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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI RAJESH KUMAR & SHRI RAM LAL NEGI
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 28.02.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2009-10.
The only issue raised by the assessee in the various grounds of appeal is against the confirmation of penalty of Rs.9,70,800/- by Ld. CIT(A) as imposed under section 271(1)(c) of the Act.
The facts in brief are that the assessment in this case was completed vide order dated 30.12.2014 passed under section 2 M/s. Quartet Thermal Engg. Pvt. Ltd. 143(3) read with section 147 wherein the income was assessed at Rs.43,10,500/- as against the return of income of Rs.11,68,751/- by making an addition of Rs.31,41,752/- in respect of bogus purchases. The penalty proceedings were initiated in the said assessment order under section 271(1)(c) for furnishing of inaccurate particulars of income amounting to concealment of income. According to the assessee, the assessment order passed under section 143(3) read with section 147 never served on the assessee and therefore no appeal could be filed. The said fact was brought to the notice of the ACIT vide letter dated 16.06.2015 by the assessee wherein the assessee stated that since assessment order was not served and received by the assessee, therefore it is not in a position to submit its reply on the penalty proceedings initiated by the AO. The said response was sent by the assessee to the AO in reply to letter dated 10.06.2015 which was addressed to the Principal Officer of the assessee giving a show cause notice to the assessee as to why the penalty should not be imposed under section 271(1)© of the Act. The addition in question was in respect of bogus purchases to the tune of Rs.31,41,752/- and in the penalty order the AO observed that assessee has furnished inaccurate particulars of income and thereby concealed the income to the extent of Rs.31,41,752/- and hence imposed a penalty of Rs.9,70,800/- vide order dated 29.06.2015 passed under section 271(1)(c) of the Act.
The Ld. CIT(A) also upheld the penalty as imposed by the AO by observing that the assessee has not been cooperative in the assessment proceedings and the addition was made only when assessee did not reply to the various notices issued by the 3 M/s. Quartet Thermal Engg. Pvt. Ltd. AO. Moreover, the department had received information from the Sales Tax Department that the assessee is beneficiary of bogus purchases from hawala parties. Accordingly, the Ld. CIT(A) held that onus cast upon the assessee to substantiate the purchases was not discharged and thus justified the order of AO by dismissing the appeal of the assessee.
The Ld. A.R. submitted before us that in this case there has been no service of assessment order on the assessee and it is only when the assessee received notice showing cause the imposition of penalty under section 271(1)(c) of the Act. The assessee came to know about the assessment order having been passed by the AO only when the show cause notice was issued. The Ld. A.R. has submitted before the bench that the AO was requested to supply copy of the order and also the proof of service of the assessment order. The Ld. A.R. submitted that the AO supplied a copy of the acknowledgement dated 05.01.2015 stating therein that the order has been received by the assessee on 13.12.2014 which is not correct. The Ld. A.R. thus submitted that the penalty imposed in a case where assessment order has not been served is bad in law and has to be quashed on the principle of natural justice. The Ld. A.R., referring to the notice issued dated 30.12.2014 under section 274 read with section 271(1)(c) of the Act, submitted that the notice has been issued in a mechanical manner without any application of mind in a standard format without striking off the irrelevant limb in the notice. The Ld. A.R. submitted that the specific charge on which the penalty was proposed was not mentioned in the notice and therefore the penalty levied on the basis of said notice
4 M/s. Quartet Thermal Engg. Pvt. Ltd. is not valid and has to be deleted. In defence of his arguments, the Ld. A.R. relied on a series of decisions as under: i. Meherjee Cassinath Holdings Pvt. Ltd., ITA No. 2555/Mum/2012 dated 28.04.2017 ii. Jehangir HC Jehangir, dated 17.05.2017 iii. M/s. Wadhwa Estate & Developers India Pvt. Ltd., dated 24.02.2017 iv. Shri Samson Perinchery, of 2014, 953 of 2014, 1097 of 2014 & 1226 of 2014 dated 05.01.2017 (Hon'ble Bombay High Court) v. M/s. SSA's Emerald Meadows, CC No. 11485/2016 dated 05.08.2016 (Hon'ble Supreme Court) vi. M/s. SSA's Emerald Meadows, of 2015 dated 23.11.2015 (Hon'ble Karnataka High Court) vii. Mrs. Piedade Perinchery, of 2014 dated 10.01.2017 (Hon'ble Bombay High Court) 6. The Ld. D.R., on the other hand, relied on the order of Ld. CIT(A) heavily and submitted that the penalty was rightly levied by the AO for concealment of income by the assessee by way of claiming bogus purchases.
We heard the rival submissions and perused the material on record including the impugned order and decisions referred by both the parties. The undisputed facts are that the AO, while framing the assessment under Section 143(3) of the Act initiated penalty proceedings for concealment of income and filing of inaccurate particulars of income, thus thereby initiating penalty proceedings under both the limbs. Similarly, while issuing penalty notice under Section 274 r.w.s. 271(1)(c) of the Act dated 27.12.2010 , the AO did not strike off one of the two limbs which 5 M/s. Quartet Thermal Engg. Pvt. Ltd. was relevant and on which the penalty was propose. Thus the assessee was not deprived of the opportunity to reply on the exact charge on which penalty was proposed to be levied. In our opinion it is mandatory on the part of the AO to specify specifically the charge on which penalty is proposed to be levied and non striking of the relevant portion would go to the root of the jurisdiction of the AO to pass penalty order. The case of the assessee is squarely covered by the judgements of the Hon'ble Karnataka High Court in the cases of Manjunatha Cotton and Ginning Factory 359 ITR 565 and M/s. SSA's Emerald Meadows in ITA No. 380 of 2015 dated 23.11.2015 wherein the SLP filed before the Hon'ble Supreme Court was also dismissed. In the case of Shri Samson Perinchery in ITA Nos. 1154 of 2014, 953 of 2014, 1097 of 2014 and 1126 of 2014 dated 05.01.2017 the Hon'ble Bombay High Court has held that the order imposing penalty under Section 271(1)(c) of the Act has to be made only on the ground on which penalty proceedings has been initiated. In view of the ratio laid down in these decisions we are of the view the order of the AO under Section 274 r.w.s. 271(1)(c) imposing penalty suffers from serious jurisdictional defect and therefore has to be reversed. We therefore set aside the order of the CIT(A) and direct the AO to delete the penalty.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 22.04.2019.