SAYED AHMED ABBAS NAQVI,MUMBAI vs. DCIT CEN CIR 2, MUMBAI

The quantum assessments were completed u/s 153A r.w.s 143(3) of the Act in both the years consequent to the search operations conducted u/s 132 of the Act in the hands of the assessee. After passing of orders by Ld CIT(A) in both the years in the appeals filed against the assessment orders, the AO passed penalty orders and levied penalty of Rs.26.61 lakhs and Rs.104.98 lakhs, computed at 150% of the tax sought to be levied. Though the assessee challenged the penalty orders by filing appeals before Ld CIT(A), yet he could not get favourable orders from Ld CIT(A). Hence the assessee has filed these appeals before us.

The Ld A.R submitted that the assessee had challenged orders passed by Ld CIT(A) in the quantum assessment proceedings by filing appeals before the Tribunal. He submitted that the Tribunal has granted relief in respect of certain items, restored certain issues to the file of AO and confirmed certain additions. The Ld A.R submitted that the assessee is pressing certain legal issues before the Tribunal.

Inviting our attention to the assessment orders passed by the AO, the Ld A.R submitted that the AO has not properly applied his mind on the matter of levying of penalty. The Ld A.R invited our attention to the last page of the assessment order and submitted that the AO has stated that the penalty proceedings have been initiated for “failure to disclose the true particulars of income. The Ld A.R submitted that the AO has, however, invoked Explanation 1 to sec. 271 of the Act in the penalty order and held that the assessee has concealed particulars of income. Thus the AO has initiated penalty proceedings under one charge, but levied penalty under another charge. He further submitted that the assessing officer has failed to strike off inappropriate limb in the notice issued by him u/s 271(1)(c) of the Act. He submitted that the facts narrated above are identical in both the years. Accordingly he submitted that there was non-application of mind on the part of the AO and hence the impugned penalty orders are liable to be quashed. He further submitted that the Hon’ble Bombay High Court has held in the case of L & T Finance Ltd (Income tax Appeal No.1363 of 2015 and others dated 04 06 2018) has taken the view that the assessing officer has to clearly specify the items which has been concealed or what particulars of income which have been filed is inaccurate. He submitted that the AO has made general observations that too made different charge in the assessment orders and penalty orders. He further submitted that the Ld CIT(A) has upheld the penalty orders by holding that the assessee has not filed correct particulars of income, while the AO has levied penalty by invoking Explanation 1 to sec. 271, which provides a deeming fiction for concealment of particulars of income. He submitted that the provisions of sec. 271(1)(c) contains two limbs viz.,

On the contrary, the Ld D.R submitted that the assessee has not raised any ground with regard to the legal issues urged by the assessee. He submitted that the non striking of inapplicable portion in the penalty notice will not vitiate the penalty proceedings as held by Hon’ble Bombay High Court in the case of Smt Kaushalya and Others (216 ITR 660). He further submitted that the co ordinate bench of Tribunal has held in the case of Earthmoving Equipment Service Corporation (ITA No.6617/Mum/2014 dated 02/05/2017) that the provisions of sec.292B shall apply to the non striking of inapplicable portion.

In the rejoinder, the Ld A.R submitted that the decision rendered in the case of Earthmoving Equipment Service Corporation (supra) is distinguishable. He submitted that the AO, in the above said case, has initiated the penalty proceedings and also levied penalty under the same limb of furnishing of inaccurate particulars of income. In these set of facts, the Tribunal has held that the provisions of sec 292B shall apply for non striking of inapplicable portion. However, in the instant case, the AO has charged the assessee with furnishing of inaccurate particulars of income, but levied penalty for concealment of particulars.

We have heard rival contentions on the legal issue and perused the record. Since the details relating to legal issues are already available on record, in our view, there is no bar on the assessee to urge the same before us at this stage. From the foregoing discussions, we notice that the assessing

On merits, the Ld A.R submitted that the additions have been made on the basis of loose papers found during the course of search on estimated basis. Accordingly the Ld A.R submitted that there is no case for levying penalty on merits also. However, since we have quashed the penalty orders on legal issue urged before us, we do not find it necessary to address the issue on merits.

In the result, both the appeals of the assessee are allowed.