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Facts
For AY 2013-14, the assessee's assessment was completed with additions for disallowance of depreciation and excess material consumption, totaling Rs. 3,20,32,751/-. Subsequently, the AO levied a penalty of Rs. 98,98,120/- under Section 271(1)(c) of the Income-tax Act for furnishing inaccurate particulars and concealment of income. The CIT(A) deleted this penalty, prompting an appeal by the Revenue and a cross-objection by the assessee to the ITAT.
Held
The Tribunal held that the penalty order passed by the Assessing Officer was void ab initio as it failed to clearly specify under which limb of Section 271(1)(c) the penalty was levied (i.e., concealment of income or furnishing inaccurate particulars). Relying on precedents from the Delhi High Court, the Tribunal quashed the penalty order. Consequently, the Revenue's appeal was dismissed, and the assessee's cross-objection was allowed.
Key Issues
Whether a penalty order under Section 271(1)(c) is valid if it does not clearly specify whether the penalty is for concealment of income or furnishing inaccurate particulars.
Sections Cited
Section 271(1)(c), Section 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “E”: NEW DELHI
Before: SHRI KUL BHARAT & SHRI BRAJESH KUMAR SINGH
The captioned appeal by the Revenue and the cross-objection by the assessee are directed against the order of National Faceless Appeal Centre (NFAC), Delhi, dated 21.08.2023, pertaining to the assessment year 2013-14, deleting the penalty levied by the Assessing Officer u/s 271(1)(c) of the Income-tax Act, 1961 (the “Act”). The following grounds of appeal raised by the Revenue are as under:
“Ground: a. "Whether on the facts and circumstances of the case and law, the Ld. CIT(A) was right in law in deleting the penalty of Rs.98,98,120/- u/s 271(1)(c) of the I.T. Act, 1961. b. Whether Ld. CIT(A) has not erred in admitting evidence in violation of Rule 46A.” 2. Cross objections raised by the assessee are as under:
1.
That the ld. CIT(A) has erred in law and on facts in not considering that the penalty order passed by the Assessing Officer was in itself void-ab- initio and liable to be quashed, more particularly in view of the decision of Hon’ble Supreme Court and Hon'ble Delhi High Court, as it was not made clear in the penalty notice as to under which limb of section 271(1)(c) of the Act, the penalty was being levied and ld. CIT(A) has in fact erred in stating that furnishing of inaccurate particulars is interlinked with concealment of income without considering the binding nature of the legal precedents.
2. That in the connection the ld. CIT(A) has erred in presuming that the ld. Assessing Officer had levied penalty for furnishing of inaccurate particulars which in fact is not the case, as is evident from para 3 of the penalty order as per which penalty was levied both for furnishing of inaccurate particulars and concealment of income.
3 & CO 12/Del/2024 3. That the ground no. 1(b) raised by the ld. Assessing Officer in Form no. 36 is not appropriate inasmuch as there was no additional evidence which was filed by the respondent before ld. CIT(A) during the course of the appellate proceedings. 3. Facts, in brief, are that for A.Y. 2013-14 the assessee filed its return declaring income at loss of Rs. 6,60,81,456/-. The assessment was completed u/s 143(3) of the Act at a loss of Rs. 3,29,19,728/- after making various additions. In appeal the learned CIT(A) sustained the additions with respect to disallowance of depreciation amounting to Rs. 13,61,120/-; and disallowance of excess material consumption claimed amounting to Rs. 3,16,71,631/-. The AO also initiated penalty proceedings u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income and concealment of income to the extent of Rs. 3,20,32,751/- and vide penalty order dated 27.03.2019 levied a penalty of Rs. 98,98,120/- at the rate of 100% of tax sought to be evaded. Aggrieved against it the assessee preferred appeal before the learned CIT(Appeals), who vide order dated 21.08.2023 deleted the penalty. Aggrieved against it the Revenue has preferred appeal and the assessee has filed cross objections before this Tribunal.
Learned counsel for the assessee at the outset submitted that in the present case the penalty order passed by the Assessing Officer is void ab initio, inasmuch as from the order of AO it is not clear under which limb of section 271(1)(c) penalty was levied i.e. whether the assessee has concealed its particulars of therefore, the subsequent proceedings have become invalid. Learned counsel submitted that the learned CIT(A) erred in stating that furnishing of inaccurate particulars is interlinked with concealment of income. He submitted that the issue is squarely covered in favour of the assessee by the ratio of decision of Hon’ble Jurisdictional High Court of Delhi in the case of PCIT & others Vs. M/s Sahara India Life Insurance Company Ltd. 2019 (8) TMI 409-Delhi High Court, Dated 2- 8-2019.
Learned DR relied on the penalty order.
We have heard rival submissions and perused the material available on record. In the penalty order the AO while imposing penalty u/s 271(1)(c) has, inter alia, observed as under:
“… it is concluded and held that the assessee has furnished inaccurate particulars of its income & concealment of income …”
The penalty order does not mention the specific charge of default committed by the assessee i.e. whether the assessee has concealed its particulars of income; or furnished inaccurate particulars of such income. The Hon’ble Jurisdictional High Court of Delhi in the case of PCIT & others Vs. M/s Sahara India Life Insurance Company Ltd. (supra) has observed as under:
5 & CO 12/Del/2024 “21. The Respondent had challenged the upholding of the penalty imposed under section 271(1) (c) of the Act, which was accepted by the ITAT. It followed the decision of the Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory [2013] 35 taxmann.com 250/218 Taxman 423/359 ITR 565 and observed that the notice issued by the AO would be bad in law if it did not specify which limb of section 271(1)(c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. The Karnataka High Court had followed the above judgment in the subsequent order in CIT v. SSA's Emerald Meadows [2016] 73 taxmann.com 241, the appeal against which was dismissed by the Supreme Court of India in SLP No. 11485 of 2016 by order dated 5th August, 2016.
On this issue again this Court is unable to find any error having been committed by the ITAT. No substantial question of law arises.”
Respectfully following the binding precedent, we hold that from the impugned penalty order it is not clear under which limb of section 271(1)(c) penalty was levied. There being no specific charge for levy of penalty, the penalty order is therefore, contrary to law laid down by Hon’ble Jurisdictional High Court.
Accordingly, impugned penalty order passed u/s 271(1)(c) of the Act is quashed.
Now coming to the Revenue’s appeal in the Revenue has challenged deletion of penalty and admission of additional evidences.
The assessee in its cross objection has challenged the legality and validity of the notice issued for initiation of penalty proceedings and reliance is made on the judgment of Hon’ble Jurisdictional High Court in the case of M/s Sahara India Life Insurance Company Ltd. (supra). We, respectfully following the binding
In the result, cross objection of the assessee is allowed and the appeal of the Revenue is dismissed.
Order pronounced in open court on 18th July, 2024.