APLNAGAPPA CHETTIAR,MADURAI vs. ACIT,CIRCLE-3,, TRICHY

आदेश / O R D E R

PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the

Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter ‘the

Ld.CIT(A)’), Delhi, dated 27.01.2024 for the Assessment Year

(hereinafter ‘AY’) 2002-03.

penalty levied u/s.271(1)(c) of the Income Tax Act, 1961 (hereinafter in

short ‘the Act’) is not sustainable, since the notice issued by the AO

before imposing of penalty was invalid, because, it didn’t specify the exact

ITA No.748/Chny/2024 (AY 2002-03) Shri A.PL.Nagappa Chettiar :: 2 ::

fault on which the penalty is proposed to be levied and drew our attention

to show cause notice issued by the AO u/s.271(1)(c) r.w.s.274 of the Act

dated 28.12.2004 for AY 2002-03.

assailed the action of the Ld. CIT(A) confirming the penalty u/s.271(1)(c)

of the Act, which penalty was imposed by AO according to assessee

without having jurisdiction. According to assessee, the Ld.CIT(A) while

passing the impugned order has not considered the fact that the notice

issued by the AO before imposition of the penalty didn’t specify the exact

fault on which the penalty is proposed to be levied i.e. whether the

assessee had furnished inaccurate particulars of income or have

concealed the income.

the show cause notice (SCN) issued by the AO u/s 271(1)(c) r.w.s. 274 of

the Act dated 28.12.2004 for AY 2002-03 by virtue of which the AO gave

notice to the assessee ‘as to why’ the penalty should not be levied

u/s.271(1)(c) of the Act or not? On perusal of the impugned SCN dated

28.12.2004, we note that the fault specified in Section 271(1)(c) of the

Act, is given i.e. “the assessee have concealed the particulars of his

income” or “furnishing inaccurate particulars of such income”, meaning

the AO has put to notice the assessee on the fault without striking down

ITA No.748/Chny/2024 (AY 2002-03) Shri A.PL.Nagappa Chettiar :: 3 ::

the inapplicable fault which could have specified which fault AO has found

assessee at default i.e. whether he is proposing penalty for the fault of

“concealment of particulars of income” or “for furnishing of inaccurate

particulars of income”. We note that by not striking down one of fault, the

assessee was unable to defend properly the charge/fault, against which,

the AO was proposing to levy penalty. In such factual background, the

Tribunal has consistently held such notices to be bad in law for not

specifying the specific fault for which the assessee being proceeded

against for levy of penalty. And this action of the Tribunal has been

upheld by several judgments of the various High Courts including the

Hon’ble jurisdictional High Court of Madras in the case of Babuji Jacob v.

ITO reported in (2021) 430 ITR 259 (Mad). We also note that the Full

bench of the Hon’ble Bombay High Court in the case of Mohd. Farhan A.

Shaikh v. DCIT reported in [2021] 434 ITR 1 (Bombay) dated 11.03.2021

held that the show cause notice issued prior to levy of penalty without

specifying the fault/charge against which the assessee is being

proceeded, would vitiate the penalty itself. And thus, the Hon’ble High

Court upheld the view of the division bench order in the case of PCIT Vs.

Goa Dourado Promotions (P.) Ltd. (Tax Appeal No.18 of 2019, dated

26.11.2019) and held that the contrary view taken by an another division

bench in the case of CIT Vs. Smt. Kaushalya (1995) 216 ITR 660 (Bom)

does not lay down the correct proposition of law.

ITA No.748/Chny/2024 (AY 2002-03) Shri A.PL.Nagappa Chettiar :: 4 ::

didn’t explicitly convey to the assessee, the specific fault/charge the

assessee is being proceeded for levy of penalty. Resultantly, the show

cause notice is found to be defective/invalid, and therefore, it is held to

be bad in law. For doing that we also rely on the decision of the Hon’ble

Karnataka High Court in the case of CIT v. Manjunatha Cotton and

Ginning Factory reported in (2013) 359 ITR 565 (Kar) and the

Department’s SLP against it has been dismissed by the Hon’ble Supreme

Court. We also find that Hon’ble Karnataka High Court in the case of CIT

v. SSA’s Emerald Meadows, reported in (2016) 73 taxmann.com 241

(Kar) endorsed the same view in Manjunatha Cotton and Ginning Factory

(supra) and held as under:-

“3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (for short ‘the Act’), to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of CIT Vs. Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565/218 Taxman 423/35 taxmann.com 250(Kar). 4. In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court. The appeal is accordingly dismissed.”

decision of the Hon’ble jurisdictional High Court in the case of Babuji

Jacob (supra), the Full bench of the Hon’ble Bombay High Court’s in the

case of Mohd. Farhan A. Shaikh (supra), we hold the impugned notices

ITA No.748/Chny/2024 (AY 2002-03) Shri A.PL.Nagappa Chettiar :: 5 :: issued for AY 2002-03 to be bad in law and consequently, direct the deletion of the penalty levied in this case.

Order pronounced on the 10th day of July, 2024, in Chennai.

Sd/- Sd/- (एस. आर. रघुनाथा) (एबी टी. वक�) (S.R.RAGHUNATHA) (ABY T. VARKEY) लेखा सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER

चे�ई/Chennai, �दनांक/Dated: 10th July, 2024. TLN, Sr.PS आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF