THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(1), VIJAYAWADA vs. SRI SAI ENGINEERING AND DRILLING, VIJAYAWADA

3. The Ld. CIT(A), after considering the submissions of the assessee, allowed the appeal filed by the assessee and deleted the penalty levied by the Ld. AO. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal and the assessee has raised Cross Objections.

CO 06/Viz/2025 Sri Sai Engineering and Drillings 4. At the outset, the Ld. AR pleaded to adjudicate the legal ground raised in the Cross Objection since it goes to the root of the matter regarding the validity of the penalty order.

5. The assessee has raised the following grounds in their Cross Objection: “1. The Ld. CIT(A) is justified in holding that the penalty order dated 16/03/2022 is barred by limitation.

2. Without prejudice to the above, the Ld. CIT(A) ought to have held that the notice issued U/s. 271(1)(c) is ambiguous in nature and hence invalid.

3. The Ld. CIT(A) ought to have cancelled the penalty of Rs. 72,31,470/- levied by the AO U/s. 271(1)(c) of the Act as the respondent did not furnish any inaccurate particulars of income.

4. Any other grounds of Cross Objection that may be raised at the time of hearing.”

CO 06/Viz/2025 Sri Sai Engineering and Drillings 9. We have heard both the sides and perused the orders of the Ld. Revenue Authorities as well as the material available on record. It is noticed that the Ld. AO passed the penalty order on 16/03/2022 considering the fact that the Ld. CIT(A) has confirmed the additions to the tune of Rs. 45,75,500/- vide order dated 28/08/2019. The Ld. CIT(A) in accordance with the provisions of section 275(1)(a) of the Act found that the Ld. AO has passed the penalty order beyond thelimitation period provided U/s. 275(1)(a) of the Act. However, the Ld. DR submitted that it is covered by the Covid-19 Pandemic and hence the extended period of limitation should be applied. But, we find the Cross Objection the assessee has raised a legal ground contesting that the notice issued U/s. 271(1)(c) of the Act does not specify whether the penalty is levied for “furnishing of inaccurate particulars of income” or “concealment of income”. The Ld. AR placed reliance on the ratio laid down by the jurisdictional Bench in Konchada Sreeram vs. ITO (supra) and the relevant paragraphs from the said order of the Tribunal (supra) are extracted herein below: “6.1…….In the assessee’s case, the issue is the defective notice u/s 271(1)(c) but not the penalty order. Unless the notice issued u/s 271(1)(c) is valid the penalty order cannot be held to be valid. The assessing officer CO 06/Viz/2025 Sri Sai Engineering and Drillings did not strike off the irrelevant column in the notice and made known the assessee whether the penalty was initiated for the concealment of income or for furnishing the inaccurate particulars. In the assessment order also the AO simply recorded that the penalty proceedings u/s 271(1)(c) are initiated separately. Neither in the assessment order nor in the penalty notice, the assessing officer has put the assessee on notice for which offence, the penalty u/s 271 was initiated. Therefore, the case is squarely covered by the decision of the Hon’ble Jurisdictional High Court of cited (supra) wherein the Hon’ble high court held as under: “On principle, when penalty proceedings are sought to be initiated by the revenue under Section 271(1)(c) of the Act of 1961, the specific ground which forms the foundation therefore has to be spelt out in clear terms Otherwise, on assessee would not have proper opportunity to put forth his defense. When the proceedings are penal in nature resulting in imposition of penalty ranging from 100% to 300% of the tax liability, the charge must be unequivocal and unambiguous. When the charge is either concealment of particulars of income or furnishing of inaccurate particulars thereof, the revenue must specify as to which one of the two is sought to be pressed into service and cannot be permitted to club both by interjecting an 'or' between the two, as in the present case. This ambiguity in the show-cause notice is further compounded presently by the confused finding of the Assessing Officer that he was satisfied that the assessee was guilty of both. We are therefore of the opinion that the order under appeal does not brook interference on any ground. We find no question of law, much less a substantial one, arising for consideration warranting admission of this appeal.” 6.2. On the similar facts, the Coordinate Bench of ITAT, Visakhapatnam in in the case of Narayana Reddy Enterprises, following the order of the Coordinate Bench in the case of Smt. Makina Annapurna Vs. ITO, Visakhapatnam in & 605/Vizag/2014 dated 2.2.2017 held that non-striking of the irrelevant column renders the notice issued u/s 271 as invalid. Respectfully, following the decision of the Hon’ble AP High Court cited supra and the decision of this Tribunal cited (supra), we hold that the notice issued u/s 271 is invalid and consequent penalty imposed by the AO is cancelled.”

(By Revenue) 12. The Revenue has raised the following grounds of appeal:

“1. The order of the Ld. CIT(A) is erroneous on facts and in circumstances of the case.

1. 1. निर्धाररती/ The Assessee – Sri Sai Engineering and Drilling, D. No. 54-18-26, B-3, Second Lane, LIC Colony, Vijayawada. 2. रधजस्व/The Revenue –Asst. Commissioner of Income Tax, Circle- 2(1), Central Revenue Buildings, Ground Floor, Mahathma Gandhi Road, Near Collector Office, Vijayawada, Andhra Pradesh-520002.