LANDCRAFT DEVELOPERS PVT. LTD.,NEW DELHI vs. ACIT, CENTRAL CIRCLE- 27, NEW DELHI
Facts
A search operation under Section 132 was conducted on the assessee, Landcraft Developers (Pvt.) Ltd., resulting in the surrender of undisclosed income. The assessee included this income in its return, and the assessment was completed. Subsequently, penalty proceedings were initiated under Section 271AAB based on a show cause notice dated 31/03/2015, which was a proforma notice typically used for Section 271(1)(c) and did not specify the charge or rate of penalty under Section 271AAB. The AO levied a penalty of Rs. 68,25,747/-, which was upheld by the CIT(A).
Held
The Tribunal held that the show cause notice issued on 31/03/2015 was fundamentally defective because it was a generic proforma notice for Section 271(1)(c) and failed to specify the appropriate charge or penalty rate under Section 271AAB. The Tribunal emphasized that Sections 271(1)(c) and 271AAB are mutually exclusive, rendering such a notice invalid for initiating penalty under Section 271AAB and vitiating the entire proceedings.
Key Issues
Whether the penalty levied under Section 271AAB was valid when the initial show cause notice was a defective proforma notice meant for Section 271(1)(c) and failed to specify the particular charge or rate of penalty under Section 271AAB.
Sections Cited
Section 271AAB, Section 132, Section 132(4), Section 143(3), Section 69A, Section 274, Section 271(1)(c), Section 22(1), Section 22(2), Section 34, Section 139(1), Section 139(3), Section 148, Section 22(4), Section 23(2), Section 142(1), Section 143(2)
AI-generated summary — verify with the full judgment below
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’: NEW DELHI BEFORE, SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA No.1062/Del/2019 (ASSESSMENT YEAR 2013-14) Landcraft Developers ACIT (Pvt.) Ltd. Central Circle-27 Golf Links, NH-24 Vs. New Delhi-55 Near Colambia Hospital Vill. Mehrauli, Paragna Dasna, Ghaziabad U.P.-201 002 PAN-AABCL 1391F (Appellant) (Respondent) Appellant by Sh. Rajkumar, CA Respondent by Sh. Jeetendra Kumar Kale, Sr. DR
Date of Hearing 04/01/2024 Date of Pronouncement 08/01/2024
ORDER PER M. BALAGANESH AM: This appeal of the assessee arises out of the order of the
Learned Commissioner of Income Tax (Appeals)-29, New Delhi,
[hereinafter referred to as ‘Ld. CIT(A)’] in Appeal No.03/2018-
19/CIT(A)-29 dated 08/01/2019 against the order passed by Ld.
Page 1 of 10
ITA No.1062/Del/2019 Landcraft Developers (P) Ltd. vs. ACIT Asst. Commissioner of Income Tax, Central Circle-27, New Delhi
(hereinafter referred to as the ‘Ld. AO’) u/s 271AAB of the Income
Tax Act (hereinafter referred to as ‘the Act’) on 29.03.2018 for the
Assessment Year 2013-14.
The only issue to be decided in this appeal is as to whether the
Ld. CIT(A) was justified in confirming the levy of penalty u/s
271AAB of the Act in the facts and circumstances of the instant
case.
We have heard the rival submissions and perused the
materials available on record. The assessee company is engaged in
the business of development of land. A search and seizure operation
u/s 132 of the Income Tax Act was carried out on 23/08/2012 in
M/s Landcraft Group of cases. During the course of search,
statement u/s 132(4) of the Act was recorded from the Director of
the assessee, wherein sum of Rs.6,42,57,474/- and Rs.40,00,000/-
was surrendered as undisclosed income by the assessee. The sum
of Rs.6,42,57,474/- was surrendered with respect to specific
income as detailed in the statement u/s 132(4) of the Act and
Rs.40,00,000/- was surrendered to cover up any other deficiency Page 2 of 10
ITA No.1062/Del/2019 Landcraft Developers (P) Ltd. vs. ACIT found during the course of search and the assessment. The
assessee duly included the aforesaid disclosure of income while
filing its return of income on 29/11/2013 and paid the requisite
taxes due thereon. The assessment was completed u/s 143(3) of the
Act for AY 2013-14 determining total income at Rs.80,05,205/-
after making addition on account of unexplained cash credit
Rs.10,00,000/- and addition of Rs.3,98,235/- made u/s 69A of the
Act in respect of transactions with M/s Pandav Developers Pvt. Ltd..
The penalty proceedings u/s 271AAB of the Act were initiated on
completion of assessment proceedings itself on 31/03/2015. A
show cause was issued u/s 274 r.w.s 271AAB of the Act on
31/03/2015. The said show cause is enclosed at Page 1 of the
Paper Book filed before us. The said show cause only mentioned the
offence committed by the assessee by mentioning that assessee has
concealed the particulars of income or furnished inaccurate
particulars of income. This show cause notice is meant for initiating
penalty proceedings u/s 271(1)(c) of the Act. The Ld. AO has used
the same show cause notice in the same format for initiating
penalty proceedings u/s 271AAB of the Act on 31.03.2015. Later,
another penalty notice dated 13/03/2018 u/s 271AAB of the Act Page 3 of 10
ITA No.1062/Del/2019 Landcraft Developers (P) Ltd. vs. ACIT was issued to the assessee in the form of letter show causing the
assessee as to why penalty u/s 271AAB of the Act should not be
imposed on the assessee. In this letter dated 13/03/2018, the Ld.
AO had duly referred to the penalty proceedings already initiated
u/s 271AAB of the Act on 31/03/2015. Hence, triggering point for
the impugned penalty proceedings u/s 271AAB of the Act is show
cause issued on 31/03/2015.
The Ld. AO levied penalty on the undisclosed income offered in
the sum of Rs.6,42,57,474/- with respect to specific income and of
Rs.3,98,235/- made in respect of addition u/s 69A of the Act.
Accordingly, the penalty @10% amounting to Rs.68,25,747/- was
levied by the Ld. AO vide order u/s 271AAB of the Act on
29/03/2018. This action of the Ld. AO was upheld by the Ld.
CIT(A).
Now, the short point that arises for our consideration is as to
whether the preliminary show cause notice issued on 31/03/2015
for initiating penalty proceedings u/s 271AAB of the Act mentioning
the inappropriate charge of offence committed by the assessee could
be construed as defective notice or not. It is pertinent to note that Page 4 of 10
ITA No.1062/Del/2019 Landcraft Developers (P) Ltd. vs. ACIT that in the order passed u/s 271AAB of the Act on 29/03/2018 by
the Ld. AO, in para-2, thereon, it has been categorically admitted by
the Ld. AO that the penalty proceedings u/s 271AAB of the Act was
started vide issuance of notice on 31/03/2015. As stated earlier,
we find that the penalty notice dated 31/03/2015 issued by the Ld.
AO was actually meant for initiating the penalty proceedings u/s
271(1)(c) of the Act. The said notice mentions the offence committed
by the assessee i.e., to say whether the assessee has concealed the
particulars of income or had furnished inaccurate particulars of
income. Both these conditions are absolutely not relevant for
initiating penalty proceedings u/s 271AAB of the Act. Moreover, the
provisions of section 271AAB (2) of the Act very clearly state that no
penalty u/s 271(1) (c) of the Act could be levied on the assessee in
respect of undisclosed income offered by the assessee pursuant to
search conducted on or after 01/07/2012. Hence, it goes to prove
that the provisions of section 271(1) (c) and section 271AAB of the
Act are mutually exclusive. Accordingly, the format for issuing show
cause notice for penalty u/s 271(1)(c) of the Act cannot be used for
initiating penalty proceedings u/s 271AAB of the Act. Further, we
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ITA No.1062/Del/2019 Landcraft Developers (P) Ltd. vs. ACIT find that the provisions of section 271AAB of the Act contains
various types of levy of penalty in the following manner:-
(i) 271AAB (1)(a)-10% of undisclosed income would be the penalty. (ii) 271AAB (1)(b)- 20% of undisclosed income would be the penalty. (iii) 271AAB(1)(c)-60% of the undisclosed income would be the penalty (iv) 271AAB(1A)(a)- 30% of undisclosed income would be the penalty. (v) 271AAB (1A) (b)- 60% of the undisclosed income would be the penalty.
Further we find that the expression undisclosed income is also
defined in Explanation-C to section 271AAB of the Act wherein it
stipulates three conditions on which a particular income could be
construed as an undisclosed income within the meaning of section
271AAB of the Act. For the sake of convenience, the show cause
notice for initiating penalty proceedings on 31/03/2015 is
reproduced hereunder:
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ITA No.1062/Del/2019 Landcraft Developers (P) Ltd. vs. ACIT
Page 7 of 10
ITA No.1062/Del/2019 Landcraft Developers (P) Ltd. vs. ACIT 7. For the sake of convenience, the definition of undisclosed
income as defined in Explanation to section 271AAB of the Act is
reproduced below:-
(c) “undisclosed income”means- (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year, or (B) otherwise not been disclosed to the "[Principal Chief Com missioner or] Chief Commissioner or [Principal Commissioner or] Commissioner before the date of search, or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted.]
From the above, it could be seen that there is a greater onus
casted on the Revenue to specifically mention in the show cause
notice itself as to what offence the assessee has committed and also
to mention the rate of penalty that is sought to be levied by the
Assessing Officer on the assessee i.e., 10% or 20% or 30% or 60% of
undisclosed income, as the case may be. If none of these
preliminary informations are mentioned in the show cause notice,
then the show cause notice issued by the Ld. AO becomes
completely defective and consequentially fatal and would vitiate the
entire penalty proceedings. This issue, in any case, is no longer res Page 8 of 10
ITA No.1062/Del/2019 Landcraft Developers (P) Ltd. vs. ACIT integra in view of the decision of Kolkata Tribunal in the case of
Sushil Kumar Paul vs. ACIT in ITA No.2274/Kol/2019 for A.Y.
2016-17 dated 15/12/2022 wherein it was held as under:-
“10. From going through the above notice issued to the assessee on 28/12/2017, we find that there is no mention about various conditions provided u/s 271AAB of the Act. The Id. AO has very casually used the proforma used for issuing notice before levying penalty u/s 271(1)(c) of the Act for the concealment of income or furnishing of inaccurate particulars of income. Except mentioning the section 271AAB of the Act in the notice, it does not talk anything about the provisions of section 271AAB. Therefore, certainly such notice has a fatal error and technically is not a correct notice in the eyes of law because it intends to penalize an assessee without spelling about the charge against the assessee.
In view of the aforesaid observations and respectfully following
the judicial precedent relied upon herein above, we hold that the
penalty notice issued on 31/03/2015 is defective and, accordingly,
entire penalty proceedings gets vitiated. Hence, the penalty levied
u/s 271AAB of the Act in the facts and circumstances of the instant
case would have no legs to stand in the eyes of law. Accordingly, the
grounds raised by the assessee are allowed on this technical aspect.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in open Court on 8th January, 2024.
Sd/- Sd/- (KUL BHARAT) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 08/01/2024 Pk/sps
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ITA No.1062/Del/2019 Landcraft Developers (P) Ltd. vs. ACIT
