TMI Blog2017 (3) TMI 804X X X X Extracts X X X X X X X X Extracts X X X X ..... for the sake of convenience. ITA NO.7332 and 7333/Mum/2014 2. The grounds of appeal taken by the assessee are as under : 1. On the facts and circumstance of the case and in law, the Hon'ble CIT(A)-37, Mumbai erred in confirming the penalty u/s. 271(1)(c) of the Income Tax Act, 1961. 2. On the facts and circumstance of the case and in law, the Hon'ble CIT(A)-37, Mumbai erred in confirming the penalty u/s 271(1)(c) of the Income Tax Act, 1961, on the disallowance of depreciation of ₹ 25,45,459/- in respect of purchase of software from a related party. 3. On the facts and circumstance of the case and in law, the Hon'ble CIT(A)-37, Mumbai erred in confirming the penalty u/s 271(1) of the Income Tax Act, 1961, on the disallowance of depreciation ₹ 37,850/-. 4. On the facts and circumstance of the case and in law, the Ho ble CIT(A)-37, Mumbai erred in confirming the penaly u/s 271(1)( c ) of the Income Tax Act, 1961, on the disallowance u/s 40(a)(ia) for ₹ 7,77,886/- 5. On the facts and circumstance of the case and in law, the Hon'ble CIT(A)-37, Mumbai erred in confirming the penalty u/s 271(1)(c) of the Income Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f appeal is in respect of confirmation of the penalty u/s 271(1)( c) of the Income Tax Act, 1961 as imposed by the AO qua the various disallowances and additions viz. Depreciation of ₹ 25,45,459/-, disallowance u/s 40(a)(ia) of the Act for ₹ 7,77,886/- addition of ₹ 1,53,55,000/- as unexplained cash credit.By means of additional ground no 2 the ld AR proposed to raise the legal and technical issue that the penalty was imposed by the AO without specifically mentioning under which charge the penalty was proposed to be levied. 6. Brief facts of the case are that the assessee filed return of income on 28.10.2005 declaring total loss of ₹ 2,11,43,869/-. The assessment was completed under section 143(3) of the Income Tax Act on 24.12.2007 determining the income at NIL by allowing certain business loss to the extent of ₹ 49,22,379/-. The AO while framing assessment under section 143(3) made certain additions/disallowances as under : i Addition u/s 68 1,53,55,000 ii Disallowance u/s 36(1)(va) 10,15,007 iii Disallwnce u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ested to appear before me at A.M. IP.M. on *****20____ and show cause why an order imposing a penalty on you should not be made under-section-271 of the Income Tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative, you may snow cause in writing on or before the said date which will be considered before any such order is made under section 271(1)(c) **** Within 15 days from the receipt of this notice. ( RAM KRISHN KEDIA ) Deputy Commissioner of Income Tax Central Circle - 9 Mumbai. Finally , the AO imposed the penalty after rejecting the contentions and submissions as raised by the assessee at the rate of 100% of the tax sought to be evaded of ₹ 72,36,947/- without pointing out the specific limb under which the penalty was levied as is apparent from the highlighted portion of notice issued u/s 274 r.w.s. 271 of the Act. In the appellate proceeding, the FAA partly allowed the appeal of the assessee by deleting the penalty imposed in respect of disallowance of ₹ 10,15,007/- u/s 36(1)(va) of the Act and disallowance of Bad debts ₹ 45,930/- and sustained penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC) viii) UOl vs. Dharamendra Textile Processors (295 ITR 244) (SC) ix) CIT V/s Reliance Petrophoducts (P) Ltd (322 ITR 159) (SC) Finally, the ld.AR prayed before the Bench that in view of the defective notice which was incurable in view of the ratio laid down by the various decisions of the Hon ble High Courts and the decisions of the Tribunal, the penalty proceedings initiated by the AO was non-est and void abinitio and therefore the appeal of the assessee should be allowed on legal issue by quashing the penalty proceedings and consequential order. 9. On the other hand, the ld. DR while controverting the arguments of the ld.AR defended the initiation of penalty proceedings and penalty imposed by the AO and confirmed by the FAA u/s 271(1)(c) read with section 274 of the Act. The ld. DR submitted that u/s 274 of the Act the mandatory conditions are that the assessee should be given an opportunity to reply the show cause. No specific format has been prescribed under the Act of the said notice. Hence it is sufficient if the assessee was aware of the charges, he had to meet on an opportunity of being heard and if the mistake in the notice would not invalidate the penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. 10. We have carefully considered the rival contentions, perused the material placed before us including the orders of authorities below and case law relied upon by the parties. The perusal of the assessment order reveals that the AO has only stated that the penalty proceedings under section 271(1)(c ) of the Act are initiated separated separately without specifying or mentioning any specific charge under which the assessee is being proposed to be penalized i.e. whether the assessee has concealed a particulars of income or furnished inaccurate particulars of income. We also find from the notice dated 26.3.2013 issued under section 271(1) (c) r.w.s.274 of the Act extracted hereinbefore that the notice has been issued in standard format without striking off any of the two limbs i.e. for concealing the particulars of income or furnishing inaccurate particulars of income of such income under which the penalty was initiated against the assessee. In view of these facts we are of the view that the AO lacked application of mind in initiating penalty proceedings while framing assessment and also while issuing the notice initiating penalty proceedings u/s 274 r.w.s271(1)(c) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice. 7 Therefore, the issue herein stands concluded in favour of the respondentAssessee by the decision of the Karnataka High Court in the case of Manjunath Cotton and Ginning Factory (supra). Nothing has been shown to us in the present facts which would warrant our taking a view different from the Karnataka High Court in the case of Manjunath Cotton and Ginning Factory (supra). 11. We are therefore respectfully following the ratio laid down by the Hon ble High Courts including the jurisdictional High Court and Supreme Court hold that the order of the CT(A) upholding the imposition of penalty u/s 271(1)(c) of the Act where the AO had not specified or mentioned the charge on which the penalty has been imposed is not correct and cannot be sustained. In view of the foregoing discussion we set aside the order of CIT(A) and direct the AO to delete the penalty levied u/s 271(1)( c ) of the Act. 12. In the remaining appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X
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