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TMI Blog2020 (2) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... nd convenience. 3. First we take up the appeals filed by the assessee(s) against the order of Ld. CIT(A) confirming levy of penalty u/s 271(1(c ) of the Act raising following grounds of appeal:- Shri Hemant Kumar Jain ITA No. 730/Ind/2018 Assessment Year 2010-11 1.1 That the Ld. CIT(A) has grossly erred in confirming penalty u/s 271(1)(c) of the Act of Rs. 15,000/- levied by A.O which is not in accordance with the law and therefore penalty requires to be deleted. 1.2 That the Ld. CIT(A) has erred in not accepting the assessee's contention and various judicial pronouncements therefore penalty requires to be deleted. 2. That the appellant craves leave to adduce additional grounds and/or amend or withdraw any of the aforesaid grounds before, or at the time of hearing of appeal. ITA No. 731/Ind/2018 Assessment Year 2011-12 1.1 That the Ld. CIT(A) has grossly erred in confirming penalty u/s 271(1)(c) of the Act of Rs. 20,000/- levied by A.O which is not in accordance with the law and therefore penalty requires to be deleted. 1.2 That the Ld. CIT(A) has erred in not accepting the assessee's contention and various judicial pronouncements therefore penalty requires to be del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled. The assessee(s) offered additional income which includes undisclosed investment in hundies. Penalty proceeding u/s 271(1)(c) were initiated and finally levied. The details of the same are as under:- A.Y. Return income u/s 153A Additional income offered Concealed income Penalty u/s 271(1)(c) Remarks Hemant Jain 2010-11 3,00,380 1,42,380 1,42,380 15,000 Hundi investment Rs. 1,35,000 Hundi interest Rs. 7380/- 2011-12 3,74,540 1,93,690 1,93,690 20,000 Hundi investment Rs. 1,70,000 Hundi interest Rs. 23690/- 2012-13 4,50,030 2,49,240 2,49,240 26,000 Hundi investment Rs. 1,87,500 Hundi interest Rs. 61740/- 2013-14 1,54,31,110 1,52,01,350 1,52,01,350 46,00,000 Hundi investment Rs. 1,43,20,000/- Hundi interest Rs. 8,81,350/- Harsh Jain 2013-14 1,04,60,940 1,01,18,850 1,01,18,850 32,00,000 Hundi investment Rs. 96,00,000 Hundi interest Rs. 5,18,850/- Aggrieved assessee preferred appeal before Ld. CIT(A) but could not succeed. 5. Now the assessee's are in appeal before the Tribunal. 6. At the outset Ld. Counsel for the assessee referring to Hon'ble Apex Court judgment in the case of National Thermal Power Corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a clear or specific charge. Fixing a charge in a vague and casual manner is not permitted under the law. Fixing twin charges is also not permitted under the law. Therefore, as per the ratio laid down by Hon'ble M.P. High Court in Pr. CIT vs Kulwant Singh Bhatia, (CL - 9-13) the notice issued by the AO is not valid and consequently, the order passed under Sec 271 (i) (c) is also not valid. B.Failure by the AO to specify in the s. 274 notice whether the penalty is being initiated for 'furnishing of inaccurate particulars of income' or for 'concealment of income' is fatal. It reflects non-application of mind and renders the levy of penalty invalid (Manjunatha Cotton 359 ITR 565 (Kar) (CL 43-62) C.The notice issued without application of mind, vague and not specific is liable to be quashed. Placing reliance on the judgment of Hon'ble Jurisdictional High Court in the case of PCIT Vs Kulwant Singh Bhatia ITA No.9 of 2018 dated 9.5.2018 (CL 9-13) Further, the impact of dismissal of SLP by the Hon'ble Supreme Court in Sundaram Finance Ltd. is discussed as Annexure A enclosed along with the various recent judgments by the Hon'ble ITAT, Indore Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Soni) Asstt. Commissioner of Income Tax (Central)-1 Indore OFFICE OF THE Deputy Commissioner of Income Tax (Central)-I, Indore PAN. ADXPJ4863C Date: 16.09.2016 To, Shri Hemant Kumar Jain, 20, Parsi Mohalla, Indore Sir, Sub: Penalty fixation u/s 271(1)(c) r.w.s. 129 of the Income Tax Act, 1961 -reg. Please refer to the above The following penalty proceeding are initiated during assessment as mentioned below: S.NO. A.Y. Section Penalty initiated on 1 2010-11 271(1)(c) 31.03.2016 You are requested to appear before the undersigned on 19.09.2016 at 11.00 AM in my office at Room No.101, Aayakar Bhawan, Main opp. White Church, Indore personally or through authorized representative to show cause as to why penalty u/s 271(1)(c) of the I.T. Act 1961 be not levied against you. If you do not want to appear personally, you may send your written reply on or before above mentioned date. If any that you have nothing to say in this regard. It is to brought to your notice that there is a change in incumbent hence this notice is issued to provide opportunity of being heard to the assessee. Sd/- (Avaneesh Tiwari) Deputy Commissioner of Income Tax (Central)-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-law as it did not specify which limb of Section 271(1)(c) of the Act of 1961, the penalty proceedings had been initiated, i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars. The Tribunal while allowing the appeal of the assessee, had relied on the decision of the Division Bench of Karnataka High Court decision in the case of CIT Vs. Maniunatha Cotton Ginning Factory(supra)". 14. It is further pointed out that the SLP filed by the Deptt. before the Apex Court on 5.8.2016 in the matter of CIT Vs. SSA'S Emerald Meadows(supra) was dismissed. 15. Very recently the Hon'ble jurisdictional High Court in the case of Principal Commissioner of Income Tax v/s Kulwant Singh Bhatia dated 09.05.2018 (ITA 9 to 14 of 2018) has held that the penalty u/s 271(1)(c) of the Act of 1961 is not sustainable in law as the notice was not specific observing as follows:- "on due consideration of the arguments of the Learned counsel for the appellant, so also considering the fact that the ground mentioned in show cause notice would not satisfy the requirement of law, as notice was not specific, we are of the view that Learned Tribunal has rightly relying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned the section but the specific charge i.e. whether the penalty have been initiated for concealment of particulars of income or for furnishing inaccurate particulars of income has not been mentioned. Now whether such type of notice which does not speak about the specific charge leveled against the assessee is valid and tenable in the eyes of law needs to be examined. 14. We find that similar issue came up before the jurisdictional High Court in the case of Shri Kulwant Singh Bhatia (supra) wherein the Hon'ble Court discussed the judgment of Hon'ble High Court in the case of CIT V/s Manjunatha Cotton Ginning Factory (supra) and CIT V/s SSA's Emeralad Meadows (supra) held that "on due consideration of the arguments of the Ld. counsel for the appellant, so also considering the fact that the ground mentioned in show cause notice would not specify the requirement of law, as notice was not specific, we are of the view that Ld. Tribunal has rightly allowed the appeal of the assessee and set aside the order of penalty enforced by the authority". 15. Similarly in the case of CIT V/s Manjunatha Ginning Factory, Hon'ble High Court of Karnataka held that "the notice issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case and respectfully following the above referred judgments of Hon'ble Apex Court, Hon'ble High jurisdictional Courts and other Hon'ble Courts and in view of the similarity of facts wherein the notice issued u/s 274 r.w.s 271(1)(c) of the Act is suffering from serious technical error and non application of mind by Ld.A.O who failed to level specific charge on the assessee at the time of initiating penalty proceedings due to which the principle of natural justice seems not to have been followed. We accordingly allow the assessee's appeal on this legal ground and hold that the impugned penalty notices issued u/s 274 r.w.s. 271(1)(c) of the Act as invalid and untenable and thus deserves to be quashed which renders the penalty proceedings void ab intio. 20. We therefore allow the common legal ground raised by the assessee in these bunch of five appeals challenging the legality of notice issued u/s 274 r.w.s. 271(1)(c) of the Act and accordingly direct the Ld.A.O to delete the penalty levied u/s 271(1)(c) of the Act at Rs. 15,000/-, Rs. 20,000/-,Rs. 26,000/-, Rs,46,00,000/-in respect of Shri Hemant Kumar Jain and Rs. 32,00,000/- in respect of Shri Harish Jain 2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming penalty u/s 271AAB of the Act at Rs. 46,62,900/- which is not in accordance with the law and therefore penalty requires to be deleted. 1.2 That the Ld. CIT(A) has erred in not accepting the assessee's contention and various judicial pronouncements therefore penalty requires to be deleted. 2. That the appellant craves leave to adduce additional grounds and/or amend or withdraw any of the aforesaid grounds before, or at the time of hearing of appeal. Shri Harsh Jain ITA No. 871/Ind/2018 Assessment Years 2015-16 1.1 That the Ld. CIT(A) has grossly erred in confirming penalty u/s 271AAB of the Act at Rs. 43,54,700/- which is not in accordance with the law and therefore penalty requires to be deleted. 1.2 That the Ld. CIT(A) has erred in not accepting the assessee's contention and various judicial pronouncements therefore penalty requires to be deleted. 2. That the appellant craves leave to adduce additional grounds and/or amend or withdraw any of the aforesaid grounds before, or at the time of hearing of appeal. 24. During the course of hearing Ld. Counsel for the assessee raised legal ground relying on the judgment of Hon'ble Apex Court in the case of National Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be quashed. 28. Per contra Ld. Departmental Representative vehemently argued supporting the orders of lower authorities and also submitted that the legal issue raised by the assessee is liable to be dismissed since in the notice issued u/s 274 of the Act the Ld. A.O has specifically mentioned the section 271AAB of the Act and it may have been a clerical error on the part of the Ld. A.O to use the same proforma as used for issuing notice u/s 274 r.w.s. 271(1)(c ) of the Act. On merits the assessee has no case since the alleged addition was not surrendered during the course of search, not included in the income tax return and taxes not paid and such undisclosed income has rightly been penalized @30% as per the provisions of Section 271 AAB(c) of the Act. Ld. Departmental Representative strongly relied on the judgment of Hon'ble Allahabad High Court in the case of Pr. CIT vs. Sandeep Chandak (2018) 405 ITR 648. This judgment of Hon'ble Allahabad High Court stands confirmed by Hon'ble Supreme Court also. 29. We have heard rival contentions and perused the records placed before us. The legal issue before us is that whether the notice issued u/s 274 r.w.s. 271AAB of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not covered by the provisions of clauses (a) and (b). (2) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). (3) The provisions of sections 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section. Explanation.-For the purposes of this section,- (a) "specified date" means the due date of furnishing of return of income under sub-section (1) of section 139 or the date on which the period specified in the notice issued under section 153A for furnishing of return of income expires, as the case may be; (b) "specified previous year" means the previous year- (i) which has ended before the date of search, but the date of furnishing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the date of search; or (ii) in which search was conducted; (c) "undisclosed income" means- (i) any income of the specified previous year represented, either wholly or partly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y admitted during the course of assessment and not challenged before the Ld. CIT(A). So it was incumbent for Ld. A.O that in the notice issued u/s 274 of the Act he should have mentioned that penalty u/s 271AAB of the Act may be levied @10/20/ 30% since the assessee falls in Clauses (a)/(b)/(c) of section 271AAB of the Act. He should have further mentioned that as the assessees case falls under clause-c of section 271AAB of the Act, why she should not be visited by penalty @30% of the undisclosed income. Against this charge the assessee should have been given a reasonable opportunity of being heard. 31. Now let us revert back to the fact of the instant case of the assessee and look into what was mentioned in the alleged notices issued u/s 274 r.w.s. 271AAB of the Act. It is not in dispute that for Assessment Year 2014-15 and Assessment Year 2015-16 similar types of notices were issued in case of both the assessee(s). Notices are reproduced below; NOTICE UNDER SECTION 274 READ WITH SECTION 271AAB OF THE INCOME TAX ACT, 1961 PAN. ADXPJ4863C OFFICE OF THE Asstt. Commissikoner of Income Tax (Central)-I, Indore Date: 31.03.2016 To Smt. Hemant Kumar Jain, 20 Parsi Mohalla, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Yours faithfully, Sd/- (Amit Kumar Soni) Asstt. Commissioner of Income Tax (Central)-1 Indore 32. From going through the above notice issued to the assessee, we find that there is no mention about various conditions provided u/s 271 AAB of the Act. In the first notice dated 31.3.2016 the Ld. A.O has very casually used the proforma used for issuing notice before levying penalty u/s 271(1)(c) of the Act for the concealment of income or furnishing of inaccurate particulars of income. In the second notice dated 03.06.16 except mentioning the Section 271AAB of the Act in the notice it does not talk anything about various clauses of section 271AAB of the Act for levying penalty @10%/20%/30%. Certainly such notice has a fatal error and technically is not a correct notice in the eyes of law because it intends to penalize an assessee without spelling about the specific charge against the assessee. 33. Hon'ble Jurisdictional High Court in the case of PCIT V/s Kulwant Singh Bhatia (supra) dealt the issue of defective notice issued u/s 274 r.w.s. 271(1)(c) of the Act and Hon'ble court after relying judgment of Hon'ble Supreme Court in the case of CIT V/s Manjunatha Cotton Gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ? (3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in deciding the appeals against the Revenue on the basis of notice issued under Section 274 without taking into consideration the assessment order When the assessing officer has specified that the assessee has concealed particulars of income? 3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271 (1)(c) of the Income Tax Act, 1961 (for short 'the Act,) to be bad in law as it did not specify Which limb of Section 271 (1 )(c) of the Act, the penalty proceedings had been initiated i.e., Whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, While allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of CIT vs. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565. 4. In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in law". 36. As regards to judgment of Hon'ble Allahabad High Court in the case of Pr. CIT Vs Sandeep Chandak (supra) which has been relied by the Departmental Representative is concerned, we find that in the decision rendered by the Co-ordinate Bench of Jaipur in the case of Ravi Mathur Vs DCIT (supra) wherein also similar issue of defective notice u/s 274 r.w.s. 271AAB was adjudicated, the judgment of Hon'ble Allahabad High Court in the case of Pr. CIT Vs Sandeep Chandak (supra) has been discussed and distinguished observing as follows:- It is further submitted that in para 5 of this judgment (Ravi Mathur), the case quoted by ld CIT(A) Pr. CIT vs Sandeep Chandak (All.) was distinguished as under: "5. Before we proceed further, the decisions relied upon by the ld D/R are to be considered. In the case of Principal CIT vs Sandeep Chandak & Others [TS-6389-HC-2017(Allahabad)-O] (supra) the issue before the Hon'ble High Court was the defect in the notice issued under section 271AAB on account mentioning wrong provision of the Act being 271(1)(c) of the Act. The Hon'ble High Court after considering the fact that the show cause notice issued by the AO though mentions sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case wherein the matter written in the body of the notice issued u/s 274 of the Act does not refer to the charges of provision of Section 271AAB of the Act makes the alleged notice defective and invalid and thus deserves to be quashed. Since the penalty proceedings itself has been quashed the impugned penalty of Rs. 36,89,200/- and Rs. 1,30,000in respect of Shri Hemant Kumar Jain and Rs. 46,62,900/- and Rs. 3,54,700/- in respect of Shri Harsh Jain for Assessment Year 2014-15 and Assessment Year 2015-16 respectively stands deleted. We accordingly allow the legal ground raised by the assessee challenging the validity of notice issued u/s 274 r.w.s. 271AAB of the Act and quash the penalty proceeding as void ab intio. In the result appeals of the assessee(s) for Assessment Years 2014-15 and 2015-16 are allowed on legal ground. 37. Since the penalty u/s 271AAB also have already been dealt and deleted on the preliminary legal points, other grounds and arguments of the assessee dealing with the merits of the levy of penalty are not been dealt with, as the same are rendered academic in nature. Thus grounds raised on merits are dismissed as infructuous. 38. Now we tak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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