MS.ADITI SUNIL CHOKSEY,MUMBAI vs. INCOME TAX OFFICER WARD 21(1)(1), MUMBAI

The only common issue involved in this appeal is with regard to action of the ld. CIT(A) upholding the levy of penalty u/s.271(1)(c) of the Act. With the consent of both the parties, the A.Y.2013-14 is taken as the lead case and the decision rendered thereon would apply with equal force for A.Y.2014-15 also except with variance in figures.

We have heard rival submissions and perused the materials available on records. We find that the return of income for the A.Y.2013- 14 was filed by the assessee on 29/07/2013 declaring total income of Rs.5,15,620/-. The assessee is a senior citizen receiving income from salary, income from business and short term capital gains. The assessee has adjusted the business loss of A.Y.2009-10 against the business income derived during the year. The ld. AO observed that assessee had credited interest income of Rs.17,47,376/- in its profit and loss account and treated the same as income from business in the return of income. The ld. AO on perusal of return of income of earlier years of the assessee brought the following facts on record with regard to treatment of interest income by the assessee in the return of income of earlier years as under:- a) A.Y.2009-10 – Interest income of Rs.14,16,130/- was shown by the assessee under the head ‘income from other sources’. b) A.Y.2010-11 – Interest income of Rs.11,71,801/- was shown by the assessee under the head ‘income from other sources’. c) A.Y.2011-12 – Interest income of Rs. 5,26,190/- was shown by the assessee under the head ‘income from other sources’. d) A.Y.2012-13- Interest income of Rs.16,44,724/- was shown by the assessee as ‘income from business’.

3 & 1317/Mum/2019 Ms. Aditi Sunil Choksey 3.1. The ld. AO observed that the aforesaid interest income was shown by the assessee including the interest income during the year under consideration from loans given by the assessee and fixed deposits kept with banks. Since assessee is not engaged in the business of advancing loans, the ld. AO sought to treat the interest income derived by the assessee as income from other sources and accordingly, denied the benefit of set off of brought forward business loss against the same while completing the assessment. The ld. AO initiated penalty proceedings u/s.271(1)(c) of the Act by mentioning in the body of the assessment order that the same is initiated for furnishing inaccurate particulars of income. We find on perusal of the penalty notice dated 29/10/2015, the ld. AO had not struck-off the specific charge i.e. whether the assessee has concealed particulars of his income or whether the assessee had furnished inaccurate particulars of his income. Ultimately, the order u/s.271(1)(c) of the Act was passed by the ld. AO for the A.Y.2013-14 on 26/04/2016 levying penalty for furnishing inaccurate particulars of income in respect of aforesaid interest income. The action of the ld. AO was upheld by the ld. CIT(A). We find that the ld. AR argued that in the absence of striking off of the relevant portion in the penalty notice dated 29/10/2015 specifying the offence committed by the assessee, the penalty levied by the assessee does not have legs to stand. In support of this proposition, the ld. AR placed on record, the copy of the decision of Hon’ble Jurisdictional High Court in the case of PCIT vs. Goa Coastal Resorts and Recreation Pvt. Ltd., in Tax Appeal No.24 of 2019 dated 11/11/2019. We have gone through the said judgement and for the sake of convenience, the facts and the decision rendered thereon by the Hon’ble Jurisdictional High Court are reproduced hereunder:-

We have carefully examined the record as well as duly considered the rival contentions. Both the Commissioner (Appeals) as well as the ITAT have categorically held that in the present case, there is no record of satisfaction by the Assessing Officer that there was any concealment of income or that any inaccurate particulars were furnished by the assessee. This being a sine qua non for initiation of penalty proceedings, in the absence of such petition, the two authorities have quite correctly ordered the dropping of penalty proceedings against the petitioner.

Besides, we note that the Division Bench of this Court in Samson(supra) as well as in New Era Sova Mine (supra) has held that the notice which is issued to the assessee must indicate whether the Assessing Officer is satisfied that the case of the assessee involves concealment of particulars of income or furnishing of inaccurate 5 & 1317/Mum/2019 Ms. Aditi Sunil Choksey particulars of income or both, with clarity. If the notice is issued in the printed form, then, the necessary portions which are not applicable are required to be struck off, so as to indicate with clarity the nature of the satisfaction recorded. In both Samson Perinchery and New Era Sova Mine (supra), the notices issued had not struck of the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or proper application of mind in matter of initiation of penalty proceedings.

In the present case, as well if the notice dated 30/09/16 (at page 33) is perused, it is apparent that the relevant portions have not been struck off. This coupled with the fact adverted to in paragraph (5) of this order, leaves no ground for interference with the impugned order. The impugned order are quite consistent by the law laid down in the case of Samson Perinchery and New Era Sova Mine(supra) and therefore, warrant no interference.

The contention based upon MAK Data (P.) Ltd.(supra) also does not appeal to us in the peculiar facts of the present case. The notice in the present case is itself is defective and further, there is no finding or satisfaction recorded in relation to concealment or furnishing of inaccurate particulars.

For the aforesaid reasons, we hold that no substantial questions of law arises in this appeal. Consequently, this appeal is dismissed.”

In the result, both the appeals of the assessee are allowed.