H.B. MANUFACTURING INDUSTRIES PRIVATE LIMITED,NEW DELHI vs. ACIT CIRCLE-10(1), NEW DELHI

Facts of the case, in brief, are that in this case assessee filed its return of income on 21.9.2012 at a loss of Rs. 3,73,208/-. Thereafter the case was reopened and assessment u/s 143(3) read with section 147 of the Act was framed assessing the total income at Rs. 21,67,290/-. The AO while framed the assessment made addition of Rs. 25,00,000/- u/s 68 of the Act and also initiated penalty proceedings u/s 271(1)(c) of the Act separately. Thereafter the AO issued notice dated 6.12.2019 calling upon the assessee as to why the penalty on the impugned addition should not be imposed. In response thereto the assessee filed its replies.

At the outset learned counsel for the assessee drew our attention to the assessment order whereby the AO had initiated penalty proceedings u/s 271(1)(c) of the Act. He submitted that the AO initiated the penalty without specifying the charge. Further, he contended that even the penalty notice also did not disclose the specific charge. He submitted that under identical facts the Hon’ble Jurisdictional High Court in the case of PCIT v. Sahara India Life Insurance Company Ltd. in order dated 02.08.2019, has upheld the order of the ITAT, holding that the notice issued by the AO would be bad in law if it did not specify which limb of Section 271(1)(c) the penalty proceedings had been initiated.

On the other hands, learned DR opposed the submissions and supported the penalty order.

We have heard rival contentions and perused the material available on record. Learned DR could not controvert the fact that the AO has not specified the charge while initiating penalty proceedings in the assessment order and also has 271(1)c) of the Act. The law is well settled in this regard. The Hon’ble Delhi High Court in the case of PCIT v. Sahara India Life Insurance Company Ltd. (supra), inter alia, has held as under: “21 The Respond ent had cha llenged the upholding of the penalty imposed under Section 271(1 ) (c) of the Act. which was accepted by the ITAT. It followed the decision of the Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory 359 JTR 565 (Kar) and observed that the notice issued by the AO would be bad in law if it did not specify which limb of Section 271(1)(c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. The Karnataka High Court had followed the above judgment in the subsequent order in Co mmission er of Inco me Tax v. SS A’s Emerald Meado ws (2016 ) 73 Taxman .co m 241 (Kar), the appea l against wh ich was dis miss ed b y the Supreme Court of India in S LP No . 11845 of 2016 by ord er dated 5 t h August , 2016 . 22 . On this issue again th is Cou rt is unab le to find any error having b een co mmitt ed by th e ITAT. No substantial question of law aris es .”

Furthermore, this judgment of the Hon’ble Delhi High Court has been followed by various Benches of the Tribunal in the cases of Meena Singhal vs. ITO (supra); George Kutty vs. DCIT(supra); and Legend Realtors Pvt. Ltd. vs. ITO (supra). Therefore, respectfully following the decision of the Hon’ble Delhi High Court as well as the orders of the Tribunal, referred to above, we hold that the initiation of penalty proceedings as well as notice issued by the AO u/s 271(1)(c) of the Act were bad in law. Therefore, the penalty levied by the AO and sustained

Appeal of the assessee is allowed.