SHRI SIDDHARTH JALAN,KOLKATA vs. A.C.I.T CIR - 37,KOLKATA, KOLKATA

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ITA 1004/KOL/2013Status: DisposedITAT Kolkata19 April 2016AY 2003-045 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty order was invalid because the show cause notice issued under Section 274 of the Act was defective, failing to specify whether the charge was for concealment of income or furnishing inaccurate particulars.

What were the facts?

The assessee received a gift of Rs. 15 lakhs, which was added to his income as he failed to substantiate it with evidence. Subsequently, penalty proceedings under Section 271(1)(c) were initiated and confirmed by the lower authorities.

What were the issues?

Whether the penalty imposed under Section 271(1)(c) is sustainable when the show cause notice is defective and does not clearly specify the charge against the assessee.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274

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Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA

Before: Shri Mahavir Singh & Shri Waseem Ahmed

आदेश /O R D E R

PER Waseem Ahmed, Accountant Member:-

1.

This appeal by the assessee is arising out of order of Commissioner of Income Tax (Appeals)-XXIV, Kolkata in appeal No.861/CIT(A)-XXIV/C-37/11- 12 dated 25.02.2013. Assessment was framed by ACIT Circle-30, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 31.03.2006 for assessment year 2003-04. Penalty levied by ACIT, Circle-37 Kolkata u/s 271(1)(c) of the Act vide his order dated 22.02.2011.

Sh Siddhartha Jalan v. ACIT, Cir-37, Kol. Page 2 2. Only effective ground raised by the assessee in his appeal that the Ld.CIT(A) has confirmed the order of the AO by sustaining the penalty order passed by the AO under section 271(1)(c) of the Act.

3.

Briefly stated facts are that the assessee is an individual and earned income from export business and income from other sources. The assessment was completed by the Assessing Officer after making certain additions and disallowances to the total income of the assessee on dated 31.03.2006. One of the additions made by the AO was towards the gift received by the assessee for Rs.15 lakhs during the year on the ground that the assessee failed to substantiate the transaction of the gift by producing the supporting evidence. Accordingly, AO recorded in his assessment order that penalty proceedings under section 271(1)(c) of the Act is initiated separately and which was confirmed by the AO by passing a penalty order u/s 271(1)(c) of the Act on dated 22nd February 2011.

4.

Aggrieved, assessee preferred an appeal to Ld. CIT(A) who confirmed the action of AO by observing as under:- “2.3 I have gone through the penalty order passed U/s 271(1)(c)and also the submission of the Ld. A/R. The appellant filed his return of income showing total income of Rs.12,59,754/- on 28/12/2003. The total income of the appellant was determined at Rs.1,12,84,370/- u/s. 143(3) on 31/03/2006 and the penalty proceeding u/s. 271(1)(c) was also initiated by the Assessing Officer. The Ld. CIT(A)-XIV has substantially upheld the additions in the present case. Vide the order dated 23/07/2010 in the Hon'ble ITAT, Kolkata has upheld the addition on Rs.15,00,000/- on account of bogus gift as the credit-worthiness of the donors could not be established. During the course of penalty proceedings, the appellant could not prove the credit- worthiness of the donors and the genuineness of the gifts before the AO. The AO has also observed that the bank accounts as furnished were also forged. In the case of CIT Vs. Deep Chand [2011] 336 ITR 292 (Punj & Har.] the Hon'ble Punjab & Haryana Hon'ble High Court has held as under:-

‘The gift amounting to Rs.1,75,000 said to have been received by the assessee was held to be bogus. Once that is so, the only conclusion is that the assessee had furnished inaccurate Sh Siddhartha Jalan v. ACIT, Cir-37, Kol. Page 3 particulars of his income and the order of the Tribunal deleting the penalty is unsustainable in law. Accordingly, it is held that the assessee had concealed the particulars of income and, thus, penalty was liable to be levied against him under section 271(1)(c) of the Act. Further, the issue regarding recording of satisfaction for initiation of penalty proceedings in the course of assessment proceedings stands concluded against the assessee in the judgement of this court reported in CIT v. Pearey Lal and Sons [EP] Ld., [2009] 308 ITR 438 (P & H].

In view of the above, the substantial question of law is answered in favour of the Revenue and the appeal is allowed accordingly’.

The decision of the Hon'ble Punjab & Haryana Hon'ble High Court income CIT Vs. Deep Chand (supra) is squarely applicable to the facts in the present case. Considering the facts of the case, I am of the opinion that the appellant has furnished inaccurate particulars of his income as the so called gift amounting to Rs.15,000,00/- has been held to be bogus in the instant case. Accordingly, the order of the AO imposing penalty of Rs.4,72,500/- u/s. 271(1)(c)in the instant case is upheld. This ground of appeal is dismissed.”

Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us by raising the following grounds of his appeal.

1. That on the facts and in the circumstances of the case, the CIT(A) had grossly erred in confirming the penalty imposed by the AO, by wrongly and illegally, invoking the provisions of section 271(1)(c) of the Act.

2.

That on the facts and on the circumstances of the case, both the AO as well as the CIT(A) had failed to appreciate that though the Hon'ble Income Tax Appellate, while rendering the judgment in dated 23.7.2010, had confirmed the addition of Rs.15 lakhs on account of gift, doubting the capacity of the donors but at the same time, had held that it had been observed that the assessee has received the alleged gifts, the assessee has also filed the copies of IT acknowledgements evidencing that all the donor are assessed to tax and also that the assessee has also filed copies of gift declaration. Accordingly, the AO as well as the CIT(A) had failed to understand that form the observations of the Hon'ble Income Tax Appellate, that mere confirmation of addition of Rs.15 lakhs does not tantamount to any furnishing of inaccurate particulars of income or concealment of any income by the appellant so as to suffer the rigors of the penal provisions as envisaged I section 271(1)(c).”

Sh Siddhartha Jalan v. ACIT, Cir-37, Kol. Page 4 Shri S. Jhajharia, Ld. Authorized Representative appearing on behalf of assessee and Shri Ashok Kumar Ld. Senior Departmental Representative appearing on behalf of Revenue.

5.

The Ld. AR submitted that the assessee did not prefer the appeal against the assessment order does not tantamount the acceptance of the concealment of income. But the assessee did so to buy the peace of mind. The ld. AR also submitted that the AO failed to record his satisfaction for levying the penalty whether it is on account of concealment of income or furnishing inaccurate particulars of income. On the contrary, Ld. DR supported the orders of Authorities below.

6.

We have heard the rival contentions of the parties and perused the materials available on record. The requirement of Sec.271(1)(c) of the Act is that the assessee should have (a) concealed the particulars of income; or (b) furnished inaccurate particulars of income. In the present case The learned counsel for the Assessee also drew our attention to the show cause notice issued u/s.274 of the Act before imposing penalty and submitted that the said notice does not specify as to whether the assessee is guilty of having “furnished inaccurate particulars of income” or of having “concealed particulars of such income”. He pointed out that the printed show cause notice does not strike out the irrelevant portion viz., “furnished inaccurate particulars of income” or “concealed particulars of such income”. He drew our attention in the case of Suvaprasanna Bhattacharya v. ACIT in ITA 1303/Kol/2010 dated 06.11.2015 where the Tribunal has held that if the show cause notice u/s.274 of the Act does not specify as to the exact charge viz., whether the charge is that the assessee has “furnished inaccurate particulars of income” or “concealed particulars of income” by striking out the irrelevant portion of printed show cause notice, than the imposition of penalty on the basis of such invalid show cause notice cannot be sustained. It is clear from the aforesaid decision that on the facts of the present case that the show cause notice u/s. Sh Siddhartha Jalan v. ACIT, Cir-37, Kol. Page 5 274 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 this Tribunal in the case of Suvaprasanna Bhattacharya (supra), we hold that the orders imposing penalty in all the assessment years 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 order imposing penalty on the assessee and allow the appeal by the assessee.

7.

In the result, assessee’s appeal stands allowed.

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