SHRI NAND KISHORE TIKAMDASJI BISANI,KOLKATA vs. ADDL. CIT, RANGE-44, KOLKATA, KOLKATA

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-XXX, Kolkata dated 03.11.2014. Assessment was framed by ACIT, Range-44, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 16.12.2011 for assessment year 2009-10. Shri Vijyaneshwar Nath Datta, Ld. Advocate appeared on behalf of assessee and Shri R.Chowdhury, Ld. Departmental Representative represented on behalf of Revenue.

The facts and circumstances under which penalty u/s 271(1)(c) of the Act was levied on the assessee by the AO are as follows :- The assessee is an individual. He is engaged in the trading business of Saree. The assessee filed return of income for A.Y. 2008-09 declaring total income of Rs.3,87,210/-. In the course of assessment proceedings u/s 143(3) of the Act, the AO noticed that the assessee had not taken value of Saree sent for embroidery for Rs.3 lakh in the closing stock and therefore the sum of Rs.3 lakh was added to the total income of the assessee by the AO as income not disclosed. In respect of the aforesaid addition made in the course of assessment proceedings, the AO initiated penalty proceedings u/s 271(1)(c) of the Act. The AO imposed penalty holding that the assessee has violated the provision of law enumerated in Section 271(1)(c) of the Act by furnishing inaccurate particulars of income and imposed penalty u/s 271(1)(c) of the Act.

Being aggrieved by this order of Ld. CIT(A) assessee came in appeal before the Tribunal.

The ld. Counsel for the assessee submitted before us that the show cause notice issued u/s 274 of the Act before imposing penalty does not contain the specific charge against the assessee namely as to whether the assessee was guilty of having concealed particulars of income or having furnished inaccurate particulars of income. A copy of the show cause notice u/s 274 of the Act was filed before us which is placed on record. Perusal of the same reveals that AO has not struck out the irrelevant portion in the show cause notice and therefore the show cause notice does not specify the charge against the assessee as to whether the charge is of concealment of A.Y. 2009-10 Nandkishore T. Bisani vs. CIT(A)-XXX Kol. Page 3 particulars of income or furnishing of inaccurate particulars of income. The ld. counsel for the assessee drew our attention to the decision of the Hon’ble Karnataka High Court in the case of CIT vs. SSA’s Emerald Meadows in ITA No.380 of 2015 dated 23.11.2015 wherein the Hon’ble Karnataka High Court following its own decision in the case of CIT vs Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 took a view that imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. The ld. counsel further brought to our notice that as against the decision of the Hon’ble Karnataka High Court the Revenue preferred an appeal in SLP in CC No.11485 of 2016 and the Hon’ble Supreme Court by its order dated 05.08.2016 dismissed the SLP preferred by the Department. The ld. Counsel also brought to our notice the decision of the Hon’ble Bombay High Court in the case of CIT vs Shri Samson Perinchery in ITA No.1154 of 2014 dated 05.01.2017 wherein the Hon’ble Bombay High Court following the decision of the Hon’ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra) came to the conclusion that imposition of penalty on defective show cause notice without specifying the charge against the assessee cannot be sustained. Our attention was also drawn to the decision of ITAT in the case of Suvaprasanna Bhattacharya vs ACIT in ITA No.1303/Kol/2010 dated 06.11.2015 wherein identical proposition has been followed by the Tribunal.

We have heard rival contentions and perused the materials available on record. At the outset, we observe that the show cause notice issued in the present case u/s 274 of the Act which does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the “inappropriate” words. In these circumstances, we are A.Y. 2009-10 Nandkishore T. Bisani vs. CIT(A)-XXX Kol. Page 4 of the view that imposition of penalty cannot be sustained. The plea of the ld. counsel for the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. We, therefore hold that the imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled. AO is directed accordingly.