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Income Tax Appellate Tribunal, “D” BENCH : KOLKATA
Before: Hon’ble Shri M.Balaganesh, AM & Hon’ble Shri S.S.Viswanethra Ravi, JM]
ORDER Per M.Balaganesh, AM
This appeal by the assessee is directed against the order passed by the Principal Commissioner of Income Tax-3, Kolkata [in short the ld PCIT] u/s 271(1)(c ) of the Income Tax Act, 1961(in short ‘the Act’) levying penalty 150% of tax sought to be evaded in the sum of Rs. 4,17,60,309/- vide his order dated 24.08.2016.
The only issue to be decided in this appeal is as to whether the Ld. Pr. CIT was justified in levying penalty u/s 271(1)(c) of the Act, in the facts and circumstances of the case.
The brief facts of this issue is that the assessee company filed its return of income for the assessment year 2009-10 disclosing total income of Rs. 4,81,69,267/-. The Ambo Agro Products Ltd. A.Yr. 2009-10 assessment was completed u/s 143(3) read with Section 144C(5) determining the total income at Rs. 30,98,86,270/- predominantly comprising of long term capital gain. Later the Ld. Pr. CIT issued show cause notice dated 12.08.2015 u/s 263 of the Act seeking to revise the order passed by the ld. AO on the following grounds:
a) The ld. AO has not examined short term capital gain arising on sale of various assets during the assessment proceedings; b) The ld. AO has not obtained form 3CEA and has not examined the assessee’s claim regarding slum sale;’ c) The ld. AO has not examined whether the assessee added during the financial year qualified for benefit u/s 50B of the Act, accordingly, the ld. CIT passed an order u/s 263 of the Act on 25.02.2016. This order u/s 263 of the Act was agitated by the assessee before this Tribunal in I.T.A. No. 676/Kol/2016. Meanwhile, the Ld. Pr. CIT passed an order levying penalty u/s 271(1)(c) of the Act in the sum of Rs. 4,17,60,310/- vide his order dated 24.08.2016. The ld. AO passed an order giving effect to the directions of the Ld. Pr. CIT u/s 263 on 30.08.2016 and raised a tax demand of Rs. 3,87,55,361/- thereon. In effect, the penalty u/s 271(1)(c) of the Act was levied by the Ld. Pr. CIT before the date of passing of the order by the ld. AO pursuant to section 263 order. Aggrieved the assessee is in appeal before us on the following grounds:
1. On the facts and circumstances of the case and in law, the Ld. Principal Commissioner Income-tax - 3, Kolkata ("the Pr.CIT") erred in levying penalty u/s 271(1)(c) of the Act. The reasons given by him for doing so are wrong, contrary to the facts of the case and against the provisions of law;
2. The action of the Pr. CIT in initiating and levying penalty under section 271(1)(c) is illegal and contrary to the provisions of law
3. The action of the Pr. CIT initiating and levying penalty under section 271(1)(c), based on a mechanical notice under section 274 of the Pr. CIT without deleting inappropriate words to be specific on allegation whether the default is for concealment of income or for furnishing inaccurate particulars of income, is invalid 2
Ambo Agro Products Ltd. A.Yr. 2009-10
4. The Pr. CIT erred in levying penalty u/s 271 (1)( c) of the Act on addition made on account of rejection of sale of business undertaking to be in the nature of slump sale, thereby applying provisions of section 50 instead of section 50B, which is neither an act of concealment of income nor of furnishing inaccurate particulars of income
The action of the Pr. CIT in levying penalty u/s 271(1)(c) of the Act without giving the Appellant a reasonable opportunity of a hearing is illegal and contrary to the principles of natural justice
6. On the facts and circumstances of the case and in law, the Assessing Officer erred in levying penalty u/s 271(l)(c) of the Act without appreciating the order of the Pr.CIT u/s 271(l)(c) is bad in law and liable to be quashed.
7. On the facts and circumstances of the case and in law, the Assessing Officer erred in levying penalty u/s 271 (1)(c) of the Act without appreciating that his order u/s 143(3) r.w 263 as well as the order of the Pr.CIT u/s 263 is bad in law and liable to be quashed.
The Pr. CIT/Ld. AO be directed to rectify/cancel the penalty order on the basis of appeal order of the Hon'ble Tribunal/Commissioner of Income-tax (Appeal) or order u/s 154 of the Act
The above grounds / sub-grounds are without prejudice to each other
The Appellant craves leave to add, amend or alter all or any of the grounds of appeal
We have heard the rival submissions. The ld. AR stated that the penalty u/s 271(1)(c) of the Act levied by the ld. Pr. CIT was pursuant to defective penalty show cause notice issued by him on 25.02.2016 inasmuch as the ld. Pr. CIT had not brought on record as to which offence has been committed by the assessee herein i.e. whether the assessee had concealed the particulars of its income or had furnished inaccurate particulars of income. The show cause notice issued u/s 274 read with Section 271(1)(c) of the Act was placed on record wherein we find that the relevant portion had not been struck off by the ld. Pr. CIT while issuing the notice. Accordingly, he pleaded that in the absence of mentioning specific charge of offence committed by the assessee in the penalty 3
Ambo Agro Products Ltd. A.Yr. 2009-10 notice, the penalty directed to be levied does not stand in the eyes of law. He placed reliance on various decisions of Hon’ble High Courts and Hon'ble Supreme Court in the case of SSA Emerald Meadows to quash the levy of penalty.
5. The ld. AR also placed on record the copy of the order passed by this Tribunal in for assessment year 2009-10 dated 19.05.2017 wherein this Tribunal had quashed the 263 order passed by the ld. Pr. CIT. We find that the entire penalty proceedings had been initiated and consequentially levied pursuant to the order passed by the ld. Pr. CIT u/s 263 of the Act. Since, the 263 order had been quashed by this Tribunal, there cannot be any levy of penalty u/s 271(1)(c) of the Act pursuant to the said revision order.
In view of these facts and circumstances of the case, we deem it fit and appropriate to cancel the levy of penalty u/s 271(1)(c) of the Act even on merits, in addition to defective show cause notice issued by the ld. Pr. CIT. Accordingly, grounds raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 04.04.2018