Chandraiah Balanna Kalal, Mumbai V. DCIT 42(2)(1), Mumbai

ITA 1285/MUM/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1606 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-06-2024
• Assessment Year: 2012-2013
• Appeal Filed On: 19-03-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 271(1)(c); 250; 274; 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C”, MUMBAI BEFORE SHRI ANIKESH BANERJEE, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA 1285/Mum/2024 (Assessment year: 2012-13) Chandraiah Balanna Kalal E-1201, Fennel, Nr. Madhuvan Society, Shimpoli, Gorai Road Borivali West, Maharashtra – 400 092 PAN : AABPK8755H vs DCIT 42(2)(1), Mumbai Kautilya Bhavan, Bandra Kurla Complex, Bandra (East), Maharashtra-400 051 APPELLANT RESPONDENT Assessee by : Shri Sumit Mantri Respondent by : Shri H.M. Bhatt (SR. DR.) Date of hearing : 12/06/2024 Date of pronouncement : 18/ 06/2024 O R D E R PER ANIKESH BANERJEE, J.M: Instant appeal of the Assessee is preferred against the order of theLd. National Faceless Appeal Centre, Delhi [for brevity, ‘Ld.CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’), for Assessment Year 2012-13, date of order 13.03.2024.The impugned order was emanated from the order of the Ld.Income-tax Officer, Ward 32(1)(2), Mumbai (in short, ‘the A.O.’) passed under section271(1)(c) of the Act, date of order12/03/2018. 2 ITA No.1285 /Mum/2024 Chandraiah Balanna Kalal 2. The assesseehas taken the following grounds of appeal:- “Ground -1. On the facts and the circumstances of the case, the Ld. A.O. erred in issuing the notice u/s 274 r.w.s. 271(l)(c) since the same does not mentions the satisfaction of the reasons for initiation of the penalty proceeding and hence the same needs to be quashed. Ground -2. On the facts and the circumstances of the case, the learned AO erred in not mentioning whether the notice has been issued towards "Concealment of income" or "for furnishing of inaccurate particulars", thus, the above notice itself is invalid and bad in law further in assessment order also the initiation has been made for both the limbs. Ground -3. On the facts and circumstances of the case, the Id. CIT(A) NFAC erred in confirming the penalty order passed by Id assessing officer without appreciating that the Id. Assessing officer vide order giving effect to the IT AT order allowed the disallowances and deleted the additions. Ground -4. On the facts and circumstances of the case, the Id. CIT(A) NFAC erred in imposing penalty without appreciating that the addition has been made on assumption basis which itself will not attract penalty u/s. 271(l)(c). Ground -5. The appellant craves leaves to add, to delete, or amend any of the above grounds of appeal at the time of the hearing.” 3. Brief facts of the case are that the assessment was completed under section 143(3). Finally, the assessment order was set aside by the ITAT, Mumbai Bench and with a part relief for the assessee. The Ld.AO passed a rectification order and calculated the tax sought to be evaded amount to Rs.59,08,492/- @100%. So, the Ld.AO levied penalty amount of Rs.59,08,492/-. Being aggrieved, the assessee filed an appeal before the Ld.CIT(A). Ld.CIT(A) dismissed the appeal petition of the assessee. Being aggrieved, assessee filed an appeal before us. 3 ITA No.1285 /Mum/2024 Chandraiah Balanna Kalal 4. We heard the rival submission and considered the documents available in the record. The Ld.AR first agitated the legal issue related to ground No.1 about the issuance of defective notice by the Ld.AO during the proceedings under section 274 read with section 271(1)(c) of the Act. The relevant notice dated 13/03/2015 is reproduced as below:- 4 ITA No.1285 /Mum/2024 Chandraiah Balanna Kalal 5 ITA No.1285 /Mum/2024 Chandraiah Balanna Kalal 5. The Ld.DR argued and fully relied on the order of the Revenueauthorities. 6. We heard the rival submissions and considered the documents available in the record. The issue is squarely covered by the judgement of Hon’ble Jurisdictional High Court in the case of Mohammed Farhan A. Shaikh Vs. PCIT (125 taxamnn.com 253) vide order dt. 11.3.2021. The relevant paragraphs are reproduced as below: - “179. Besides, the prima facie opinion in the assessment order need not always translate into actual penalty proceedings. These proceedings, in fact, commence with the statutory notice under section 271(1)(c) read with section 274. Again, whether this prima facie opinion is sufficient to inform the assessee about the precise charge for the penalty is a matter of inference and, thus, a matter of litigation and adjudication. The solution, again, is a tick mark; it avoids litigation arising out of uncertainty. 180. One course of action before us is curing a defect in the notice by referring to the assessment order, which may or may not contain reasons for the penalty proceedings. The other course of action is the prevention of defect in the notice—and that prevention takes just a tick mark. Prudence demands prevention is better than cure. Answers: Question No. 1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(1)(c), does a mere defect in the notice— not striking off the irrelevant matter—vitiate the penalty proceedings? 181. It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(1)(c), read with section 274 of IT Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness. 182. More particularly, a penal provision, even with civil consequences, must be construed strictly. And ambiguity, if any, must be resolved in the affected assessee's favour.” 6 ITA No.1285 /Mum/2024 Chandraiah Balanna Kalal 6.1. The issue is squarely covered by the jurisdictional High Court which is legally binding on us. Ld. AO did not mention the nature of concealment in the notice issued u/s 274/271(1)(c). The counsel laid down that in the absence of such specific notice, the notice would be invalid. As held in various judicial pronouncements including the decision of Hon’ble Karnataka High Court in CIT V/s SAS’s Emerald Meadows (73 Taxmann.com 241) against which Special Leave Petition (SLP) filed by the department stood dismissed by Hon’ble Supreme Court which is reported as 73 Taxmann.com 248. The notice u/s 274/271(1)(c) of the Act is not carrying the specific limb. Therefore, this is a case where both the parts of the offences i.e., concealment of income as well as furnishing of inaccurate particulars of income were involved. Finally, respectfully following the binding judicial precedents as cited aforesaid, we are of the considered opinion that the impugned penalty is not sustainable on legal grounds. The ld. DR is unable to submit any contrary judgment before the bench. Hence, penalty U/s 271(1)(c) amount of Rs.59,08,492/- is quashed. The appeal of the assessee is succeeded. Order pronounced in the open court on 18 th day of June 2024. Sd/- sd/- (GAGAN GOYAL) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,दिन ांक/Dated: 18/06/2024 Pavanan 7 ITA No.1285 /Mum/2024 Chandraiah Balanna Kalal Copy of the Order forwarded to: 1. अपील र्थी/The Appellant , 2. प्रदिव िी/ The Respondent. 3. आयकरआयुक्त CIT 4. दवभ गीयप्रदिदनदि, आय.अपी.अदि., मुबांई/DR, ITAT, Mumbai 5. ग र्डफ इल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, Mumbai