SHRI PRITAM SINGH,KOLKATA vs. ITO, WD-28(3), KOLKATA, KOLKATA

This is an appeal by the Assessee against the order dated 03.03.2014 of CIT(A)-XIV, Kolkata relating to A.Y.2008-09.

In this appeal the assessee has challenged the order of CIT(A) whereby the CIT(A) confirmed the order of AO imposing penalty on the assessee u/s 271(1)(c) of the Income Tax Act, 1961 (Act).

The facts and circumstances under which penalty u/s 271(1)(c) of the Act was imposed on the assessee by the AO are as follows :- The Assessee is an individual. During the course of assessment proceedings the AO found that there was cash deposit of Rs.65,00,000/- into the Savings bank account of the assessee at Springdale Branch at Punjab. The assessee could not explain the source of fund out of which the deposit in the bank account was made and therefore a sum of Rs.65,00,000/- was added to the total income of the assessee in the assessment proceedings. 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.

In the penalty proceedings the assessee tried to explain the source of fund as receipt from his father Shri Sulakhan Singh. It was claimed that Shri Sulakhan Singh had sold agricultural land at Punjab and had given the sale proceeds to the assessee. This explanation was not accepted in the penalty proceedings and penalty u/.s 271(1)(c) of the Act was imposed on the assessee by the AO. The order of AO was confirmed by CIT(A). Aggrieved by the order of CIT(A) the assessee has filed the present 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 is placed at page-1 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 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 2

None appeared on behalf of the department. However an application for adjournment was made and the same was rejected as the issue raised by the assessee in this appeal is fully covered by the decisions referred to above.

We have already observed that the show cause notice issued in the present case u/s 274 of the Act 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 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 case cannot be sustained and the same is directed to be cancelled.

In the result the appeal of the assessee is accordingly allowed.