegal and cannot be sustained. The three decisions relied by Ld. DR in favour of revenue have been successfully distinguished by Ld. AR as discussed by us in foregoing para of this order; we do not reproduce the same discussion here to avoid repetition. Ld. DR has, however, raised an important point that in the assessment-order, the AO has clearly mentioned that the assessee concealed income and since penalty u/s 271(1)(c) has its origin from assessment-order, it has to be construed that the AO has specified charge in the assessment-order itself. We are afraid to accept such a contention of Ld. DR for the reason that in the scheme of Income-tax Act, 1961, the assessment-proceeding and penalty-proceedings are distinct and independent. For example, there are separate procedures for initiating assessment proceedings and penalty proceedings; there are separate notices for two proceedings; there are separate orders for concluding two proceedings and there are separate appellate provisions for the orders passed in two proceedings. The Hon’ble Supreme Court has also held in Dilip N. Shroff Vs. JCIT, Civil Appeal 2746 of 2007 order dated 18.05.2007 as under: “51. The order imposing penalty is quasi-criminal in nature and, thus, burden lies on the department to establish that the assessee had concealed his income. Since burden of proof in penalty proceedings varies from that in the assessment proceeding, a finding in an assessment proceeding that a particular receipt is income cannot automatically be adopted, though a finding in the assessment proceeding constitute good evidence in the penalty proceeding. In the penalty proceedings, thus, the authorities must consider the matter afresh as the question has to be considered from a different angle. [Soe Anantharam Veerasinghaiah & Co. v. C.I.T., Andhra Pradesh, 1980 Supp SCC 13].”

12. In view of above discussions and for the reasons stated therein, we are satisfied that the penalty imposed by AO is not legal. Accordingly, we quash the penalty-proceeding at the very threshold on legality aspect itself as claimed by assessee. The ground raised

by assessee is allowed.”

17. The fourth decision relied by Ld. DR is a decision of ITAT, Pune bench in DCIT Vs. Tapadiya Construction Ltd. (2025) 171 taxmann.com 810 (Pune – Trib.). We re-produce below the relevant paras of order of ITAT for an immediate reference: – AY 2017-18

“This appeal filed by the Revenue directed against the order of ld. Commissioner of Income Tax (Appeals), Pune-12, Pune u/sec. 250 of the Income Tax Act, 1961; dated 09.03.2024 for the A.Y.2019-20. The Revenue has raised the following grounds of appeal:

“1. On the facts and in the circumstances of the case, Ld. CIT(A) erred in law and in facts by deleting the penalty u/s 271AAB of the I.T. Act, 1961 without appreciating the fact that during the course of Search & Seizure proceedings, the Director of the company had declared the undisclosed income of Rs. 2,45,58,000/- for the assessment year under consideration and the same was offered in its return of income.

2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and in facts by deleting the penalty u/s 271AAB of the I.T. Act, 1961 without appreciating the fact that in the show cause notices issued by the AO for initiation of penalty proceedings u/s 271AAB of the I.T. Act, 1961, it was clearly mentioned by then AO that "there is undisclosed income for the specified previous year as defined in section 271AAB of the IT Act, 1961."

3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and in facts by deleting the penalty u/s 271AAB of the I.T. Act, 1961 without appreciating the fact that the undisclosed income unearthed as a result of search only. Had the search not taken place, the undisclosed income would have escaped taxation.

[Emphasis supplied]

XXX

4.6 In the case of the assessee, the Assessing Officer has specifically initiated penalty proceedings under section 271AAB(1A) of the Act, as seen from the para 6 of the assessment order which has been reproduced above. Thus, the Assessing Officer has categorically specified the charge of the penalty in the assessment order. Then, in the penalty order the Assessing Officer has again discussed 271AAB(1A) of the Act. Thus, at the time of assessment, the Assessee was made aware that penalty proceedings under section 271AAB(1A) of the Act, has been initiated for undisclosed income. In the assessment order, the AO has specifically mentioned the amount of undisclosed income also. Therefore, the Assessee was categorically made aware about the amount of undisclosed income for which penalty under section 271AAB(1A) of the Act was initiated. As far as notice dated 05.06.2021 is concerned, these are computer generated notices and the Assessing Officer do not have any scope to make changes other than putting the dates, PAN, Assessment Year etc. In this context, we derive strength from the order of the ITAT Pune in the case of Smt. Taradevi R Bafna Vs. ACIT (supra), which has relied on Hon’ble Allahabad High Court’s decision in the case of 17 – AY 2017-18

Sandeep Chandak (supra). The relevant paragraph of the ITAT Pune order is reproduced here as under:

“9. On a perusal of the provisions of section 271AAB, it is distinctly evident that the section 271AAB of the Act is self-contained. It is worthy to note that, on one hand, the sub section (1) thereof authorises levy of penalty on undisclosed income where the proceedings u/s 132 of the Act is initiated, and on the other hand the sub-section (2) puts an embargo on imposing of penalty u/s 270A and u/s 271(1)(c) of the Act on such undisclosed income falling within the realm of subsection (1). This clearly establishes the solitary domain of section 271AAB over undisclosed income where the proceedings u/s 132 of the Act is initiated and at the same time it drags out the authorisation of imposition of penalty u/s 270A and 271(1)(c) of the Act as extra-territorial.

10. Keeping aforesaid in mind, we find that, the appellant's contention that, the afore stated SCN represents the non-application of mind in communicating the exact charge for rebuttal falls like a house of cards on two counts;

(i) Firstly, the impugned SCN calling upon the appellant to showcase the reasons as to why a penalty u/s 271AAB should not be imposed clearly concluded intimating the consideration of representation before concluding proceedings imposing penalty u/s 271AAB of the Act, as it ostensible from the reproduced text of SCN laid at para 8 hereinbefore.

(ii) Secondly, the sub-section (2) of section 271AAB intractably expunges the levy of penalty u/s 270A and 271(1)(c), consequently, it communicates the exact charge left i.e. levy of penalty u/s. 271AAB(1) for undisclosed income where the proceedings u/s 132 of the Act is carried out.

11. In this context, we heedful to quote that, our aforesaid view finds fortified by the decision of Hon'ble Apex Court in the case of "Sandeep Chandak v. PCIT" reported in [2018] 93 taxmann.com 406/255 Taxman 367 (SC) where in similar facts and circumstance their lordship have dismissed the appeal of the assessee and upheld the order of Hon'ble High Court sustaining the penalty imposed u/s. 271AAB of the Act, as under;

A search u/s 132 of the Act was carried out in case of assessee, and in the course of search, assessee made a statement admitting certain undisclosed income. Assessing Officer added said amount to assessee's taxable income and thereupon, issued a notice u/s 274 r.w.s. 271 of the Act for initiating penalty proceedings to which assessee submitted written reply. Assessing Officer having rejected assessee's explanation, passed a penalty order u/s 271AAB. Tribunal proceeding on presumption that penalty proceedings had 18 – AY 2017-18 been initiated u/s 271(1)(c), set aside penalty order. High Court took a view that where assessee in course of search admits undisclosed income and the manner in which such income has been derived, then provisions of section 271AAB would automatically be attracted and further the High Court opined that since opportunity of hearing as prescribed u/s 271AAB had been given to assessee, penalty order passed by Assessing Officer was to be restored. Supreme Court held that, on facts, there was no ground to interfere with impugned order passed by High Court and, therefore, instant petition was to be dismissed.

4.6.1 The ITAT Pune (supra) has followed the decision of Hon’ble Allahabad High Court in the case of PCIT Vs. Sandeep Chandak [2018] 405 ITR 648 (All) dated 27.11.2017 which has been confirmed by the Hon’ble Supreme Court vide decision in the case of Sandeep Chandak Vs. PCIT [2018] 255 Taxman 367 (SC), order dated 23.04.2018. The said case was relied by ld. DR for the Revenue. The said decision of Hon’ble Allahabad High Court was arising from the ITAT Lucknow’s Decision in the case of Sandeep Chandak Vs. PCIT in and ITA No.417/Lucknow/2016. The Hon’ble Allahabad High Court has held as under :

“22. Section 271AAB provides the procedure for penalty where the search has been initiated. In the present case, admittedly a search and seizure operation is carried out in which the assessees have surrendered the amount of Rs.4 crores each (Rs.4 lakh each by all the three assessees) and therefore, in view of the provisions of Section 271AAB the assessees are required to pay, by way of, penalty in addition to tax, if any, a sum computed @ 10% of undisclosed income of the specified period or previous years. In the case where the assessee in the course of search in a statement (under Section 4 of Section 132) admits the undisclosed income and specified manner in which such income has been derived, than the provisions of Section 271AAB automatically attracts and the proceedings are to be carried out/completed.

4.7 Thus, Hon’ble High Court has upheld the validity of notice under section 271AAB of the Act, issued by the Assessee, which was one of the issue before the Hon’ble High Court. The said order of the Hon’ble High Court has been upheld by Hon’ble Supreme Court. In these facts and circumstances of the case, the law laid down by Hon’ble Allahabad High Court is a binding precedence, binding on us. Therefore, respectfully following Hon’ble Allahabad High Court in the case of Sandeep Chandak(supra) and Hon’ble ITAT Pune in the case of Smt. Taradevi R. Bafna (supra), we hold that the order passed by ld. CIT(A) is not sustainable. Hence, for all the reasons discussed, we set aside the order of ld. CIT(A). Accordingly, Ground No.2 raised by the Revenue is allowed.”

“Counsel for the appellant has submitted that the penalty proceedings are being initiated under Section 271AAB of the Act and not under Section 271(1)(c) of the Act. He has pointed out that the Tribunal has wrongly proceeded on the basis of the fact that the impugned penalty proceedings are being carried out under Section 271(1)(c). He has submitted that from the perusal of the penalty notice dated 23.9.2015 it is crystal clear that the notice has been issued under Section 274 read with section 271 of the Act. Counsel for the appellant (Revenue) has submitted that in the said notice dated 23.9.2015 the assessing authority of the assessee has categorically and clearly mentioned and has requested the assessee to appear before him and clearly indicated therein that as to why an order imposing the penalty be not made under Section 271 of the Act and has further mentioned that in case of failure on the part of the assessee in not appearing and not availing the opportunity of being heard in person or through an authorised representative on or before the date indicated in the notice and also indicated that the assessee may show cause through authorised representative in writing on or before the date indicated and his reply will be considered before any such order is made under Section 271AAB. We find that in the show cause notice the assessing authority has clearly indicated that the penalty proceedings are related to the penal proceeding of Section 271AAB and surprisingly, we find that the ITAT has proceeded by considering the said notice issued under Section 271(1)(c). Learned counsel for the appellant has submitted that the findings recorded by the ITAT namely that issuance of the notice under Section 271(1)(c) of the Act will not automatically deem that the assessing authority has initiated the proceedings for imposition of penalty under Section 271AAB and accordingly given an opportunity to the assessee is wholly irrelevant. The ITAT has further held that the departmental representative has conceded before the Tribunal that the – AY 2017-18 penalty proceedings have not been initiated under Section 271AAB therefore, no penalty can legally be imposed against the assessee. In this regard, the Tribunal has observed as follows: "The notice since does not relate to the provision of section 271AAB therefore, I cannot agree with Learned D.R. That the notice issued u/s 271(1)(c) of the Act was valid for initiation of proceedings u/s 271AAB. Initiation of penalty proceedings, in my view, is the foundation for the validity of the imposition of penalty u/s 271AAB. On this basis itself, the penalty can be cancelled. This is also fact on record that no penalty proceedings either u/s 271(1)(c) of the Act or 271AAB has been initiated during the course of assessment proceedings." The ITAT has further held that the assessing authority should record the satisfaction report before proceeding under Section 271AAB which in the present case is disappeared. The ITAT at the end has recorded as follows : "No opportunity has been given to the assessee in respect of the penalty to be levied u/s 271AAB of the Act. On this basis also, the order passed by the Assessing Officer is against the principles of natural justice of providing the proper opportunity to the assessee and accordingly I quash the order of the Assessing Officer. I have also gone through the provisions of section 271AAB and noted that this section specifies three different situations under which the penalty can be imposed on the assessee under different clauses (a), (b) and (c), the penalty has to be imposed on different rate. The Assessing Officer has not specified in the notice in respect of which clause the penalty is going to be levied on the assessee. On this basis also, in my opinion, the penalty cannot be sustained." At the end the Tribunal has held that since the provisions of Section 271AAB are not mandatory therefore, levy of penalty in each and every case where ever the assessee has made default is unjustified. On the other hand, learned counsel for the assessee has submitted and has relied upon the findings recorded by the ITAT and has emphasised that in the present case unless the satisfaction is recorded and in the present case since the same has not been recorded by the assessing authority and the notice has been issued under Section 274 read with Section 271, as such the impugned penalty proceedings under Section 271AAB are wholly illegal and unjustified therefore, he assailed the judgment of the Tribunal. After hearing the parties at length, on inquiry, the counsel for the appellants has placed the copy of the assessment order which has been passed in the cases of all the assessees for the Assessment Year 2014-15 as an individual status dated 31.3.2015 under Section 143 (3) of the Act. We have noticed that in the assessment proceedings the assessing authority has observed as below : – AY 2017-18

"The assessee, has e-filed the return of income u/s 139(1) on 30.09.2014 vide acknowledgment No.37789163100914. In the said return the assessee has declared total income Rs.4,16,39,320/-. The case is to be completed under compulsory scrutiny as per the provisions of Section 153A(b) of the I.T. Act, 1961, accordingly a notice u/s 143(2) of the I.T. Act, 1961 dated 17.1.2014 was issued and duly served upon the assessee. Thereafter, further notices u/s 143(2)/142(1) of the I.T. Act 1961 along with detailed questionnaire dated 01.12.2014 were issued and served upon the assessee on 01.12.2014 fixing the date of compliance on 08.12.2014." During the course of the assessment proceedings the assessee (namely Sri Sandeep Chandak) has shown his income for Assessment Year 2014-15 being total income of Rs.4,16,39,315/- which the assessee earned as Salary Income, Rental Income from Property at City Centre, Kanpur, Dividends, interest on PPF/bank on Saving Bank and FDR Account/Bonds. The assessing authority has also mentioned in the assessment order that the assesee has also earned non- taxable share of profit from partnership firm Chandak Infratech, where he is a partner. It has further mentioned in the assessment order that the assessee offered to tax on the income of Rs.4 crores and accordingly, the assessment is completed at the total income as indicated hereinabove of Rs.4,16,39,320/- under Section 143(3) of the Act. We find that while passing the assessment order under Section 143(3), the assessing authority has not initiated the penalty proceedings under Section 271(1)(c) of the Act. Section 271 provides the procedure in case of failure to furnish return, comply with notice, concealment of income etc. Sub clause (c) of Section 271(1) provides that if the assessing authority in the course of any proceedings under the Income Tax Actis satisfied that any person "has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty." In the present case, the regular assessment proceedings are being carried out under Section 143(3), which is a proceeding of assessment as so stipulated under Section 143 and sub section (3) of Section 143 provides the procedure to be adopted by the assessing authority during the course of the assessment proceedings. Section 271AAB provides the procedure for penalty where the search has been initiated. In the present case, admittedly a search and seizure operation is carried out in which the assessees have surrendered the amount of Rs.4 crores each (Rs.4 lakh each by all the three assessees) and therefore, in view of the provisions of Section 271AAB the assessees are required to pay, by way of, penalty in addition to tax, if any, a sum computed @ 10% of undisclosed income of the specified period or previous years. In the case where the assessee in the course of search in a statement (under Section 4 of Section 132) admits the undisclosed income and specified manner in which such income has been derived, than the provisions of Section 271AAB automatically attracts and the proceedings are to be carried out/completed. – AY 2017-18 We have noticed that the penalty notice has been issued under Section 274 read with section 271. Section 274 provides that no order imposing a penalty shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard. In the instant case the penalty notice issued clearly indicates that the opportunity of being heard is provided to the assessee and therefore, the penalty notices has been issued under Section 274 read with section 271 calling upon the assessee to show cause in writing or in person which fulfill the requirement of Section 274 of the Act. In the present case, the provisions of Section 271AAB are fully applicable as of the conditions so stipulated or attracts as a search has been initiated under Section 132 and during the course of search the statement of the assessee has been recorded under sub section (4) of Section 132, in which the assessees admit undisclosed income and specifies the manner in which such income has been derived. We have gone through the contents of the penalty notice and we find that in the penalty notice, which has been issued under Section 274 read with Section 271, the assessing authority has clearly indicated that the proceedings under Section 271AAB being initiated and the reply to the show cause notice in writing on or before the date so as indicated will be considered before any such order is made under Section 271AAB. We find the substance in the submission of the learned counsel for the department and we noticed that the orders passed by the CIT (Appeals), affirming the orders of the penalty, are fully justified where the CIT (Appeals) has recorded a categorical finding with regard to the statement of Sri Kamal Kishore Chandak during the search and the issuance of the penalty notices under Section 271AAB, which is relevant. We have noticed that this fact has not been considered by the Tribunal. In this regard, we may reproduce the relevant finding of CIT (Appeals) hereinbelow : "From the above provisions, it may be seen that the AO may impose the penalty under this section if following ingredients are fulfilled.

2. The assessee has made disclosure of undisclosed income during the course of search action, has paid the tax together with interest and has filed return of income.

In other words, this penalty is not based upon the facts gathered during course of assessment proceeding. It is for to this reason, in my opinion, satisfaction of the AO is not required to be recorded by AO during assessment proceedings or at the time of completion of the proceedings. Thus, initiation of the penalty after the completion of assessment proceeding is not vitiated by law. The Ld. A.Rs have also challenged that the caption of the notice mentioned only Section 271 and not 271AAB. In this respect, the copy of notice has been produced by the Ld. A.R. before me. It is seen that the Ld. A.R. is correct in observing that the section of penalty has not been correctly mentioned by the AO in the caption. However, the AO will get the benefit of section 292BB of the Income Tax Act, 1961 because firstly, the assessee has raised no objection before the AO in this regard. Secondly, last line of the notice clearly mentions section 271AAB. Thirdly, the assessee has given reply to said notice which shows that the assessee fully comprehended the implication of the notice that it is for section 271AAB. The assessee has also challenged that the principles of natural justice has not followed by the AO. The detailed submissions of A.R. in this regard has already been reproduced above. The A.R. did not produce any evidence to show that he was not given proper opportunity of hearing. It is clear from the penalty order that the AO has given penalty notice and which was also replied by the assessee. Therefore, in my opinion, principle of natural justice has not been violated. Thus in view of above discussion penalty imposed by AO u/s 271AAB of the Act is confirmed." Since admittedly, no proceeding under Section 271(1)(c) are initiated by the assessing authority during the course of the assessment proceeding under Section 143(3), the impugned penalty proceedings under Section 271AAB are fully justified and are initiated in accordance with law. We find that the order of the ITAT cannot sustain, therefore, the same is set aside and the penalty orders under Section 271AAB passed by the assessing authority, confirmed by the CIT (Appeals), are affirmed and are restored. The appeals filed by the Revenue are allowed.” [Emphasis supplied] Thus, the emphasised lines of above order of Hon’ble Allahabad High Court clearly demonstrate that the AO made a typo mistake of mentioning section 271(1)(c) in the ‘caption’ of notice issued to assessee whereas in the body of notice, the charge of section 271AAB was clearly specified. Therefore, in such – AY 2017-18 peculiar situation, the Hon’ble High Court accepted that the mistake was curable by virtue of section 292BB of the Act and then the Hon’ble Court took support from assessment-order. The present case of assessee is altogether different wherein the AO has specified a wrong charge in the show-cause notice issued to assessee as discussed earlier. Therefore, the facts of Sandeep Chandak’s case are altogether different and the same is not applicable to present case of assessee.