BIMAL DEVI SINGH,JAMSHEDPUR V. DEPUTY COMMISSIONER OFINCOME TAX, CENTRAL CIRCLE, JAMSHEDPUR, JAMSHEDPUR

ITA 83/RAN/2022

AI Insights

The case revolves around a penalty imposed on Bimla Devi Singh following a search and seizure operation under section 132 of the Income Tax Act, 1961. During the operation, the assessee admitted to certain manipulations in share transactions to earn long-term capital gains and offered undisclosed income, which was accepted by the AO without modification. However, a penalty of Rs. 7,26,727 was later imposed for alleged concealment of income under section 271(1)(c). The assessee contested the penalty, arguing that the notice was defective and the income returned was accepted without any adverse inference. The Tribunal, referencing several judicial precedents, found the penalty notice to be ambiguous and thus invalid, leading to the cancellation of the penalty.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 32763 (ITAT-RANCHI)
• Duration Of Justice: 2 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2015-2016
• Appeal Filed On: 26-09-2022
• Other Referred Cases: CIT & Anr. vs. Manjunatha Cotton & Ginning Factory, SSA's Emeralds Meadows vs. CIT, Raj Kumar Agrawal vs CIT, Mohd. Farhan A. Shaik vs. Dy. CIT, Pr. CIT vs. Golden Peace Hotels and Resorts (P) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Capital Gains; Principle of natural justice; Initiation of penalty proceedings
• Section: 250; 271(1)(c); 153A; 274

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL \"RANCHI BENCH\", RANCHI Shri Partha Sarathi Chaudhury, Judicial Member Shri Ratnesh Nandan Sahay, Accountant Member I.T.A. No.83/RAN/2022 Assessment Year: 2015-16 Bimla Devi Singh CA Akshay Ringasia, Suit No. 3, 2nd Floor, AviskarBumra Enclave, Diagonal Road, Bistupur, Jamshedpur - 831001 [PAN: ALAPS0931R] ............…...………… Appellant vs. DCIT (Central Circle), Jamshedpur, Office of ACIT/DCIT, Central Circle 1, Office Road Jamshedpur - 831001 ........................... Respondent Appearances by: Assesseerepresented by :None (Written submission filed) Department represented by :Khubchand T. Pandya. Sr. DR Date of concluding the hearing :11.11.2024 Date of pronouncing the order : 28.11.2024 ORDER Per Ratnesh Nandan Sahay, Accountant Member: This appeal filed by the Assessee is against the order of the Ld. Commissioner of Income Tax (Appeals), Patna-3[hereinafter referred to as “the Ld. CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2015- 16, dated 27.07.2022. 2. The assessee has raised the following grounds of appeal: I.T.A. No.83/RAN/2022 Bimla Devi Singh 2 \"1. That under the facts and circumstances of the case, no penalty u/s.271(1)(c) should had been levied, hence the impugned order levying penalty of Rs. 7,26,727/- needs to be quashed. 2. That the very initiation of penalty is bad in law as the Ld. AO has failed to record a proper or transparent satisfaction in his notice while initiating proceedings under section 271(1)(c), thus rendering the entire penalty proceeding null and void. 3. That under the facts and circumstances, the initiation of penalty proceedings under section 271(1)(C) are illegal and unsustainable in law, in view of legal interpretation and the settled judicial pronouncement by various courts and benches of tribunals. 4. That without prejudice, by no stretch of imagination could the assessee be subjected to penalty for concealment when the return income itself was accepted without modification and there was no undisclosed income which is sine qua non for invoking section 271(1)(c). 5. That the assessee craves leave to add, alter or amend any ground before or at the time of hearing.\" 3. The facts of the case, in brief, are that in this case search & seizure operation was conducted u/s132 of the Income tax Act on 17.08.2017 and the statement of the assessee was recorded on oath u/s 132(4) of the Act in which the assessee admitted that certain manipulations were done in the transaction of shares to earn long term capital gains and to buy peace, the assessee offered undisclosed income and paid due tax on that while filing return of income in response to notice u/s 153A of the Act. It was alleged by the assessee that the Ld. AO had accepted the same income returned by it but subsequently, initiated penalty proceedings u/s 271(1)(c) of the Act and issued notice u/s 274 of the Act and finally, imposed a penalty of Rs.7,26,727/-. I.T.A. No.83/RAN/2022 Bimla Devi Singh 3 4. Aggrieved by the order of the Ld. AO, the assessee preferred appeal before the Ld. CIT(A) who dismissed the appeal by passing a detailed reasoned order. 5. Aggrieved by the above order, the appellant has preferred this appeal. Before us, the ld. Authorised Representative also submitted a written submission in support of the grounds taken in the appeal. It was claimed by the appellant that all the relevant details were produced before the AO during assessment proceedings u/s 153A of the Act and no adverse inference was drawn by the Ld. AO and the income returned by the assessee was accepted without disturbing the same. In fact, no evidence was brought on record to prove that any concealment has been made by the assessee or any inaccurate particulars have been furnished. Further, the appellant also filed a copy of penalty notices issued u/s 274 r.w.s. 271 (1) (c) of the Act and claimed that the said notice is defective in as much as it did not specifically state as to whether the notice was for concealment of income or for furnishing of incorrect particulars of income and placed reliance on various case laws in support of its contention that if certain show cause notice of penalty in printed form was issued u/s 274 without pointing out the relevant default, initiation of penalty proceedings on one limb while finding the I.T.A. No.83/RAN/2022 Bimla Devi Singh 4 assessee guilty in another limb is bad in law as held in the case of CIT &Anr. vs. Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar.) It is further contended the Hon'ble Supreme Court in the case of in SSA’s Emeralds Meadows vs. CIT 242 taxmann 180 on similar facts has held there was no substantial question of law and dismissed the SLP of the Department with regard to the above penalty of proceedings. 6. The learned DR relied on the orders of lower authorities and justified that the penalty was rightly initiated and imposed. 7. We have carefully considered the rival submissions along with the judicial decisions. It may be stated here that similar issue has already been dealt with by this Bench in its recent decision in the case of Raj Kumar Agrawal vs CIT for Assessment Years 2012-13 to 2016-17 in ITA No.255- 258/Ran/2023 dated 26th August 2024 on alleged defective notice issued u/s 274 of the Act. The Bench after taking note of the facts of the case and proposition of law as emerging from cited decisions above cancelled all the penalty orders. The operative part of the appeal is reproduced as below for ready reference: - \"4. We observe from the notices above that the limb on which the penalty has been imposed is not specified. The inappropriate portion of the notice has not been struck off. It is discernible that the AO had not striked off either of the two limbs i.e. concealment of the particulars of income; and furnishing of inaccurate particulars. The Full bench of the Hon'ble Bombay High Court in Mohd. Farhan A. Shaik vs. I.T.A. No.83/RAN/2022 Bimla Devi Singh 5 Dy. CIT (2021) 125 taxmann.com 253 (Bom.) considered this very issue. Answering the question in affirmative, the full bench held that a defect in notice of not striking the inappropriate words vitiates the penalty even though the AO had properly recorded the satisfaction for imposition of penalty in his order u/s143 (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 the portions which are inapplicable in the penalty notice were not struck off, the penalty was vitiated. SLP of the Department against this judgment has been dismissed by the Hon'ble Supreme Court in Pr. CIT vs. Golden Peace Hotels and Resorts (P) Ltd. (2021) 124 taxmann.com 249 (S.C). 5. The Hon'ble Karnataka High Court in SSA Emeralds Meadows vs. CIT 242 taxmann 180 also echoed the view that if the charge of penalty is not specific in the notice issued to the assessee u/s 274 r.w.s.271 (1) (c) of the Act, meaning thereby if such notice is ambiguous as to whether penalty is levied for concealment of income or for providing of inaccurate particulars of income, then such notice is void ab initio and bad in law. This view of the Hon'ble Karnataka High Court was upheld by the Hon'ble Apex Court whereby the SLP filed by the Department was dismissed in CIT vs. SSA Emeralds Meadows (2016 )242 taxmann 180 (S.C). 6. We must reiterate and we feel appropriate in this context of adjudication also to revisit the classic decision of Hon'ble Karnataka High Court in CIT &Anr. vs. Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar.) wherein the court had enshrined that levy of penalty is altogether different from assessment procedures. The penalty cannot be levied in a routine manner. The principles of natural justice must be followed wherein the notice served on the assessee must clearly and unambiguously specify the charge on which the Department proposes to levy the penalty so that the assessee can be ready with his defence and prepare his case and submissions accordingly. 7. In view thereof, even without going into the merits of the extant cases only on the very legal premise that in the penalty notice issued u/s 274 r.e.s.271(1)(c) of the Act, the inapplicable words were not struck off, the levy of penalty therefore is vitiated and is held bad in law. We therefore, set aside the orders of the ld. CIT(A) and direct the AO to delete the penalty from the hands of the assessee for the years hereinabove enumerated in the cause title.\" 8. Since the issue in hand hinges on the alleged defective show cause notice issued in terms of section 274 of the Act, following I.T.A. No.83/RAN/2022 Bimla Devi Singh 6 this Bench’s decision in the case of Raj Kumar Agrawal(supra),we, set aside the penalty order and direct the AO to delete the penalty imposed on the assessee. 9. In the result, the appeal filed by the assessee is allowed. Order pronounced on 28.11.2024. Sd/- Sd/- [Partha Sarathi Chaudhury] [Ratnesh Nandan Sahay] Judicial Member Accountant Member Dated: 28.11.2024. AK, PS (on tour) Copy of the order forwarded to: 1.Bimla Devi Singh 2.DCIT (Central Circle), Jamshedpur, 3. CIT(A) 4. Pr.CIT 5. CIT(DR) 6. Guard File //True copy// BY ORDER, (Senior Private Secretary) (On Tour), ITAT, Ranchi "