SH. DHEERAJ GUPTA,NEW DELHI vs. DCIT, NEW DELHI

The ground of appeal read as under:-

The brief facts of the case are that the assessee filed its return of income for the assessment year 2009-10 on 31.3.2010 at a total income of Rs. 2,16,500/- and the same was processed u/s. 143(1) of the I.T. Act, 1961. A search and seizure operation u/s. 132 of the Act was carried out on 21.9.2010 in the Shilpi Group of companies and in the case of the assessee also. Therefore, a notice u/s. 153(A) of the Act, dated 11.10.2011 was issued to the assessee. In response to the said notice, the assessee filed return of income on 2.11.2011 declaring a net taxable income of Rs. 2,16,500/-. On perusal of the return of income, AO observed that the assessee had shown long term capital gain of Rs. 19,18,379/- on sale of property. The assessee, therefore, claimed deduction u/s. 54F of the Act amounting to Rs. 19,18,379/-. During the assessment proceedings, the assessee was asked to furnish necessary details / documents regarding the said investment. The assessee did not submit any details / documents, however, he filed revised return of income on 18.3.2013 showing total income of Rs. 21,34,877/- wherein he offered long term capital gains of Rs. 19,18,379/- which was earlier claimed as deduction u/s. 54F of the Act. In view of the facts of the case, penalty proceedings u/s. 271(1)(c) of the Act were also initiated for concealment / furnishing inaccurate particulars of income in the assessment order passed under section 153A/143(3) of the Act on 25.3.2013. Accordingly, notice u/s. 274 of the Act r.w.s. 271(1)(c) of the Act was issued to the assessee on 25.3.2013 and thereafter, on 26.8.2013 requiring him to explain as to why penalty u/s. 271(1)© should not be imposed on him. In response to the said notice, the assessee replied vide his letter dated 3.9.2013. After examining the reply of the assessee, the AO held that assessee’s submission does not hold water and the same is devoid of any merit. Thus, the assesee’s reply is not at all tenable and was not accepted and the same was rejected by the AO by observing that it is a fit case for levy of penalty u/s. 271(1)© of the Act and imposed the penalty of Rs. 4,32,389/- u/s. 271(1)© of the Act vide his order dated 30.9.2013.

Against the Penalty order the Assessee appealed before the ld. CIT(A), who vide impugned order dated 11.9.2014 has sustained the penalty and dismissed the appeal of the assessee.

At the time of hearing, Ld. Counsel for the Assessee has stated that the penalty proceedings ought to fail, because in the assessment order, penalty has been initiated as “penalty proceedings u/s. 271(1)© are initiated separately. It was further stated by him that it nowhere mentions that it is for concealment of income or for furnishing in accurate particulars of income. It was further stated that penalty notice dated 25.3.2013 (sent alongwith the assessment order) mentions both the alleged charges without clearly specifying as to whether it is for concealment or for inaccurate particulars. He further stated that the next penalty notice dated 26.8.2013 is also on the similar lines as per notice dated 25.3.2013. Therefore, he stated that the notice for penalty was ambiguous and vague in as much as it is stated both concealment of particulars of income or furnishing of inaccurate particulars. He stated that that both the concealment of particulars of income or furnishing of inaccurate particulars, the eventual penalty order is for concealment of particulars of income where the penalty proceedings were initiated for furnishing of inaccurate particulars, if finally culminated into an order for concealment of particulars of income. In other words, no proper or reasonable opportunity was given by the AO to meet the charge. The charge itself was stated to be nebulously. He further stated that it is a settled law that where the show cause notice of penalty is vague or ambiguous, no penalty is sustainable. The penalty notice contains both ingredients of penalty without satisfying the particular contravention for which the proceedings have been initiated. In such circumstances, the penalty as levied by the AO in terms of his order dated 30.9.2013 in ab initio invalid, illegal and must be quashed. Finally, he stated that penalty in dispute has been levied by the AO and wrongly confirmed by the Ld. CIT(A). He requested that on legal issue the penalty may be deleted. In support of his contention he relied upon the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Whiteford India Ltd. {2013} 38 taxmann.com 15 (Gujarat).

On the contrary, Ld. DR relied upon the order of the Ld. CIT(A) and stated that the quantum in dispute has been upheld by the Revenue Authority and the penalty in dispute has rightly been levied by the AO, because the Assessee has not offered any explanation on the issue in dispute before the Revenue Authorities and even before this Bench.

I have heard both the parties and perused the orders passed by the Revenue Authorities alongwith relevant records available with us. I have perused the notice dated 25.3.2013 and 26.8.2013 issued by the Dy. Commissioner of Income Tax, Central Circle-1, New Delhi for the asstt. Year in dispute for initiating the penalty and directing the assessee to appear before him at 11.30 AM on 22.4.2013 and further on 11.00 AM on 3.9.2013 respectively and issued a Show Cause notices to the assessee stating therein that why an order imposing the penalty of amount should not be made u/s. 271(1)(c) of the I.T. Act, 1961. After perusing the notices dated 25.3.2013 and 26.8.2013 issued by the AO to the assessee, I am of the view that the AO vide his penalty order dated 30.9.2013 vide para no. 9 has stated that the assessee has concealed / furnished inaccurate particulars of this income to the extent of Rs. 19,18,379/- and imposed minimum penalty @100% was imposed. I find that in the penalty order it nowhere mentions that it is for concealment of income or for furnishing in accurate particulars of income. I further note that penalty notice dated 25.3.2013 mentions both the alleged charges without clearly specifying as to whether it is for concealment or for inaccurate particulars. I note that in the next penalty notice dated 26.8.2013 is also on the similar lines as per notice dated 25.3.2013. Therefore, the notice for penalty was ambiguous and vague in as much as it is stated both concealment of particulars of income or furnishing of inaccurate particulars. I further find that both the concealment of particulars of income or furnishing of inaccurate particulars, the eventual penalty order is for concealment of particulars of income where the penalty proceedings were initiated for furnishing of inaccurate particulars, if finally culminated into an order for concealment of particulars of income. In other words, no proper or reasonable opportunity was given by the AO to meet the charge. The charge itself was stated to be nebulously. I find that the Hon’ble Gujarat High Court decision in the case of CIT vs. Whiteford India Ltd. (2013) 38 taxmann.com 15 (Gujarat) has held that where the show cause notice of penalty is vague or ambiguous, no penalty is sustainable. The penalty notice contains both ingredients of penalty without satisfying the particular contravention for which the proceedings have been initiated. In such circumstances, the penalty as levied by the AO in terms of his order dated 30.9.2013 in ab initio invalid, illegal and must be quashed. The penalty in dispute has been levied by the AO and wrongly confirmed by the Ld. CIT(A) is in contravention of the provision of law as well as the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Whiteford India Ltd.(Supra), in as much as, without specifying the exact charged on the Assessee, the penalty has been levied on a premise which the assessee was never told and or allowed to meet. Hence, the penalty in dispute is not sustainable in the eyes of law.

In the background of the aforesaid discussions and respectfully following the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Whiteford India Ltd. {2013} 38 taxmann.com 15 (Gujarat) (Supra), I delete the penalty in dispute and decided the issue in dispute in favor of the assessee and against the Revenue.

In the result, the appeal filed by the assessee stands allowed.