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TMI Blog2025 (3) TMI 800X X X X Extracts X X X X X X X X Extracts X X X X ..... he corresponding limb thereunder. His case in light thereof is that the learned Assessing Officer's failure in not pinpointing the relevant limb under section 271AAB (a) to (c) vitiates the entire penalty proceedings herein. He further quotes the tribunal's order in Sh. Ashok Bhatia Vs. DCIT, ITA No. 869/Ind/2018, order dated 05.02.2020, holding an identical section 271AAB penalty as not sustainable, as follows "3. Brief facts of the case as culled out from the records are that assessee derives income from business of retail trading of sarees, income from house properties and income from other sources as interest. A search and seizure operations u/s 132 of the Act were carried out on the business as well as residential premises of CHL Group of Indore including the assessee on 4.10.2013. The return for Assessment Year 2014-15 was filed on 22.12.2015 u/s 153A of the Act declaring income of Rs. 2,24,66,650/- including surrendered income of Rs. 2,08,00,522/-. Assessment u/s 143(3) was completed on 22.3.16 adding Rs. 6,07,306/- being 20% of the jewellery found and not seized valued at Rs. 30,36,532/- and initiating penalty proceedings u/s 271AAB. Assessee preferred appeal for CIT(A) b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch. The assessee deserves an opportunity to plead before the Ld. A.O before being visited with the penalty u/s 271AAB of the Act. The alleged notice issued u/s 274 r.w.s 271AAB of the Act is liable to be quashed since there is a technical defect in issuing the notice. Reliance placed on the decision of Co-ordinate Bench, Chennai in the case of DCIT V/s R. Elangovan 1199/CHNY/2017 order dated 05.04.2018 which has also been followed by Jaipur Bench of Tribunal in the case of Ravi Mathur Vs. DCIT, ITA No.969/JP/2017 laying down the proposition that show cause notice issued u/s 274 of the Act without drawing requisite levy of penalty u/s 271AAB of the Act is a defective notice and is liable to be quashed. 6. 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 asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed previous year declaring such undisclosed income therein; (b) a sum computed at the rate of twenty per cent of the undisclosed income of the specified previous year, if such assessee- (i) in the course of the search, in a statement under sub-section (4) of section 132, does not admit the undisclosed income; and (ii) on or before the specified date- (A) declares such income in the return of income furnished for the specified previous year; and (B) pays the tax, together with interest, if any, in respect of the undisclosed income; (c) a sum which shall not be less than thirty per cent but which shall not exceed ninety per cent of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b). (2) No penalty under the provisions of clause (c) of subsection (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in subsection (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 ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty proceedings u/s 271AAB of the Act the first step to be taken by Ld. A.O is to issue a valid notice u/s 274 of the Act. Subsection (1) to Section 274 of the Act provides a procedure that " No order imposing a penalty under this Chapter shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard". To comply with this requirement the notice u/s 274 should be clear enough to convey the assessee about the charge which is to be leveled against him/her/it for levying the penalty for the contravention of the related provisions of the Act which in the instant case relates to not surrendering of undisclosed amount during the course of search which is subsequently 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 assessee's case falls under clause-c of section 271AAB of the Act, why she should not be visited by penalty @30% of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned case, you are hereby requested to appear before the undersigned on 10.06.2016 at 11.50AM 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 271AAb 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, otherwise penalty proceedings shall be decided on merits. Sd/- (Amit Kumar Soni) Deputy Commissioner of Income Tax (Central)-I Indore OFFICE OF THE Deputy Commissioner of Income Tax (Central)-I, Indore PAN. ACFPB4590H Date: 16.09.2016 To Shri Ashok Kumar Bhatia 33-A Radha Nagar Neelkanth Colony Indore- 452006 Sir, Sub: Penalty fixation u/s 271AAB 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 2014-15 271AAB 22.03.2016 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 personal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der imposing penalty has to be imposed only after hearing the assessee or giving a assessee opportunity of hearing. Opportunity that is to be given to the assessee should be a meaningful one and not a farce. Notice issued to the assessee reproduced (supra), does not show whether penalty proceedings were initiated for concealment of income or for furnishing inaccurate particulars of income or for having undisclosed income within the meaning of Section 271AAB of the Act. Notice in our opinion was vague. Hon'ble Karnataka High Court in the case of SSA's Emerald Meadows (supra) relying in its own judgment in the case of Manjunatha Cotton and Ginning Factory (supra) had held as under:- "2. This appeal has been filed raising the following substantial questions of law. (1) Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case? (2) Whether, on the facts and in the circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent proceedings : though proceedings for imposition of penalty emanate from proceedings of assessment, they are independent and a separate aspect of the proceedings; The findings recorded in the assessment proceedings in so far as "concealment of income" and "furnishing of incorrect particulars" would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the proceedings on the merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared invalid in the penalty proceedings". View taken by the Hon'ble Karnataka High Court in the above judgment was indirectly affirmed by the Hon'ble Apex Court, when it dismissed an SLP filed by the Revenue against the judgment in the case of SSA's Emerald Meadows (supra), specifically observing that there was no merits in the petition filed by the Revenue. Considering the above cited judgments, we hold that the notice issued ujs.274 r.w.s. 271AAB of the Act, reproduced by us at para 5 above was not valid. Ex-consequenti, the penalty order is set aside. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271AAB. Thirdly, the assessee has given reply to said notice which shows that the assessee fully comprehended the implication of the notice that it is for section 271AAB. The assessee has also challenged that the principles of natural justice has not followed by the AO. The detailed submissions of A.R. in this regard has already been reproduced above. The A.R. did not produce any evidence to show that he was not given proper opportunity of hearing. It is clear from the penalty order that the AO has given notice and which was also replied by the assessee. Therefore, in my opinion, principle of natural justice has not been violated. Thus in view of above discussion penalty imposed by AO u/s. 271AAB of the Act is confirmed." Thus it was found by the Hon'ble High Court that the mistake in mentioning the section in the show cause notice is covered under section 292BB and the AO will get the benefit of the same. The said decision will not help the case of the revenue so far as the isse involves the merits of levy of penalty under section 271AAB. As regards the decision of Kolkata Benches of the Tribunal in the case of DCIT vs Amit Agrawal (TS-7675-ITAT-2017(Kolkata)-O) (Supra), we fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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