GAGANDEEPSINGH A ALAG,MUMBAI vs. ITO 21(2)(1), MUMBAI

The present appeal filed by the assessee is directed against the order passed by the CIT(A)-38, Mumbai, dated 25.07.2016, which in itself arises from the order passed by the A.O under Sec.271(1)(c) of the Income Tax Act, 1961 (for short ‘Act’) dated 24.03.2014 for A.Y 2009-10.

Briefly stated, the facts of the case are that the A.O on the basis of the AIR information gathered that the assessee had purchased an immovable property for a consideration of Rs.1,20,41,800/-. During the course of the assessment proceedings, the AO called upon the assessee to submit the P a g e | Gagandeep Singh Alag Vs. Income Tax Officer-21(2)(1)

Aggrieved, the assessee assailed the assessment order in appeal before the CIT(A). The CIT(A) being of the view that it was not a case of an outright transfer of any immovable property by Shri Amrik Singh A. Alag to the assessee, but a case where he had purchased the property and had made the payment for 30% share of the assessee, without requiring the assessee to reimburse the share of his investment. On the basis of his aforesaid deliberations, the CIT(A) sustained the addition, though not under Sec. 56(2)(vii), but under Sec. 56(2)(vi) of the Act.

After the culmination of the assessment proceedings, the assessee was called upon by the A.O to show cause as to why penalty under Sec.271(1)(c) may not be imposed on him. The A.O not finding favour with the explanation of the assessee imposed a penalty under Sec. 271(1)(c) of Rs.1,06,570/-. The assessee carried the matter in appeal before the CIT(A), who confirmed the penalty imposed by the AO under Sec.271(1)(c) and dismissed the appeal.

The assessee being aggrieved with the order of the CIT(A) had carried the matter in appeal before us. The ld. Authorized Representative (for short ‘A.R’) for the assessee had assailed before us the validity of the penalty imposed under Sec. 271(1)(c) on two grounds, viz. (i) the validity of jurisdiction assumed by the A.O for imposition of penalty under Sec.271(1)(c); and (ii) maintainability of the penalty under Sec.271(1)(c) on merits. The ld. A.R at the very outset of the hearing of the appeal submitted that as the deed of assignment was dated 29.12.2007 and pertained to the period relevant to A.Y 2008-09, thus no penalty under Sec. 271(1)(c) could have been imposed on the assessee during the A.Y 2009-10. Alternatively, it was submitted by the ld. A.R that even otherwise from a perusal of the ‘Show cause’ notice (for short ‘SCN’), dated 30.12.2011 issued by the A.O under Sec.274 r.w.s. 271 of the Act, it was not discernible as to for which default the assessee was called upon to explain as to why penalty under Sec.271(1)(c) may not be imposed on him. The ld. A.R taking us through the copy of the ‘SCN’ at Page 38 of the ‘Paper book’ of the assessee (for short ‘APB’) submitted that the AO while issuing the notice had failed to strike off the irrelevant default, as a result whereof the assessee was not put to notice as regards the default for which he was being called upon to explain as to why penalty under the aforesaid statutory provision may not be imposed on him. Per contra, the ld. Departmental Representative (for short ‘D.R’) relied on the orders of the lower authorities. 7. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find from a perusal of the assessment order that as observed by the A.O, the deed for assignment on the basis of which the assessee had acquired 30% share in the property was dated 29.12.2007. We thus, are of the considered view that now when the assignment deed itself pertains to the period relevant to A.Y 2008-09, hence by no means penalty under Sec. 271(1)(c) in respect of the impugned addition of Rs. 4,59,000/- made under Sec. 56(2)(vi) could have been imposed on the assessee in A.Y 2009-10. We find that as the assessee had not assailed the order passed by the CIT(A) in P a g e | Gagandeep Singh Alag Vs. Income Tax Officer-21(2)(1)

We have also perused the ‘SCN’, dated 30.12.2011, which was issued by the A.O under Sec.274 r.w.s. 271 of the Act. A perusal of the ‘SCN’ reveals that as the A.O had failed to strike off the irrelevant default, hence the assessee was not put to notice as regards the default for which he was called upon to explain as to why penalty under Sec.271(1)(c) may not be imposed on him. We are of the considered view that the non striking off the irrelevant charge in the ‘Show cause’ notice not only reflects the non application of mind by the A.O, but the same seriously defeats the very purpose of giving reasonable opportunity of hearing to the assessee as contemplated under Sec.

We find that the distinction between the said two defaults had been appreciated at length by the Hon’ble Supreme Court in its judgments passed in the case of Dilip & Shroff Vs. Jt. CIT (2007) 210 CTR (SC) 228 and T. Ashok Pai Vs. CIT (2007) 292 ITR 11 (SC), wherein the Hon’ble Apex Court had concluded that the two expressions namely ‘Concealment of particulars of income’ and ‘furnishing of inaccurate of particulars’ of income have different connotation. We further find that the High Court of Karnataka in the case of CIT Vs. SSA’s Emerald Meadows (73 taxmann.com 241)(Kar), following its earlier order in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar), had held that where the notice issued by the A.O under Sec. 274 r.w Sec. 271(1)(c) does not specify the limb of Sec. 271(1)(c) for which the penalty proceedings had been initiated, i.e whether for ‘concealment of particulars of income’ or ‘furnishing of inaccurate particulars’, the same had to held as bad in law. The ‘Special Leave Petition’ (SLP) filed by the revenue against the aforesaid order of the Hon’ble Karnataka High Court had thereafter been dismissed by P a g e | Gagandeep Singh Alag Vs. Income Tax Officer-21(2)(1)