TMI Blog2020 (8) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... and has to be treated as invalid. Since this notice clearly shows the non application of mind on the part of the AO and there is no specific ground on which penalty proceeding is initiated, therefore, following the decisions in the case of CIT Vs. Manjunath Cotton and Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] and SSA s Emerald Meadows [ 2016 (8) TMI 1145 - SC ORDER] the penalty notice issued u/s. 274 r.w.s 271 AAA is bad in law and, therefore, is invalid. - Decided in favour of assessee. - ITA No.4280/Del/2018, ITA No.2674/Del/2018 - - - Dated:- 7-8-2020 - Sh. R. K. Panda, Accountant Member And Ms. Suchitra Kamble, Judicial Member For the Appellant : Sh. Saras Kumar, Sr. DR For the Respondent : Sh. Sanjiv Sapra, CA ORDER PER R.K PANDA, AM: These are cross appeals. The first one is filed by the assessee and the second one filed by the revenue and are directed against the order dated 12.03.2018 of the CIT(A)-30, New Delhi relating to A.Y.2012-13. For the sake of convenience these appeals were heard together and are being disposed of by this common order. 2. The appeal filed by the revenue was dismissed on account low tax effect. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejecting the request of the appellant to keep the penalty proceedings in abeyance till the disposal q quantum appeal. The imposition of penalty is therefore pre-matured and liable to be quashed on this ground alone. 3. That the entire penalty proceedings are vitiated on account of non-provision of proper and reasonable opportunity to the appellant and therefore the penalty order is liable to be quashed on this ground. 4. 'That as per settled position of law, the penalty order is liable to be quashed on account of the fact that there is no clear cut finding in the impugned order as to why penalty has been imposed on account of furnishing of inaccurate particulars or on account of concealment of income. 5. That on the facts and circumstances of the case and in law, the AO was not justified in imposing a penalty of ₹ 15,84,210/- on account of the following:- 5.1 Alleged notional interest on alleged balance in bank account with HSBC Bank aggregating ₹ 5,27,098/-; 5.2 Alleged notional interest on Promissory Notes aggregating ₹ 93,357/-; 5.3 Alleged unaccounted investment in jewellery aggregating ₹ 55,69,850/-; 5.4 Alleged u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n facts and in law in rejecting the contention of the assessee that the order levying penalty in contravention of the provisions of Section 275(1 )(a) of the Act is bad in law and liable to be quashed. 8. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in rejecting the contention of the assessee that the penalty proceedings are independent, as such mere addition does not lead to levy of penalty. 9. The appellant craves leave to add, amend or alter any of the grounds of appeal. 6. So far as the appeal filed by the revenue is concerned, the Ld. Counsel for the assessee referring to the consolidated order of the Tribunal vide ITA No.3367/Del/2016 and Co. No.124/Del/2018 order dated 13.01.2020 for A.Y.2012-13 submitted that all additions made by the AO were finally stand deleted except notional interest on HSBC Bank account which has been set aside and the addition on account of undisclosed expenditure on purchase of watches has been partly sustained. Therefore, the appeal filed by the revenue challenging the deletion of penalty by the Ld. CIT(A) has no merit at all since the vary basis on which penalty was levied does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1596 1597 /Mum/2014) 9. So far as the merit of the case is concerned the Ld. Counsel for the assessee submitted that before the AO it was explained that all these three ladies watches worn by his family members are very old and received by them on different family occasions. However, such explanation of the assessee was not accepted without bringing on record any material to controvert such explanation. He submitted that in view of explanation as offered by the assessee these three ladies watches cannot be considered to be undisclosed income as defined in clause (a) to explanation 271 AAA. He submitted that the addition on the basis of which penalty has been sustained is only on account of difference in opinion with regard to the valuation of these three ladies watches. He submitted that the AO had initially valued these three ladies watches at ₹ 7,76,800/-. The Ld. CIT(A) reduced such valuation to ₹ 5,24,600/-. The Tribunal vide order dated 13.01.2020 further reduced the valuation of the watches to ₹ 3,07,600/-. Referring to various decisions he submitted that penalty u/s.271 AAA should not be imposed where the addition sustained is on account of mere dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. Now, coming to the penalty sustained by the CIT(A) is concerned admittedly the same is levied on account of the addition made by the AO for the three ladies watches at ₹ 5,24,460/- which has substantially been reduced to ₹ 307600/- after the order of the Tribunal. Before deciding the issue on merit we would first like to decide the legal ground argued by the Ld. Counsel for the assessee challenging the validity of the notice. 15. A perusal of the notice issued u/s. 274 r.w.s. 271 AAA dated 27.02.2015 copy of which is placed at page No.135 of the paper book shows that the same is a printed format without striking of the inappropriate words of the same. For the sake of clarity the same is being reproduced which reads as under :- UNDER SECTION 274 READ WITH SECTION 271 AAA OF THE INCOME TAX ACT 1961 OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 30, NEW DELHI ROOM NO. 320, 3RD FLOOR, ARA CENTRE, E-2, JHANDEWALAN EXTN, NEW DELHI F.No. ACIT/CC-30/2014-15/ DATE :27.02.2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section. Explanation.-For the purposes of this section,- (a) undisclosed income means- ( i)) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has- (A) not been recorded on or before the date of search in the books of account or other documents ,maintained in the normal course relating to such previous year ; or (B) otherwise not been disclosed to the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] before the date of search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified pervious year which is found to be false and would not have been found to be so had the search not been conducted ..... 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