H.M. ICE & STORAGE PVT. LTD.,DELHI vs. DCIT, CIRCLE- 12(1), NEW DELHI

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ITA 926/DEL/2018Status: DisposedITAT Delhi20 August 2018AY 2001-025 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 was bad in law as it did not specify under which limb of Section 271(1)(c) the penalty proceedings were initiated. Following the decision of the Karnataka High Court and the dismissal of the Revenue's SLP by the Apex Court, the penalty was set aside.

What were the facts?

The Assessing Officer levied a penalty under Section 271(1)(c) of the Income Tax Act. The assessee contended that the penalty notice issued under Section 274 r.w.s. 271 was invalid because the inappropriate words were not struck off, making it unclear whether the penalty was for concealment of income or furnishing inaccurate particulars.

What were the issues?

The primary issue was the validity of a penalty notice under Section 274 r.w.s. 271 where inappropriate words were not struck off, rendering the specific limb of Section 271(1)(c) unclear.

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: Ms. Apoorva Bhardwaj, CA
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 15.11.2017 of CIT(A)- 42, New Delhi relating to assessment year 2001-02.

2.

Levy of penalty of Rs.5,14,150/- 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. The ld. counsel for the assessee at the outset referring to page – 1 of the Paper Book drew the attention of the Bench to the notice issued u/s 274 r.w.s. 271 and submitted that the Assessing Officer has not struck off the inappropriate words. Therefore, under which limb the penalty has been levied had not been specified. Referring to various decisions including the decision of the Pune Bench of the Tribunal in the case of Vidyanath Urban Co-operative Bank Ltd. vs. ACIT and vice-versa vide & 2079/PUN/2014 order dated 24.03.2017 for assessment years 2007-08 & 2008-09, he submitted that the Tribunal, following the decision of the Hon’ble Karnataka High Court in the case of CIT vs. Manjunath Catton & Ginning Factory reported in 359 ITR 565, has cancelled such penalty on the ground that the notice issued u/s 274 r.w.s.

271 is bad in law and subsequent proceedings arising thereafter are vitiated on account of non-striking off of the inappropriate words in the penalty notice.

Referring to various other decisions, she submitted that since the Assessing Officer in the instant case has not struck off the inappropriate words in the penalty notice, therefore, the penalty so levied by the Assessing Officer and sustained by the ld. CIT(A) would bad in law.

4. The ld. DR on the other hand submitted that non-striking off the inappropriate words from the penalty notice will not invalidate the proceedings.

Since the assessee in the instant case had concealed its true income liable to tax by way of furnishing inaccurate particulars of income o account of accommodation entries of Rs.13,00,000/-, therefore, the penalty levied by the Assessing Officer and sustained by the ld. CIT(A) should be upheld.

5.

I have considered rival arguments made by both the sides and perused the material available on record. I find the Assessing Officer levied penalty of Rs.5,14,150/- u/s 271(1)(c) on account of accommodation entries of Rs.13,00,000/- taken by the assessee from M/s Ankur Marketing Limited which during the course of assessment proceedings was found not in existence and the assessee was unable to prove the identity and creditworthiness of the loan creditor and genuineness of the transactions. I find the addition was sustained by the ld. CIT(A) and the Assessing Officer thereafter initiated penalty proceedings and, thereafter, levied penalty of Rs.5,14,150/- u/s 271(1)(c) which has been sustained by the ld. CIT(A). It is the submission of the ld. counsel for the assessee that the inappropriate words in the notice issued u/s 274 r.w.s. 271 has not been struck off by the Assessing Officer for which the penalty proceedings are initiated and, therefore, the penalty so levied by the Assessing Officer and sustained by the ld. CIT(A) is bad in law.

6.

I find merit in the above argument of the ld. counsel for the assessee. 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.”

7.

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 had 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.

8.

In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on this 20th August, 2018.

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