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Income Tax Appellate Tribunal, MUMBAI BENCHES “G” MUMBAI
Before: SHRI RAJESH KUMAR, HON. & SHRI AMARJIT SINGH, HON.
PER RAJESH KUMAR, ACCOUNTANT MEMBER
This appeal filed by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-33, Mumbai, dated 16/08/2018 also.
The only issue raised by the assessee in various grounds of appeal is against upholding the order of the AO by the ld.CIT(A) wherein the AO has imposed penalty u/sec.271(1)(c) of the Income Tax Act, 1961 (in short 'the Act').
(M/s. G.L. Pangam & Associates)
The assessee has challenged the order of the AO before the ld.CIT(A) on the ground that AO imposed penalty u/sec.271(1)(c) of the Act which is not in accordance with the provisions of the Act. The assessee also challenged the confirmation of penalty on merits.
We would like to adjudicate the legal issue whether the AO has imposed penalty in accordance with the provisions of section 271(1)(c) or not first.
Ld.AR while referring to the notice u/sec. 274 r.w.s. 271 of the Act dated 05/02/2014, submitted that the said notice has been issued in mechanical manner without application of mind.
The said notice has been issued in standard format without striking of irrelevant limb in the penalty notice. In other words, the AO has not struck down one of the two limbs which is not applicable to the assessee. He further submitted that in absence of mentioning the correct limb in the notice issued u/sec. 274 r.w.s. 271(1)(c) penalty cannot be levied as the assessee was deprived of its legal right to respond to one of the two charges on which the penalty was proposed to be levied. To defence of his argument, ld.AR relied on the following decisions:-
(M/s. G.L. Pangam & Associates) 1) CIT vs. SSA’s Emerald Meadows [(2016) 73 taxmann.com 241 (Kar.) 2) CIT vs. Samson Perinchery [(2017) 392 ITR 4 (Bom)] 3) M/s. Nishigandha Trading Co. Ltd. vs. DCIT (ITA No.7244/Mum/2017, dated 09/08/2019)
Ld.AR, therefore submitted that in view of the ratio laid down in the above decisions, the appeal of the assessee may kindly be allowed by setting aside the order of the ld.CIT(A) and directing the AO to delete the penalty.
Ld.DR, on the other hand, relied on the orders of the authorities below.
After hearing the rival contentions of both the parties and perusing the material on record, we observe that in this case the AO has issued penalty notice on 05/02/2014 u/sec. 274 r.w.s.
271(1)(c) in which the AO has not marked one of the two limbs i.e. concealment of particulars of income or furnishing inaccurate particulars of income and has issued notice in mechanical manner in standard format without application of mind. In our opinion, the notice issued by the AO is not valid as the AO failed to mention the charge on which the penalty was proposed to be levied thereby depriving the assessee to respond to the charge on which the penalty was proposed to be levied. The case of the (M/s. G.L. Pangam & Associates) assessee is squarely covered by the decision on the Hon'ble Karnataka High Court in the case of SSA’s Emerald Meadows (supra), against which SLP has been dismissed by the Hon'ble Supreme Court. Besides, the case is squarely covered by the decision of the Hon'ble Bombay High Court in the case of Samson Perinchery (supra) which provides that failure on the part of the AO to state the charge on which the penalty was proposed to be levied would render the penalty order as invalid and ab initio and thus penalty cannot be sustained. In view of the ratio laid down in these decisions, we are inclined to set aside the order of the ld.CIT(A) and direct the AO to delete the penalty. Thus, this appeal filed by the assessee is allowed.
In the result, appeal of the assessee is allowed.
Order Pronounced in the open Court on 03rd December, 2019