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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri M. Balaganesh, AM & Shri S. S. Viswanethra Ravi, JM]
ORDER Per Shri M. Balaganesh, AM:
This appeal by assessee is arising out of order of CIT(A), Central-III, Kolkata vide appeal No. 08/CC-XXIII/CIT(A)C-III/11-12/Kol dated 24.12.2012. Assessment was framed by ACIT, Central Circle-XXIII, Kolkata u/s. 153A read with sec. 143(3) of the Income tax Act, 1961 (hereinafter referred to as the “Act”) for AY 2007-08 vide his order dated 29.12.2010. Penalty u/s. 271(1)(c) of the Act was imposed by ACIT, CC-XXIII, Kolkata vide his order dated 02.05.2011.
The only issue to be decided in this appeal of assessee is as to whether the ld CIT(A) is justified in confirming the penalty u/s. 271(1)(c) of the Act in the sum of Rs.44,17,390/- in the facts and circumstances of the case.
The brief facts of this issue are that there was a search and seizure operation u/s. 132(1) of the Act in this case on 04.04.2008. During the course of search at the residence of the assessee several books of account and other documents were found and seized in which various monetary transactions were found and recorded. In the assessment order the Ld. AO observed that the assessee admitted that many of these transactions were not recorded in his regular books of accounts. He also observed that from the notings of such transactions, the assessee prepared a peak cash statement incorporating therein those receipts and expenses during the previous year 2005-06 and made disclosure of Rs.1,30,80,560/- and offered it for taxation. The Ld. AO thereafter issued notice to the assessee on 29.12.2010
2 Parmanand Agarwal AY 2007-08 calling for explanation as to why penalty u/s. 271(1)( c) of the Act shall not be imposed. In response to the same, the assessee stated that the penalty should not be imposed as the assessee has voluntarily disclosed an amount of Rs.1,30,80,560/- which was worked out on the basis of peak amount as such the assessee stated that there was neither willful neglect nor was the evidence produced found to be false, fabricated or fraudulent. Another unaccounted transaction of Rs.43,000/- was also found from the seized records, which had not been disclosed by the assessee in his return of income, was also added by the AO to the returned income of the assessee and penalty was also imposed on it. The AO did not accept the plea of the assessee and imposed penalty of Rs.44,17,390/- being 100% of the tax as per provisions of section 271(1)(c) of the Act. Aggrieved, assessee went in appeal before Ld. CIT(A), who upheld the action of AO by observing as under: “In the instant case the search u/s.132(1) was carried out on 04.04.2008 whereas the assessment year involved is 2007-08. The due date for filing of return of income for the assessment year under appeal had expired before the date of search and since, the appellant had disclosed unaccounted additional income of Rs.l,30,80,560/- during the course of search, that income was definitely not declared by him in any return of income filed by him before the date of search. Therefore, even though the appellant had declared such income in his return of' income furnished u/s.l53A, i.e., after the date of search, particulars of such income are deemed to have been concealed or inaccurate particulars of such income are deemed to have been furnished as provided by Explanation 5A. Similarly, the AO had given a finding in the assessment order that the cash receipt of Rs.43,000/- found recorded on page no.40 of the seized material marked as Annexure AS/10 was not recorded in the regular books of account of the appellant. Since, such income was not disclosed by the appellant to the Department, such income is definitely concealed income of the appellant in respect of which levy of penalty u/s.271 (1)(c) is fully justified. In light of the above discussion, penalty of Rs.44,17,390/- uls.271(1)(c) has rightly been levied by the AO in this case. Hence, the levy of penalty is confirmed.”
Aggrieved, assessee is in further appeal before us.
The ld AR argued placed the copy of the show cause notice for initiating penalty proceedings u/s 274 read with section 271(1) (c ) of the Act wherein, the ld AO had merely ticked the portion of concealment of income or furnishing of inaccurate particulars of income without making specific charge on the assessee to respond. It is well settled that the penalty proceedings are distinct and separate from assessment proceedings. He placed reliance on the decision of the Co-ordinate Bench decisions of this Tribunal, Delhi Tribunal, Mumbai Tribunal and Bangalore Tribunal as mentioned in the compilation of case laws running from pages 2 to 122 of his paper book. In response to this, the ld DR vehemently relied on the orders of the lower authorities.
3 Parmanand Agarwal AY 2007-08 5. We have heard the rival submissions. The facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. It is well settled that the penalty proceedings are distinct and separate from assessment proceedings. It is also well settled that the ld AO should specifically pinpoint the charge of offence committed by the assessee in as much as to whether he had concealed the particulars of his income or furnished inaccurate particulars of his income in his penalty notice. We find that the show cause notice u/s.274 of the Act dated 29.12.2010 kept in page 1 of the assessee’s paper book, which is in a printed form does not strike out as to whether the penalty is sought to be levied on the for “furnishing inaccurate particulars of income” or “concealing particulars of such income”. On this aspect we find that in the show cause notice u/s.274 of the Act the AO has not struck out the irrelevant part. It is therefore not spelt out as to whether the penalty proceedings are sought to be levied for “furnishing inaccurate particulars of income” or “concealing particulars of such income”. The Hon’ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Karn), has held that notice u/s. 274 of the Act should specifically state as to whether penalty is being proposed to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of income. The Hon’ble High court has further laid down that certain printed form where all the grounds given in section 271 are given would not satisfy the requirement of law. We also find that this case law has been relied upon in the following cases of the co-ordinate benches of this tribunal and other tribunals :-
(i) Satyananda Achariya Biswas vs DCIT in dated 2.12.2015 (Kolkata Tribunal) (ii) Gouri Das Maity vs ITO in ITA No. 2590/Kol/2013 dated 2.2.2016 (Kolkata Tribunal) (iii) Deepak Kumar Patwari vs ACIT in ITA Nos. 616 to 618/Kol/2013 dated 3.2.2016 (Kolkata Tribunal) (iv) Ramesh Prasad Sao vs DCIT in ITA No. 997/Kol/2011 dated 3.2.2016 (Kolkata Tribunal) (v) DCIT vs Pratap Properties Pvt Ltd in ITA Nos. 1386-1388/Kol/2010 dated 10.2.2016 (Kolkata Tribunal) (vi) E Krishnappa vs ITO in ITA Nos. 313 to 315/Bang/2014 dated 14.8.2015 (Bangalore Tribunal) (vii) Ashwani Kumar Arora vs ACIT in ITA No. 844/Del/2014 dated 19.5.2016 (Delhi Tribunal)
It is clear from the aforesaid decisions that on the facts of the present case that the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Following the decision of the Hon’ble Karnataka High Court which has been followed in the aforesaid tribunal decisions, we hold that the order imposing penalty in the assessment year 2007-08 have to be held as invalid and consequently penalty imposed is cancelled.
For the reasons given above, we hold that levy of penalty in the present case cannot be sustained. We therefore cancel the orders imposing penalty on the Assessee and allow the appeal by the Assessee. In view of our above conclusions on the issue of not recording of proper satisfaction and the defect in show cause notice u/s.274 of the Act, we are not dealing with the other arguments made on merits of the order imposing penalty on the Assessee.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 03.08.2016
Sd/- Sd/- (S. S. Viswanethra Ravi) (M. Balaganesh) Judicial Member Accountant Member Dated :3rd Aug, 2016 Jd.(Sr.P.S.) Copy of the order forwarded to: APPELLANT – Shri Parmanand Agarwal, 11, Ballygunge Park Road, 1. flat No. 2B, Kolkata-700 019. Respondent –ACIT, Central Circle-XXIII, Kolkata. 2 The CIT(A), Kolkata 3. 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order,