VIJAY KUMAR,GURGAON vs. ITO, WARD- 4(5), GURGAON

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ITA 2650/DEL/2018Status: DisposedITAT Delhi29 August 2018AY 2014-155 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty notice issued under Section 274 read with Section 271(1)(c) was bad in law because it did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars. This decision was based on High Court and Supreme Court pronouncements.

What were the facts?

The assessee filed a revised return of income after the original return. The Assessing Officer made additions to the income and subsequently levied a penalty under Section 271(1)(c). The CIT(A) upheld the penalty.

What were the issues?

Whether a penalty under Section 271(1)(c) is valid if the notice issued under Section 274 does not specify the limb of the section under which proceedings are initiated.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, NEW DELHI

Before: SHRI R. K. PANDA

For Appellant: Dr. Rakesh Gupta, Adv
For Respondent: Shri Atiq Ahmed, Sr. DR

O R D E R

PER R. K. PANDA, AM :

1.

This appeal filed by the assessee is directed against the order dated 30.03.2018 of CIT(A)- 1, Gurgaon relating to assessment year 2014-15.

2.

Levy of penalty of Rs.6,84,440/- by the Assessing Officer u/s 271(1)(c) of the I.T. Act, 1961 which has been sustained by the ld. CIT(A) is the only issue raised by the assessee in the grounds of appeal

3. Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 02.08.2014 declaring total income of Rs.2,16,000/-. The assessee has filed the revised return of income on 31.03.2016 declaring an income of Rs.20,21,650/-. The assessment was completed u/s 143(3) on 27.12.2016 determining the total income at Rs.27,81,682/- wherein the Assessing Officer made certain additions on account of commission income received from Landmark Apartments Pvt. Ltd. of Rs.24,81,682/- and Rs.2,80,000/- towards rental income received from house property. The assessee did not file any appeal. Subsequently, the Assessing Officer levied penalty of Rs.6,84,440/- u/s 271(1)(c) of the I.T. Act, 1961. In appeal, the ld. CIT(A) upheld the action of the Assessing Officer.

4. Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before the Tribunal.

5.

The ld. counsel for the assessee, at the outset, referring to the notice issued u/s 274 r.w.s. 271 submitted that the show cause notice issued u/s 274 r.w.s. 271 does not define the nature of default i.e. whether the penalty is levied for concealment of income or for furnishing of inaccurate particulars of income.

He submitted that the Assessing Officer imposed the penalty u/s 271(1)(c) in this case on the ground that the assessee has concealed his income and furnished inaccurate particulars of income. Referring to the decision of the Hon’ble Karnataka High Court in the case of CIT vs. M/s SSA’S Emerald Meadows vide of 2015 order dated 23.11.2015, he submitted that the Hon'ble High Court in the said decision, following the decision in the case of Manjunath Cotton and Ginning Factory reported in 359 ITR 565, had upheld the decision of the Tribunal cancelling the penalty and dismissed the appeal filed by the Revenue on the ground that the notice issued by the Assessing Officer u/s 274 r.w.s. 271 is bad in law since it did not specify under which limb of section 271(1)(c) penalty proceedings have been initiated. He submitted that the SLP filed by the Revenue has been dismissed by the Hon’ble Supreme Court.

Referring to various decisions filed in the Paper Book, he submitted that under identical circumstances various Benches of the Tribunal are cancelling the penalty so levied where the inappropriate words are not struck off from the notice issued u/s 274 r.w.s. 271 of the Act. He accordingly submitted that on this preliminarily ground itself the order of the ld. CIT(A) sustaining the penalty levied by the Assessing Officer should be set-aside and the penalty should be cancelled.

6.

The ld. DR on the other hand heavily relied on the order of the ld. CIT(A). He submitted that mere non-striking of the inappropriate words will not invalidate the initiation of penalty proceedings and the provisions of section 292B/292BB will come to rescue of the Department.

7.

I have considered the rival arguments made by both the sides and perused the material available on record. A perusal of the notice issued u/s 274 r.w.s.

271 shows that the inappropriate words in the said notice has not been struck off i.e. the notice does not specify under which limb of section 271(1)(c) the penalty proceedings had been initiated i.e. whether for concealment of income or for furnishing of inaccurate particulars of income. I find the Hon’ble Karnataka High Court in the case of M/s SSA’S Emerald Meadows (supra) has observed as under :-

“3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (for short ‘the Act’) to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565.

4.

In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court. The appeal is accordingly dismissed.”

8.

I find the SLP filed by the Revenue has been dismissed by the Hon’ble Apex Court. Further, the various Benches of the Tribunal following the above decisions are cancelling the penalty so levied by the Assessing Officer and confirmed by the ld. CIT(A) on account of non-striking of the inappropriate words from the notice issued u/s 274 r.w.s. 271 of the Act. Since in the instant case, the Assessing Officer has not struck off the inappropriate words in the notices issued u/s 274 r.w.s. 271, therefore, the notice does not specify under which limb of section 271(1)(c) the penalty proceedings has been initiated i.e. whether for concealment of income or for furnishing of inaccurate particulars of income. Therefore, the penalty proceedings become bad in law. I, therefore, set-aside the order of the ld. CIT(A) and direct the Assessing Officer to cancel the penalty so levied. The appeal filed by the assessee is accordingly allowed.

9.

In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on this 29th August, 2018.

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