ACIT, CENTRAL CIRCLE- 30, NEW DELHI vs. SANJIV GUPTA, NEW DELHI

These are cross appeals. The first one is filed by the assessee and the second one filed by the revenue and are directed against the order dated 12.03.2018 of the CIT(A)-30, New Delhi relating to A.Y.2012-13. For the sake of convenience these appeals were heard together and are being disposed of by this common order.

2. The appeal filed by the revenue was dismissed on account low tax effect. Subsequently the Tribunal vide M.A. No.96/Del/2019 order dated 06.08.2019 recalled the order of the Tribunal. Hence, is a recalled matter.

“1. That the order passed by ACIT, Central Circle-30, New Delhi (hereinafter referred to as “AO”) imposing penalty is bad in law and contrary to the facts. 2. That the AO was not justified in imposing penalty by rejecting the request of the appellant to keep the penalty proceedings in abeyance till the disposal q quantum appeal. The imposition of penalty is therefore pre-matured and liable to be quashed on this ground alone.

3. That the entire penalty proceedings are vitiated on account of non-provision of proper and reasonable opportunity to the appellant and therefore the penalty order is liable to be quashed on this ground. 4. 'That as per settled position of law, the penalty order is liable to be quashed on account of the fact that there is no clear cut finding in the impugned order as to why penalty has been imposed on account of furnishing of inaccurate particulars or on account of concealment of income. 5. That on the facts and circumstances of the case and in law, the AO was not justified in imposing a penalty of Rs. 15,84,210/- on account of the following:- 5.1 Alleged notional interest on alleged balance in bank account with HSBC Bank aggregating Rs. 5,27,098/-; 5.2 Alleged notional interest on Promissory Notes aggregating Rs. 93,357/-; 5.3 Alleged unaccounted investment in jewellery aggregating Rs. 55,69,850/-; 5.4 Alleged undisclosed expenditure on purchase of watches aggregating Rs. 7,76,800/-; 5.5 Alleged undisclosed cash aggregating Rs. 31,00,000/ -, overlooking the fact that the said amount already stands declared in Income Tax. Return pertaining to A.Y. 2011-12. 5.6 Alleged undisclosed expenditure on purchase of jewellery aggregating Rs. 35,42,000/- on the basis of certain rough jottings. 5.7 Alleged undisclosed investment in Silver aggregating Rs.22,33,000/-, although, the said Silver articles are fully explained. 6. That the appellant craves leave to add, alter, amend or modify any of the above grounds at the time of hearing or earlier.

( A.Y.2012-13) (Assessee) 1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO in levying penalty under section 271 AAA of the Act Page | 4

3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO in levying penalty on the addition made by him on account of accrual/interest on deposit in alleged foreign bank account, HSBC Geneva 4. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO in levying penalty on the addition of undisclosed investment of Rs.5,24,600/-on account of purchase of watches. (ii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the penalty on the investment already taxed in the hands of assessee in AY 2009-10 & AY 2010-11 5. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in confirming the penalty despite the fact that the additions made in the assessment order itself being not sustainable, no penalty under section 271AAA can be levied. 6. On the facts and circumstances of the case, the learned CIT(A)has erred, both on facts and in law, in confirming the penalty levied by the AO on an addition made on estimated basis. 7. On the facts and circumstances of the case, the learned CIT(A)has erred, both on facts and in law in rejecting the contention of the assessee that the order levying penalty in contravention of the provisions of Section 275(1 )(a) of the Act is bad in law and liable to be quashed. 8. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in rejecting the contention of the assessee that the penalty proceedings are independent, as such mere addition does not lead to levy of penalty. 9. The appellant craves leave to add, amend or alter any of the grounds of appeal.

6. So far as the appeal filed by the revenue is concerned, the Ld. Counsel for the assessee referring to the consolidated order of the Tribunal vide and Co. No.124/Del/2018 order dated 13.01.2020 for A.Y.2012-13 submitted that all additions made by the AO were finally stand deleted except notional interest on HSBC Bank account which has been set aside and the addition on account of undisclosed expenditure on purchase of watches has been partly sustained. Therefore, the appeal filed by the revenue challenging the deletion of penalty by the Ld. CIT(A) has no merit at all since the vary basis on which penalty was levied does not survive.

7. So far as assessee’s appeal is concerned, the Ld. Counsel for the assessee submitted that the penalty notice u/s.274 r.w.s 271 AAA dated 27.02.2015, copy of which is placed at page-135 of the paper book and which was issued alongwith the assessment order u/s.143 (3) dated 27.02.2015 shows that such penalty notice is in printed form where nothing has been tick marked or scored off even though it mentions section 271 AAA. He submitted that the notice does not mention the particular limb of explanation to section 271 AAA defining “undisclosed income” for which penalty is proposed to be levied. Rather such notice reproduces the language under the scope of section 271 (1) (c) and not section 271 AAA. Therefore, such notice is vague and accordingly invalid. The penalty notice clearly shows the non application of mind on the part of the AO and in the absence of any specific ground on which penalty is initiated there is violation of principle of natural justice. Accordingly, such penalty proceedings are bad in law and have to be quashed. Page | 6

8. Referring to the decision of Hon’ble Karnataka High Court in the case of CIT Vs. Manjunath Cotton and Ginning Factory reported in 359 ITR 565, he submitted that in absence of non striking of the inappropriate words in the penalty notice, the penalty proceedings were quashed. He submitted that the SLP filed by the revenue against the above decision of Hon’ble Karnataka High Court was dismissed by the Hon’ble Supreme Court in appeal (c) No.-1398/2014 dated 11.07.2016. Similarly the Hon’ble Karnataka High in the case of CIT Vs. SSA’s Emerald Meadows vide order dated 23.11.2016 reported in 73 taxman.com 241 has also taken similar view and the SLP filed by the revenue has been dismissed by the Hon’ble Supreme Court vide CC No.11485/2016 dated 05.08.2016. He submitted that even though the above decisions of Hon’ble Karnataka High Court are in respect of penalty u/s. 271 (1) (c) of the Act but the ratio laid down there is equally applicable to penalty u/s. 271 AAA or 271 AAB of the Act which are pari-materia. The Ld. Counsel for the assessee also relied on the following decisions :-

“UNDER SECTION 274 READ WITH SECTION 271 AAA OF THE INCOME TAX ACT 1961 OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE – 30, NEW DELHI ROOM NO. 320, 3RD FLOOR, ARA CENTRE, E-2, JHANDEWALAN EXTN, NEW DELHI F.No. ACIT/CC-30/2014-15/ DATE :27.02.2015 To,

Sh. Sanjiv Gupta 56A/1, New Friends Colony (E) New Delhi Sir, Where as in the course of proceedings before me for the assessment year- 2012-13 it appear to me that you. have concealed the particulars of your income or furnished Inaccurate particulars of such income in terms of section 271 AAA. You are hereby requested appear before me on. 26.03.2015 and show cause why an order imposing a penalty on you should not be made under section 271 of the Income Tax Act, 1961. if you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative you may showcause in writing on or before the said date which considered before any such order Is made under section 271.

(Ram Niwas) Asstt. Commissioner of Income Tax Central Circle-30, New Delhi”

271 (1) …. If the [Assessing] Officer or the [***] [Commissioner (Appeals)] [or the [Principal Commissioner or] Commissioner] in the course of any proceedings under this Act, is satisfied that any person- 271 (1) (c) “has concealed the particulars of his income or [***] furnished inaccurate particulars of [such income, or]”

(3) No penalty under the provisions of clause (c)of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). (4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section. Explanation.—For the purposes of this section,— (a) “undisclosed income” means— ( i)) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has— (A) not been recorded on or before the date of search in the books of account or other documents ,maintained in the normal course relating to such previous year ; or (B) otherwise not been disclosed to the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] before the date of search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified pervious year which is found to be false and would not have been found to be so had the search not been conducted. (b) “specified previous year” means the previous year – (i) Which has ended before the date of search, but the date of filing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the said date; or (ii) in which search was conducted.]”

Order pronounced in the open court on 07.08.2020.