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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI N.V. VASUDEVAN & SHRI B.R. BASKARAN
O R D E R Per N.V. Vasudevan, Vice President
This is an appeal by the revenue against the order dated 20.09.2017of the CIT(Appeals), Davangere relating to assessment year 2009-10.
In this appeal the revenue has challenged the order of the CIT(Appeals) whereby the CIT(A) cancelled the order of the AO imposing penalty on the Assessee u/s.271(1)(c) of the Income Tax Act, 1961 (the Act).
There is a delay of 29 days in filing this appeal. The delay in filing the appeal is explained as owing to administrative difficulties. The delay is not inordinate and is condoned accepting the reasons given in the affidavit filed by the Officer concerned.
As far as the merits of the appeal of the revenue are concerned, the facts are that penalty was imposed on the Assessee in respect of an addition of Rs.75 lacs to the total income of the Assessee. The Assessee is an individual. He was during the relevant previous year engaged in the business of acting as canvasing agent for edible seeds and edible oils under the name and style of M/s. Srinivasa & Co. On 12.9.2009 when the Assessee was travelling from Challekere, Karnataka to Erode, Tamil Nadu, he was intercepted by the police and a sum of Rs.75 lacs which he was carrying with him was seized by the police. The Assessee explained that the sum in question was money of persons who had entrusted it to him for purchase of SF seeds. Based on the aforesaid seizure, the Income Tax Department carried out survey u/s.133A of the Act on the Assessee on 13.2.2009. In his statement before the AO recorded on 16.2.2009, he maintained that the money in question did not belong to him and belonged to various parties for whom he was to purchase SF seeds. Later on, the Assessee offered to tax the sum of Rs.75 lacs as his income and paid taxes thereon by filing a revised return. It has been the stand of the Assessee that notwithstanding the fact that the sum of Rs.75 lacs was offered to tax, it was for the reason that the Assessee was not able to produce the parties from whom he received the sum of Rs.75 lacs and not for the reason that it was his money from sources which he could not explain (unexplained money).
It is in respect of the aforesaid addition, penalty proceedings were initiated u/s.271(1)( c) of the Act and penalty was levied by the AO by order dated 31.5.2012. In the appeal filed against the said order, the Assessee has specifically raised ground No.2 before CIT(Appeals) contending that the show cause notice issued u/s.274 of the Act was defective in as much as the specific charge against the assessee has not been spelt out in the said notice and such defect renders the order imposing penalty as illegal, null and void. The CIT(A) however cancelled the penalty on the ground that the revised return was not valid in the eye of law because the original return filed by the Assessee itself was invalid and therefore no penalty could be imposed. The following were the relevant findings of the CIT(A):-
“6a. I fully agree with the argument of the AR and as the Return of income filed on 22/01/2010 was not in accordance with the provisions of Sec.139(1), second return of income filed becomes invalid as per the provisions of Sec.139 of the I T Act. The furnishing of a revised return is provided by sub-section (5) of Section 139. According to this sub-section "any person having furnished a return under sub-section (1) or sub-section (2)" may furnish a revised return at any time before the assessment is made if he discovers any omission or any wrong statement in the original return. The very fact that this right is given to a person who has filed a return under sub-section (1) or sub-section (2) of Section 139 means by necessary implication that such a right is denied to a person who files the return under Section 139 (4). It should also be noted that where a belated return is filed u/s 139(4), no revised return u/s 139(5) can be filed as also held by the Hon'ble Supreme Court in the case of Jagdish Chandra Sinha v. CIT 220 ITR 67 (SC). 6b. In view of the facts, I hold that levy of penalty has no legs to stand. Thus, the ground succeeds.”
Aggrieved by the order of the CIT(Appeals), the revenue has filed the present appeal before the Tribunal raising the following grounds of appeal:-
“1. The order of the Commissioner of Income Tax(Appeals), Davangere, is opposed to the law and not on the facts and circumstances of the case.
2. The CIT (Appeal) erred in deleting the addition made by the AO purely on technical grounds without giving reasons as to how the declaration was voluntary by the assessee. The CIT(A) has not discussed the merits of the case in terms of intentional concealment as per provisions of section 271(1)(c).
3. For these and other grounds that may be urged upon, the order of the CIT(A) may be reversed and that assessment order be restored.
4. The appellant craves leave to add, alter, amend or delete any other grounds or before hearing of the appeal.”
We have heard the rival submissions. We are of the view that without going into the merits of the basis on which CIT(Appeals) has cancelled the order imposing penalty passed by the AO, the penalty levied is not sustainable for the reason that the show cause notice u/s.274 of the Act before imposing penalty was defective and such defect would have the effect of rendering the order imposing penalty as illegal, null and void as held by the Hon’ble Karnataka High Court. In terms of Rule 27 of the Income Tax Appellate Tribunal rules, 1963, the Tribunal can uphold the order of the CIT(A) on grounds decided against the Assessee (in this case ground No.2 raised by Assessee before CIT(A) was not adjudicated and hence deemed to have been dismissed).
The ld. Counsel for the assessee submitted before us that the show cause notice issued u/s 274 of the Act before imposing penalty does not contain the specific charge against the assessee, namely, as to whether the assessee was guilty of having concealed particulars of income or having furnished inaccurate particulars of income. A copy of the show cause notice u/s 274 of the Act was filed before us and perusal of the same reveals that the AO has not struck out the irrelevant portion in the show cause notice and therefore the show cause notice does not specify the charge against the assessee as to whether the charge is of concealment of particulars of income or furnishing of inaccurate particulars of income.
The ld. Counsel for the assessee drew our attention to the decision of the Hon’ble Karnataka High Court in the case of CIT vs. SSA’s Emerald Meadows in of 2015 dated 23.11.2015 wherein the Hon’ble Karnataka High Court, following its own decision in the case of CIT vs Manjunatha Cotton and Ginning factory (2013) 359 ITR 565, took a view that imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to, whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. The ld. Counsel further brought to our notice that as against the decision of the Hon’ble Karnataka High Court the revenue preferred an appeal in SLP in CC No.11485 of 2016 and the Hon’ble Supreme Court by its order dated 05.08.2016 dismissed the SLP preferred by the department.
We have heard the submissions of the learned counsel for the Assessee and are of the view that the show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to, whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. The plea of the ld. Counsel for the assessee that in such circumstances penalty u/s.271(1)(c) of the Act cannot be imposed, has to be accepted, as such a plea is based on the decisions referred to by the learned counsel for the Assessee. We, therefore, hold that imposition of penalty in the present case cannot be sustained and the same was rightly cancelled by the CIT(A).
In the result, appeal by the revenue is dismissed.
Pronounced in the open court on this 15th day of February, 2019.