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PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-50, [the ld. CIT(A)], Mumbai dated 22.03.2017 for Assessment Year 2010-11. The assessee has raised the following grounds of appeal:
1. On the facts and circumstances of the case and in law, the learned CIT (A) has erred in upholding the penalty levied under section 271(1)(c) of the Income Tax Act, 1961.
2. The show-cause notice under section 274 read with section 271 of the Income Tax Act, 1961 dated 28th March 2013 is null and void. 2. Brief facts of the case are that the assessee is engaged in the business of dealing in Iron and Steel Trading. The assessee filed its return of income on 15.10.2010 declaring loss at Rs. 7,47,860/-. The case was selected for Mum 2017-M/s Gupta Steel Corporation Pvt. Ltd. scrutiny and the assessment was completed on 28.03.2013 under section 143(3) wherein the loss on account of purchase and sale of shares of SK Ispat was held as a sham transaction and the long term capital loss was not allowed to carry forward. The Assessing Officer while passing the assessment order initiated the penalty. The Assessing Officer levied the penalty @ 100% of the tax sought to be evaded. The Assessing Officer worked out the penalty of Rs. 2,97,44,556/- vide order dated 30.09.2013. On appeal before the ld. CIT (A), the action of Assessing Officer in levying the penalty was confirmed.
However, the ld. CIT(A) directed that tax sought to be evaded on Long Term Capital Gain (LTCG) is to be computed at 20% of Long Term Capital Loss (LTCL). Therefore, The Assessing Officer was directed to re-compute the tax sought to be evaded/quantum of penalty. Further aggrieved, the assessee has filed the present appeal before us.
We have heard the submission of ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the revenue and perused the material available on record. At the outset of hearing, the ld. AR of the assessee submits that the ground of appeal raised by assessee is covered in assessee’s group case in Radhakrishna Roadways Pvt. Ltd. vs. ACIT in dated 14.03.2019, wherein similar penalty was deleted. On merit, the ld. AR of the assessee submits that the loss has been lapsed and the assessee has not claimed set off of such loss.
Accordingly, there is no evasion of tax on claiming and disallowance of such 2 Mum 2017-M/s Gupta Steel Corporation Pvt. Ltd. long term capital loss. The ld. AR of the assessee also filed the copy of acknowledgement of Income Tax Return (ITR) for Assessment Year 2018-
In other alternative submission, the ld. AR of the assessee submits that no specific charge was specified in the notice dated 28.03.2014, issue under section 274 r.w.s. 271(1)(c). The Assessing Officer while passing the assessment order has not specified under which limb of Clause (c) of section 271(1) the penalty was initiated. Accordingly, the ld. AR of the assessee submits that in absence of specific charge, the penalty levied by Assessing Officer is not sustainable in support of his submissions relied on the decision in assessee’s group case in Radhakrishna Vs ACIT (ITA No.3728/M/2017 dated 14.03.2019) , Bombay High Court in Samson Perinchary (ITA No. 1154 of 2014), Karnataka High Court in CIT Vs Manjunatha Cotton and Ginning Factory (359ITR 565 Kar) and Andhra Pradesh High Court in PCIT Vs Smt Baisetty Revathi [2017] 398 ITR 88 T& AP). 4. On the other hand, the ld. Departmental Representative (DR) for the revenue submits that the assessee has shown a non-genuine transaction for sale and purchase of share. It is a clear case of inaccurate particulars. 5. We have heard the rival submissions of both the parties and perused the material on record. We have also deliberated on the various decisions cited by learned AR. There is no dispute that the AO while passing the assessment order made disallowance of long term capital loss and treated the capital gain for the said year as Nil. No further appeal against such action/ treatment was 3 Mum 2017-M/s Gupta Steel Corporation Pvt. Ltd. filed by the assessee. The assessee before us has filed the copy of the ITR for AY 2018-19 wherein the assessee has shown the loss on account of long term capital loss has not been set off the assessee. Therefore, the assertion of the ld. AR for the assessee that there is no tax evasion on the part of the assessee as the disallowed loss has not been set off, which has been lapsed, is a convincible force. No contrary fact is brought by ld. DR for the revenue to our notice that the alleged disallowance of loss was set off by the assessee.
The undisputed facts are that the Assessing Officer while framing assessment u/s. 143(3) of the Act initiated penalty proceedings u/s. 271(1)(c) of the Act without mentioning whether the same relates to concealment of income or filing of inaccurate particulars of income. Similarly, the notice u/s. 271(1)(c) dated 28.03.2013 was also issued without striking off the inappropriate portion of the notice.
Even on legal issue raised by the assessee, we have noted that on similar case in assessee’s group case the coordinate bench of the Tribunal on similar set of facts in Radhakrishna Roadway Pvt Ltd Vs ACT (supra) deleted the penalty holding as under:
“We have heard the rival submissions of both the parties and perused the material on record including the various decision cited by the learned AR. The undisputed facts are that the Assessing Officer while framing the assessment u/s 143(3) of the Act initiated the penalty u/s 271(1)© of the Act without mentioning whether the same relates to concealment of income or filing inaccurate particulars of income. Similarly, when the notice u/s 271(1)© was issued on 28.03.2013 the same was issued in mechanical manner without Mum 2017-M/s Gupta Steel Corporation Pvt. Ltd. striking off irrelevant limb and therefore there was no application of mind on the part of the Assessing Officer. Even in the order imposing penalty, the Assessing Officer mentioned both limbs. In our view it is mandatory on the part of the Assessing Officer to specifically state the particular charge on which penalty is proposed to be levied and non-striking off of the irrelevant limb will go to the root of Jurisdiction of the Assessing Officer to pass penalty order. In the case of Manjunath Cotton & Ginning Factory (supra) and M/s. SSA’s Emerald Meadows, of 2015 dated 23.11.2015, it has been held that no penalty can be imposed where one of the two limbs i.e. ‘concealment of income’ and ‘furnishing of inaccurate particulars of income’ on which penalty was proposed to be imposed is not mentioned. In the case of M/s. SSA’s Emerald Meadows (supra) SLP filed in Hon'ble Supreme Court by the Department has also been dismissed. In the case of Shri Samson Perinchery (supra) Hon'ble Bombay High Court has held that penalty to be imposed on the ground/limb on which penalty has been initiated. Thus, in view of the ratio laid down by various courts and judicial forums, we are of the view that penalty order is bad in law. Accordingly, we direct the Assessing Officer to delete the penalty.”
The Hon’ble Telangana & Andhra Pradesh in PCIT Vs Smt. Baisetty Revathi (supra) also held that when penalty proceedings are sought to be initiated by the revenue under section 271(1)(c), the specific ground which forms the foundation ,therefore, has to be spelt out in clear terms. Otherwise, an 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 per cent to 300 per cent 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 5 Mum 2017-M/s Gupta Steel Corporation Pvt. Ltd. service and cannot be permitted to club both by interjecting one or between the two.
Considering the above factual and legal discussions narrated above, in our view the penalty order levied by assessing officer and confirmed by ld CIT(A) is not sustainable on factual as well as on legal aspect. Therefore, we direct the assessing officer to delete the entire penalty levied under section 271(1) (c) of the Act. In the result the grounds of appeal
raised by the assessee are allowed. 10. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 22/07/2019.