MR AMAR ROY,KOLKATA vs. INCOME TAX OFFICER, WARD - 34(2), KOLKATA, KOLKATA

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 being a dealer and distributor of Tube well and allied spare parts runs business under the name and style of M/s. Roy Enterprise. The original return of income for the Assessment years 2001-02 to 2006-07 were filed as under: 2001-02: Original Return filed on 16/07/2001 showing total income of Rs.l,33,589/-. 2002-03: Original Return filed on 29/07/2002 showing total income of Rs.l,47,832/-. 2003-04: Original Return filed on 16/07/2003 showing total income of Rs.95,544/-. 2004-05: Original Return filed on 16/07/2004 showing total income of Rs.l,38,607/-. 2005-06: Original Return filed on 27/07 1200S showing total income of Rs.l,08,295/-. 2006-07: Original Return filed on 14110/2006 showing total income of Rs.l,41,335/-.

Subsequently, based on some information received from the ADIT(Inv), Unit (1), Kol, wherein, in course of verification it was revealed from statement recorded u/s.131 of the Act on 02/07/2007 that the assessee has admitted that income from inherited investments after the death of his father which were later on reinvested in units of mutual fund were not included in the return of income for the above-mentioned assessment years, proceeding u/s.147 was initiated on 31103/2008 with the prior approval of the Addl.CIT R-34, Kol and notices u/s.148 of the Act for the A.Y's 2001- 02 to 2006-07 were served upon the assessee within the stipulated period. In response to notices issued u/s.148 of the Act, the assessee filed returns on the following dates for the above-mentioned assessment years: 2001-02: Return filed on 11/11/2009 showing income of Rs.l,56,516/- . 2002-03: Return filed on 11/11/2009 showing income of Rs.2,99,394/-. 2003-04: Return filed on 11/11/2009 showing income of Rs.2,55,040/-. 2004-05: Return filed on 11/11/2009 showing income of Rs.2,17,163/-. 2005-06: Return filed on 11/11/2009 showing income of Rs.2,04,430/-. 2006-07: Return filed on 11/11/2009 showing income of Rs.2,96,659/-.

Notices u/s.143(2) & 142(1) of the IT Act were issued and finally the assessment u/s.143(1)/143(3)/147 of the Act were completed on 21/12/2009 for the assessment years 2001-02 to 2006-07 at the following figures: 2001-02: (Rs.1,33,589/- + Rs.1,92,940) = Rs.3,26,529/- 2002-03: (Rs.1,47,832/- + Rs.1,82,328) = Rs.3,30,160/- 2003-04: (Rs.95,544/- + Rs.1,81,156) = Rs.2,76,700/- 2004-05: (Rs.1,38,607/-+ Rs.2,37,931) = Rs.3,76,540/- 2005-06: (Rs.1 ,08,295/- + Rs.1,89,666) = Rs.2,97,961/- 2006-07: (Rs.1,08,295/- + Rs.1,89,666) = Rs.2,97,961/-

In respect of the additions made in the Assessment proceedings as above, the AO initiated penalty proceedings u/s.271 (1)(c ) of the Act for A.Y.'s 2001-02 to 2006-07 and imposed penalty holding that the assessee has violated the provision of Section 2 3 to 2536/Kol/2013 Mr.Amar Roy A.Yr.2001-02 to 2006-07 271(1)(c) of the Act. The AO imposed penalty at 100% of the tax sought to be evaded. On appeal by the assessee, the CIT(A) confirmed the orders of AO. Aggrieved by the orders of CIT(A) the assessee has preferred the present appeals before the Tribunal.

The ld. Counsel for the assessee submitted before us that the show cause notices issued u/s 274 of the Act before imposing penalty do 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. Copies of the show cause notices u/s 274 of the Act are placed at pages-1 to 12 of the assessee’s paper book and 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 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 CIT vs Manjunatha Cotton and Ginning factory (supra) came to the conclusion that imposition of penalty on defective show cause 3 4 to 2536/Kol/2013 Mr.Amar Roy A.Yr.2001-02 to 2006-07 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. The ld. DR relied on the order of CIT(A).

We have already observed that the show cause notices issued in the present appeals u/s 274 of the Act do 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 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 imposition of penalty in the present appeals cannot be sustained and the same are directed to be cancelled.

In the result the appeals of the assessee are allowed. Order pronounced in the Court on 03.05.2017. Sd/- Sd/- [Waseem Ahmed] [ N.V.Vasudevan ] Accountant Member Judicial Member Dated : 03.05.2017. [RG PS] Copy of the order forwarded to: