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Facts
During a survey, the assessee admitted additional income of Rs.1,48,58,844/- for AY 2016-17. The assessment was completed accepting this increased income, and the Assessing Officer (AO) initiated penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961.
Held
The Tribunal held that the AO's penalty notice under Section 271(1)(c) was invalid because it did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars, nor were the inapplicable words struck off from the notice. This procedural defect renders the penalty unsustainable.
Key Issues
Whether the penalty levied under Section 271(1)(c) is valid when the notice issued by the AO lacks specificity regarding the charge of concealment or inaccurate particulars of income.
Sections Cited
271(1)(c), 143(3), 147, 148, 40(a)(ia), 274
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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI S.R. RAGHUNATHA
O R D E R
PER MAHAVIR SINGH, VICE PRESIDENT:
This appeal by the Revenue is arising out of the order of the Commissioner of Income Tax (Appeal), Chennai - 19 dated 13.02.2024. The assessment was framed by the Deputy Commissioner of Income Tax, Cuddalore Circle, Cuddalore for the assessment year 2016-17 u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 31.12.2018.
2. The sole issue in this appeal of Revenue is as regards to the order of CIT(A) deleting the penalty levied by AO u/s.271(1)(c) of the Act amounting to Rs.51,18,200/- for the reason that there is no specific charge framed while initiating penalty u/s.271(1)(c) of the Act i.e., Whether assessee has concealed the particulars of income or furnishing inaccurate particulars of income.
We have heard ld. Senior DR and gone through facts and circumstances of the case. Brief facts are that the assessee filed her return of income for the assessment year 2016-17 on 17.10.2016 declaring income of Rs.16,03,180/-. While the assessment was pending, there was a survey on the business premises of the assessee on 04.10.2017. During the course of survey, the assessee agreed to admit additional income. Consequent to the survey, the AO issued notice u/s.148 of the Act dated 20.03.2018. In compliance to the notice, the assessee filed return declaring income of Rs.1,64,62,020/- thereby admitting additional income of Rs.1,48,58,844/-. The assessment was completed accepting the declaration of income of Rs.1,67,66,600/-, which includes a sum of Rs.3,04,580/- being 30% of Rs.10,15,265/- which was disallowed under the provision of section 40(a)(ia) of the Act. While completing the assessment, the AO had initiated penalty proceedings u/s.271(1)(c) of the Act and levied penalty of Rs.51,80,200/- being 100% of the tax on the alleged concealed trading income. Aggrieved, assessee preferred appeal before CIT(A).
4. Before CIT(A), the assessee made submission that the levy of penalty is invalid as the AO has not specified in the notice whether the penalty is levied for concealment of income or for furnishing inaccurate particulars. He further contended that the AO has not struck of the inapplicable words in the notice u/s.274 r.w.s. 271 of the Act and therefore, the notice and the entire proceedings are invalid. After going through the submissions, the CIT(A) directed the AO to delete the penalty levied by him by observing as under:- 7.3.3 The A.0. while issuing a show-cause notice u/s 274 r.w.s. 271 of the Act on31.12.2018 has simply issued the notice in the regular proforma without making any clear charge that the assessee has concealed the particulars of income or furnished in accurate particulars of such income. The A.O. is not specific as to how the Appellant has concealed the particulars of income or furnished inaccurate particulars of such income.
7.3.4 The A.R. during the course of Appellate Proceedings has relied upon the decision rendered by the Hon'ble ITAT 'C Bench, Chennai in in the case of The DCIT, Corporate Circle-3(2), Chennai v. M/s.Vicoans Infrastructure Environmental Engineering Pvt. Ltd. dated 24.08.2022. In this case, the Jurisdictional Tribunal has observed the following; "In the case under consideration the AO has not struck the appropriate in applicable words in the penalty notice. Also as mentioned in earlier para, in the assessment order the AO has not mentioned whether the penalty is initiated for concealment or filing inaccurate particulars. If the AO intended to initiate the penalty on account of both for concealment of Income and filing inaccurate particulars of Income t the AO should have specifically used the word "and" between the words “Concealment of Income". "filing inaccurate particulars of income" in the penalty notice. This issue goes to the root of initiation of penalty. Therefore, respectfully following Hon'ble jurisdictional High Court and the Hon'ble Bombay High Court (supra), it is held that the penalty u/s271(1) (c) is not maintainable. Hence, the Assessing Officer is directed to delete the penalty y/s 271(1) (c).”
7.3.5 The Hon'ble ITAT while passing the above order, has relied upon the decision of the Madras High Court in the case of Babuji Jacob v. ITO as reported in (2021]124taxmann.com 363 [Madras], and the decision of the Hon'ble Bombay High Court in the case of Ganga Iron & Steel Trading Co. v/s Commissioner of Income Tax as reported in [2022] 135 taxmann.com 244 (Bombay) order dated December 22, 2021.
7.3.6 While going through the facts of the Appellant's case, it is clear that the A.O. has not made any findings in the Assessment Order(s) while initiating the proceedings u/s 271(1)(c) of the Act, and also in the show- cause notice issued, theA.0. has simply stated that "have concealed the particulars of your income or furnished inaccurate particulars of such income". The facts and circumstances discussed by the Hon'ble ITAT as per the decision relied upon supra will squarely apply to the facts and circumstances of the Appellant's case. In view of this, by following judicial discipline, I hold that as held by the Jurisdictional ITAT, that the penalty levied u/s 271(1)(c) of the Act, amounting Rs.30,84,800/- and Rs.51,80,200/-are not sustainable for the AY(s) 2015-16 and 2016-17. Accordingly, the Grounds raised by the Appellant upon this issue are treated as allowed and the A.0. is hereby directed to delete the penalty levied u/s 271(1)(c) of the Act for the AY(s) 2015-16and 2016-17.”
We noted that admitted facts are that, during survey certain sales were found not to be recorded in the books of accounts and hence, assessee admitted additional income to the tune of Rs.1,48,58,844/- and declared in the return of income filed in response to notice u/s.148 of the Act. The AO initiated penalty proceedings but while issuing notice u/s.274 r.w.s. 271 of the Act, the AO has mentioned no specific charge in the notice whether the penalty is being levied for concealment of particulars income or for furnishing of inaccurate particulars of income. The AO has not struck of the inapplicable words in the notice issued u/s.274 r.w.s. 271 of the Act. In these facts, admittedly the issue is covered by the decision of Hon’ble High Court of Madras in the case of Babuji Jacob vs. ITO reported in [2021] 124 taxmann.com 363 (Madras), wherein Hon’ble High Court considering the decision cited by Revenue of Hon’ble High Court of Madras in the case of Sundaram Finance Ltd., vs. ACIT reported in 403 ITR 407 (Mad) decided the issue in favor of assessee. Hence, the issue is covered by the Jurisdictional High Court decision in the case of Babuji Jacob, supra, and accordingly, we confirm the order of CIT(A) deleting the penalty. The appeal of the Revenue is dismissed.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 23rd August, 2024 at Chennai.