SHRI RAJINDER KUMAR SHARMA,UDHAMPUR vs. INCOME TAX OFFICEER WARD-2(4), UDHAMPUR

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ITA 175/ASR/2019Status: DisposedITAT Amritsar11 August 2022AY 2009-106 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty notice issued under Section 274/271(1)(c) was void ab initio because it did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars. The Tribunal also noted that the addition was based on a GP rate, which is not a specific nature of addition.

What were the facts?

The assessee's assessment was completed, and penalty proceedings were initiated under Section 271(1)(c) based on an addition of 19.8% GP on undeclared deposits/sales. The Assessing Officer (AO) levied a penalty, which was upheld by the CIT(A).

What were the issues?

Whether a penalty notice under Section 271(1)(c) is valid if it does not specify the limb of the section under which the penalty is being levied. Whether penalty can be levied on an addition based on a GP rate.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274

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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.

Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE

Hearing: 05.07.2022Pronounced: 11.08.2022

ORDER Per:Anikesh Banerjee, JM:

The instant appeal was filed by the assessee against the order of the ld. Commissioner of Income Tax(Appeals), Jammu, [in brevity the CIT(A)] bearing appeal no. CAJ/10064/2017-18, date of order 27.121.2018, the order passed u/s 250(6) of the IT Act 1961, [in brevity the Act] for A.Y.2009-10.

The impugned order was originated from the order of the ld. ITO, Ward-2(4), Udhampur, order passed u/s 271(1)(c) of the Act date of order 20.04.2017.

2.

Tersely, we advert the fact of the case. The assessment of assessee was completed u/s 143(3)/147 of the Act. After that, the penalty proceeding was initiated u/s 271(1)(c) /274 of the Act.The penalty was levied on basis of the addition on 19.8% of G.P.calculated on undeclared deposits / sales of Rs.10,18,050/- which is worked out amount to Rs.2,01,574/-. The tax was sought to be evaded amount to Rs.31,614/-. The ld. AO levied penalty u/s 271(1)(c) amount of Rs. 31,620/-.

3.

Aggrieved assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) upheld the order of the ld. AO. Being aggrieved assessee filed an appeal before us.

4.

The ld. Counsel first pointed out that the notice issued by the ld. AO u/s 274/271(1)(c) of the Act dated 17.11.2016 bearing no. ITO/UDH/2546 is not specified the nature of penalty whether it is concealment or inaccurate particular of income. The copy of the notice is annexed here: -

5.

The ld. Counsel also pointed out that the addition was made on the basis of G.P. rate @ 19.8% on undeclared cash credit amount of Rs.10,18,050/- which is calculated amount to Rs.201574/-. The penalty should not be levied on the tax on calculating G.P. Rate. The extract from the order of the ld. AO is annexed here:-

“Keeping in view the Gross profit rate of 19.8% declared by the assessee, I assume same GP rate on undeclared sale/cash credit in SBI a/c as reasonable. Therefore, by applying the same G.P rate of 19.8% on Rs. 10,18,050/- an addition of Rs. 2,01,574/- is made in the already assessed income of Rs. 8,14,250/-. Penalty proceedings u/s 27l(1)(c) for concealment of income/ furnishing inaccurate particulars of income are being initiated' separately.”

6.

The ld. Sr. DR vehemently argued and relied on the order of the ld. CIT(A).

But he had not made any strong objection against the assessee’s plea.

7.

We heard the rival submission and considered the documents available in the record. First of all the addition was made on the basis of G.P. rate @ 19.8% on undisclosed turn over. Addition of G.P. rate is not specific nature of addition.

Further the ld. AO did not specify the satisfaction by mentioning the limb u/s 271(1)(c)related to the notice u/s 271(1)(c )/274 of the Act. As result the said notice is void ab initio. The ld. Counsel relied on the order of the coordinate bench in the case of Sh. Prem Pal Gandhi in date of order 13.05.2022. The observation of the coordinate bench is extracted as follows:

“11. In the case on hand, we find that at the first instance, while replying to the penalty show cause notice dated 17/08/2012, the assessee raised a specific plea that there was no concealment of income, that he had not furnished inaccurate particulars of income and that the notice was not proper. Therefore, the phraseology, which was adopted by the assessee, if read as a whole, would clearly show that he had objected to the issuance of the notice and as there was no basis for issuance of the notice under Section 271(1)(c) of the Act, both limbs in the said provision do not get attracted.

12.

In the case of “Mohd. Farhan A. Shaikh Vs. DCIT”, [2021] 125 taxmann.com 253 (Bombay) held that where assessment order clearly records satisfaction for imposing penalty on one or other, or both grounds mentioned in section 271(1)(c), a mere defect in notice, not striking off irrelevant matter would vitiate penalty proceedings vide Para 188 by observing as under: “188. We may, in this context, respectfully observe that a contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must be precise. It should give no room for ambiguity. Therefore, Dilip N. Shroff Case (supra) disapproves of the routine, ritualistic practice of issuing omnibus show-cause notices. That practice certainly betrays non- application of mind. And, therefore, the infraction of a mandatory procedure leading to penal consequences assumes or implies prejudice.”

13.

Following Hon’ble Bombay High Court, in the case of “Mohd. Farhan A. Shaikh Vs. DCIT”, (Supra) we delete the penalty levied by the AO and confirmed by CIT(A). We direct the AO accordingly.”

8.

The respectfully observation of the coordinate bench is accepted. The notice itself erroneous as no specific satisfaction of the ld. AO is mentioned whether it is concealed income or inaccurate particular of income. We are directing the ld. AO to delete the penalty amount of Rs.31620/- levied u/s 271(1)(c) of the Act.

9.

In the result, the ITA 175/Asr/2019 is allowed.

Order pronounced in the open court on 11.08.2022

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