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Facts
A search and seizure operation under section 132 led to the discovery of a document based on which an addition of Rs. 3,13,000/- was made to the assessee's income for AY 2013-14. The Assessing Officer levied a penalty of Rs. 94,000/- under section 271(1)(c) for concealment of income, which was subsequently confirmed by the CIT(A). The assessee disputed ownership of the document and challenged the penalty.
Held
The ITAT found that the ld. CIT(A) failed to consider the assessee's submissions and grounds, including crucial legal issues regarding the validity of the penalty notice under section 274 r.w.s. 271(1)(c) and violations of natural justice. Therefore, the tribunal restored the matter to the CIT(A) for fresh adjudication after properly considering all arguments and evidence. The appeal was allowed for statistical purposes.
Key Issues
1. Whether the penalty notice under section 274 r.w.s. 271(1)(c) was vague and defective for not specifying the limb. 2. Whether the CIT(A) violated natural justice by not considering assessee's explanations and submissions. 3. Whether the seized document and the income addition truly belonged to the assessee, justifying the penalty for concealment.
Sections Cited
Section 132, Section 153A, Section 153C, Section 271(1)(c), Section 274, Section 250, Section 69
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW ‘B’ BENCH, LUCKNOW
O R D E R PER NIKHIL CHOUDHARY, A.M.: This is an appeal filed by the assessee against the orders of the ld. CIT(A), NFAC in confirming the penalty under section 271(1)(c) levied by the ld. Assessing Officer on 23.01.2022 for the Assessment Year 2013-14. The grounds of appeal
are as under:- “1. THAT ON THE FACTS AND IN LAW, THE ORDER PASSED BY LD. CIT (APPEALS), NFAC U/S 250 OF THE ACT IS BAD IN LAW.
2. THAT ON THE FACTS AND IN LAW, THE LD. CIT(APPEALS), NFAC HAS ERRED IN UPHOLDING ACTION OF LEARNED AO IN LEVYING PENALTY OF RS. 94,000/- UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961.
3. THAT ON THE FACTS AND IN LAW, THE NOTICE ISSUED FOR LEVY OF PENALTY UNDER SECTION 274 R.W.S 271(1)(C) DATED 14/02/2020 IS VAGUE AND DEFECTIVE SINCE, IT DOES NOT SPECIFY THE LIMB UNDER WHICH PENALTY UNDER SECTION 271(1)(C) WAS INITIATED.
4. THAT ON THE FACTS AND IN LAW, THE LD. CIT(A) NFAC HAS ERRED IN NOT APPRECIATING THAT THE ASSESSEE HAD OFFERED AN EXPLANATION. THE PENALTY PROCEEDINGS AND THE CONSEQUENT ORDER ARE INVALID AND VOID AB INITIO AS THE SAME WERE INITIATED AND LEVIED SOLELY ON THE BASIS OF AN AFFIDAVIT WITHOUT INDEPENDENT EVIDENCE OF CONCEALMENT.
Prime Products Limited A.Y. 2013-14 5 THAT THE LD. CIT(A) NFAC HAS FAILED TO APPRECIATE THAT "CONCEALMENT OF INCOME OF RS. 3,13,000/- WAS NEITHER DELIBERATE NOR INTENTIONAL, HENCE THE PENALTY U/S 271(1)(C) IS NOT SUSTAINABLE. 6 THAT THE ALLEGED INCOME OF RS.3,13,000/-ADDED U/S 69 BASED ON SEIZED DOCUMENTS IS ITSELF DISPUTED AND UNDER CHALLENGE, AND NO PENALTY UNDER SECTION 271(1) (C) SHOULD HAVE BEEN LEVIED UNTIL FINALITY OF ASSESSMENT ON SUCH ADDITION. 7 THAT THE LEARNED CIT(A) NFAC HAS FAILED TO GIVE PROPER CONSIDERATION TO THE EXPLANATION AND SUPPORTING DOCUMENTS FURNISHED BY THE APPELLANT, THEREBY VIOLATING PRINCIPLES OF NATURAL JUSTICE. 8 THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR WITHDRAW ANY GROUND(S) AT THE TIME OF HEARING.”
The facts of the case are that a Search and Seizure operation under section 132 of the Income Tax Act was carried out in the case of Harish Chandra Jaiswal, Anil Kumar Jaiswal and Sunil Kumar Jaiswal on 9.07.2014. In the said search, certain documents belonging to the assessee were seized which were handed over to the ld. AO by the assessee. After recording a satisfaction note, assessment proceedings were initiated under section 153A r.w.s. 153C and on account of entries recorded in page no. 16A of LP-6, an addition of Rs. 03,13,000/- was made in the hands of the assessee company, holding that the transaction recorded on page numbers 16A to 16J, 17A and 29 all belong to M/s Prime Products and not M/s RKJ Cold Storage & Ice Factory, Safipur, since the assessee had itself filed an affidavit owning up the said page. Subsequently, penalty proceedings were initiated under section 271(1)(c). During the penalty proceedings, the assessee company replied that the document in question was the description of cash in hand as on 5.06.2012, relating to M/s RKJ Cold Storage & Ice Factory, Safipur. However, the ld. AO noted that the Director, of the said company in their affidavit dated 7.12.2016 filed before the DCIT, Central Circle, Kanpur had stated that the said page belongs to the assessee. He also pointed out that there was no evidence to show that the said page belongs to M/s RKJ Cold Storage & Ice Factory, Safipur. The ld. AO noted that the ld. CIT(A) had dismissed the appeals of the assessee against the addition made. He held that in view of the same, it was clear that the assessee had concealed the particulars of income to the extent of Rs. 3,13,000/- Prime Products Limited A.Y. 2013-14 and thereafter relying upon the decisions of the Hon’ble Supreme Court in the case of Union of India vs. Dharmendra Textile Processors and Ors (2008) 306 ITR 277 (SC) and MAK Data Pvt. Ltd. vs. CIT (2013) 358 ITR 593, he levied a penalty of Rs. 94,000/-, being 100 percent of the tax sought to be evaded.
Aggrieved with the said levy of penalty, the assessee went in appeal before the NFAC. The ld. CIT(A) to whom the case was allotted went through the order of the ld. AO and confirmed the same. Ongoing through the said appeal order, it is not clear as to whether any opportunity was given to the assessee before such order was passed.
The assessee is aggrieved at this order issued by the ld. CIT(A). Sh. Ashish Jaiswal Advocate (hereinafter referred to as the ld. AR) appearing on behalf of the assessee submitted that the ld. CIT(A) was wholly unjustified in confirming the penalty order in the manner he had. He submitted that it was apparent from a plain reading of the appeal order that the ld. CIT(A) had merely rubber stamped the findings of the ld. AO and not even allowed the assessee an opportunity to present his case. This was grossly violative of the principles of natural justice and therefore, the order deserves to be quashed. The ld. AR further submitted that written submissions had been made before the ld. CIT(A) and invited our attention to pages 4 to 14 of his paper book which contained the acknowledgment and the written submission. The ld. AR submitted that it was evident from the order that the same had not been considered before the passing of the order. The ld. AR further submitted that the order of the ld. AO was prima facie not maintainable, because while issuing the notice under section 148, the ld. AO had not struck out the irrelevant limb and as per various decisions raised by various Courts, the failure to strike out the irrelevant limb rendered the notice to be vague and the proceedings to be void ab initio. The ld. AR submitted that his ground had been raised before the ld. CIT(A) and not addressed by him. Furthermore, there was no evidence to suggest that LP-6-page 16A belonged to the assessee. A penalty proceeding was a separate proceeding in itself and before the penalty could be levied, a finding was required to be arrived at that the said paper in question, Prime Products Limited A.Y. 2013-14 actually belonged to the assessee. A copy of the said notices issued by the ld. AO under section 274 r.w.s. 271(1)(c) were contained on page nos. 1 and 2 of the paper book. Accordingly, it was prayed that the penalty being bad in law may kindly be quashed.
On the other hand, Sh. R.R.N. Shukla, ld. Addl CIT DR (hereinafter referred to as the ld. DR) submitted that the addition had been made in the hands of the assessee on the strength of an affidavit sworn by the Director of the Company M/s RKJ Cold Storage & Ice Factory, Safipur. Therefore, it was quite clear that the cash details of Rs. 3,13,000/-, which were not reflected in the books of the assessee was a concealment and penalty on the same was justified. The ld. Addl CIT DR submitted that since it had clearly been stated in the assessment order that the assessee had concealed income to the extent of Rs. 3,13,000/-, it could not be said that there was any ambiguity in the mind of the assessee as to which charge he had to reply to and therefore, the assessee could not seek shelter on the plea that the notice created ambiguity in the mind of the assessee and rendered the penalty proceedings void. He further submitted that since the assessee had not offered any explanation before the ld. AO, the ld. CIT(A) was justified in confirming the penalty.
We have duly considered the facts and circumstances of the case. We find that before the ld. CIT(A) the assessee had questioned the legality of both the notice and the findings of the ld. AO on its merits but the ld. CIT(A) has totally ignored the submissions made by the assessee and the grounds raised by the assessee. On the other hand, he has chosen to simply reproduce extracts from the penalty order and confirmed the penalty without any narration as to the submissions made by the assessee and his decision with regard to them. Even legal issues such as the validity of the notice issued under section 274 r.w.s. 271(1)(c) have not been addressed. We, therefore, think it appropriate that the matter should be restored to the file of the ld. CIT(A) so that the ld. CIT(A) may consider the grounds of appeal filed by the assessee alongwith the submissions that were uploaded and thereafter take a fresh decision in accordance with the facts and law.