Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, PUNE BENCH, ‘B’ PUNE – VIRTUAL COURT
Before: SHRI R.S. SYAL & SHRI S.S. VISWANETHRA RAVI
PER R.S.SYAL, VP :
These two appeals by the assessee are directed against two
separate orders passed by the CIT(A)-6, Pune on 30-12-2016
confirming the penalty of Rs.3.20 crore imposed by the Assessing
Officer (AO) u/s.271(1)(c) of the Income-tax Act, 1961 (hereinafter
also called ‘the Act’) in relation to the assessment year 2004-05.
ITA No.474/PUN/2017 :
The first ground taken by the assessee is against the
confirmation of penalty which was levied by the AO without any
specific charge of either concealment or furnishing of inaccurate
particulars of income.
2 ITA Nos.474 and 2000/PUN/2017 Eagle Flask Industries Pvt. Ltd.,
We have heard both the sides through virtual court and gone
through the relevant material on record. Shorn of unnecessary details,
the primary issue is whether the levy of penalty on account of wrong
striking out of the inapplicable limb of section 271(1)(c) of the Act
from the notice issued u/s.274 is detrimental to the imposition of the
penalty. Indubitably, there can be a case involving both the charges,
viz., some of the additions or disallowance falling under the limb of
`concealment of income’, while others under `furnishing of
inaccurate particulars of income’. In such a situation, there is no need
to strike off any of the two.
Before testing the contention of the assessee under law, it is
significant to find out the details of additions/disallowance
culminating into penalty for determining, if these fall under any one
or both of the limbs. On perusal of the penalty order, it can be seen
that the penalty has been imposed with reference to disallowance
u/s.43B; provisions made for unpaid octroi duty; excess depreciation;
disallowance of advertisement and sales promotion expenses; sundry
balances of debtors and advances written off. It is thus vivid that
none of the items of additions relates to `concealment of income’ and
all the items fall under the category of `furnishing of inaccurate
particulars of income’.
3 ITA Nos.474 and 2000/PUN/2017 Eagle Flask Industries Pvt. Ltd.,
A copy of notice u/s 274 of the Act dated 26-12-2006 has been
placed at page 28 of the paper book in which both the limbs, namely,
concealing the particulars of income or furnishing of inaccurate
particulars of income are present. In other words, there is no striking
out of the irrelevant limb of the penalty. Thereafter, the penalty
order came to be passed by the AO on 30-03-2010. In the first para
itself, the AO again observed “that the penalty proceedings
u/s.271(1)(c) of the I.T. Act 1961 vide notice dated 26/12/2006 was
separately initiated for concealment of income and filing inaccurate
particulars of income.” The penalty order was eventually passed by
noticing that “the assessee has committed the default within the
meaning of section 271(1)(c) of the I.T. Act, 1961, without any
reasonable cause.” It is thus manifest that the AO not only initiated
the penalty by means of notice u/s.274 r.w.s. 271(1)(c) without
giving a specific charge but also levied the penalty under the same
vague combined charge of both the limbs.
Recently, the full Bench of Hon’ble Bombay High Court in
Mohd. Farhan A. Shaikh Vs. Dy.CIT (2021) 125 taxmann.com 253
(Bom) has considered this very issue. Answering the question in
affirmative, the Full Bench held that a defect in notice of not striking
out the irrelevant words vitiates the penalty even though the AO had
4 ITA Nos.474 and 2000/PUN/2017 Eagle Flask Industries Pvt. Ltd.,
properly recorded the satisfaction for imposition of penalty in the
order u/s 143(3) of the Act. In another judgment, the Hon’ble
Bombay High Court in Pr.CIT Vs. Golden Peace Hotels and Resorts
(P.) Ltd. (2021) 124 taxmann.com 248 (Bom) also took similar view
that where inapplicable portions were not struck off in the penalty
notice, the penalty was vitiated. The SLP of the Department against
this judgment has recently been dismissed by the Hon'ble Supreme
Court in Pr.CIT Vs. Golden Peace Hotels and Resorts (P.) Ltd.
(2021) 124 taxmann.com 249 (SC).
In view of the overwhelming legal position, it is clear that where
the charge is not properly set out in the notice u/s 274, viz., both the
limbs stand therein without striking off of the inapplicable limb, the
penalty order gets vitiated. Turning to the facts of the extant case, we
find from the notices u/s 274 of the Act that the AO did not strike out
the irrelevant limb and further committed the same mistake in the
penalty order as well. Respectfully following the Full Bench
judgment of the Hon’ble jurisdictional High Court, we overturn the
impugned order on this legal issue and direct to delete the penalty.
In the result, the appeal is allowed.
5 ITA Nos.474 and 2000/PUN/2017 Eagle Flask Industries Pvt. Ltd.,
ITA No.2000/PUN/2017
This is an appeal against the order passed by the CIT(A) pursuant
to the rectification order u/s.154 of the Act. In view of our decision
in deleting the penalty in ITA No.474/PUN/2017, the instant appeal
has been rendered infructuous. The same is, therefore, dismissed.
In the result, the appeal is dismissed.
Order pronounced in the Open Court on 02nd September, 2021.
Sd/- Sd/- (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; िदनांक Dated : 02nd September, 2021 सतीश
आदेश की �ितिलिप अ�ेिषत/Copy of the Order is forwarded to: अपीलाथ� / The Appellant; 1. ��थ� / The CIT(A)-6, Pune 2. 3. The Pr.CIT-5, Pune 4. DR, ITAT, ‘B’ Bench, Pune गाड� फाईल / Guard file. 5.
आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune
ITA Nos.474 and 2000/PUN/2017 Eagle Flask Industries Pvt. Ltd.,
Date 1. Draft dictated on 02-09-2021 Sr.PS 2. Draft placed before author 02-09-2021 Sr.PS 3. Draft proposed & placed before JM the second member 4. Draft discussed/approved by JM Second Member. 5. Approved Draft comes to the Sr.PS Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *