SHRI AJAYA KUMAR CHADDA , JALANDHAR V. INCOME TAX OFFICER WARD-1 (1), JALANDHAR

ITA 146/ASR/2023

AI Insights

The case involves an appeal by Sh. Ajay Kumar Chadda against the order of the CIT(A) National Faceless Appeal Centre, Delhi, which confirmed the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961 for the Assessment Year 2015-16. The primary contention raised by the assessee was the defectiveness of the penalty notice issued under Section 274 read with Section 271, which failed to specify the exact nature of the default, whether it was for concealment of income or furnishing inaccurate particulars of income. The Tribunal admitted the additional ground of appeal and, after considering various precedents, including decisions from the Supreme Court and other High Courts, concluded that the notice was indeed defective and thus the penalty could not be sustained.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114544 (ITAT-AMRITSAR)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-08-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 16-05-2023
• Other Referred Cases: CIT v. Varas International, National Thermal Power Co. Ltd. v. CIT, Ventura Textiles Vs. CIT, Radhi ka Surgical Pvt. Ltd. vs. ACIT, M/s. Akhil Meditech Pvt. Ltd., P CIT vs. Sahara India Life Insurance Co. Ltd., CIT & Anr. v. Manjunatha Cotton and Ginning Factory, Mohd. Farhan A. Shaikh vs. Dy. CIT, I.G. International Pvt. Ltd. Vs. ACIT, Aesthetica Enterprises Pvt. Ltd. v. ACIT, M/s S S A 'Emerald Meadow, Commissioner of Income Tax vs. S S A 'Emerald Meadows
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHIT KUMAR NIGAM
• Assessee Lawyers: KARAN NAGPAL
• Section: 27; 271(1)(c); 90; 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No. 146/Asr/2023 Assessment Year: 2015-16 Sh. Ajay Kumar Chadda 687-R, Model Town, Jalandhar, Punjab [PAN: AAIPC 7006J] Vs. Income Tax Officer, Ward-1(1), Jalandhar (Appellant) (Respondent) Appellant by : Sh. Navdeep Monga, Adv. & Sh. Karan Nagpal, Adv. Respondent by: Sh. Mohit Kumar Nigam, Sr. DR Date of Hearing: 03.08.2023 Date of Pronouncement: 23.08.2023 ORDER Per Dr. M. L. Meena, AM: The captioned appeal has been filed by the by the assessee against the order of the ld. CIT(A) National Faceless Appeal Centre (NFAC), Delhi dated 23.03.2023 in respect of Assessment Year: 2015-16 wherein I.T.A. No. 146/Asr/2023 Assessment Year: 2015-16 2 challenging therein the confirmation of penalty levied u/s 271(1)(c) of the Income Tax Act, 1961. 2. At the time of hearing, the ld. counsel for the assessee has raised the additional ground of appeal under Rule 11 of the ITAT Rules as under: “viii. That on the facts and under the circumstance of the case the penalty levied under Section 271(1)(c) of the Act is void as the notice u/s.274 read with Sec. 271 dated 10.08.2017 is bad and defective as it was issued without deleting the appropriate clause under which the penalty is proposed to be imposed is either for filling of inaccurate particular of income or concealment of particulars of income and as such the notice is not sustainable and not curable.” 3. He prayed that the said additional ground arises out of the facts available on record and since it goes to the root of the matter, therefore, the same may be permitted to be admitted in the light of the decision of the Hon’ble Supreme Court in the case of CIT v. Varas International 284 ITR 80 (SC) and National Thermal Power Co. Ltd. v. CIT reported in 229 ITR 383 (SC). 4. Per contra, the ld. DR for the department failed to rebut the contention of the assessee on the issue of admission of additional on the legal issue. Since, the legal issue raised by the assessee goes to the root of the issue in deciding the matter and therefore, in the light of the principle I.T.A. No. 146/Asr/2023 Assessment Year: 2015-16 3 laid down by the Hon’ble Apex Court in the case of National Thermal Power Corporation Ltd. v. CIT (supra), the legal ground raised by the assessee is admitted for adjudication on merits of the case. He filed written brief, relevant is reproduced as under: “7 . L d . co u n se l a d ve r te d to th e imp u g n e d p e n a lty n otice d a te d 2 0 .0 6 .2 0 1 4 a n d sub mitte d th a t th e n a tu re o f d e fa u lt co mmi tte d b y th e a sse s se e i s n o t kn o w n a s th e in a p p ro p ria te p o r tio n in th e re le va n t co lu mn o f th e sh o w ca u se n o tice h a s n o t b ee n stru ck o ff. Co n se q u e n tl y, th e A sse ss in g O ffi ce r h i mse lf w a s u n su re o f th e ca te g o ry u n d e r w h ich th e d e fa u lt i s b la me d o n th e asse sse e . Co n se q u e n tl y, th e p e n a lty o rd e r p a sse d in co n se q u e nce o f su ch d e fe ctive n o t ice s u ffe rs f ro m n o n a p p lica t io n o f min d a n d la ck o f sa tisfa ctio n to w a rd s n a tu re o f d e fa u l t. It w a s fu rth e r p o in te d o u t th a t th e a sse s se e b e lo n g s to Ro ck la n d G ro u p o f co mp a n ie s w h e re th e se a rch w a s co n d u cte d o n 0 6 .0 9 .2 0 1 1 , a n d in th e id e ntica l se t o f fa cts, th e p e n a lty i mp o se d u /s.2 7 1 (1 )( c) w a s d e lete d in o th e r g ro u p ca se s o w n in g to si mi la r d e fe ct ive n o t ice . A re fe re nce w a s ma d e to th e d e cis io n o f Co -o rd in a te B e n ch o f Tr ib u n a l in Rad h i ka S u rg ica l P vt. L td . vs. A CI T in ITA s No .5 0 9 0 , 5 0 9 1 a n d 5 0 9 2 /De l/2 0 1 7 a n d M/s. A kh il Me d ite ch P vt. L td . in ITA s No .5 1 1 8 , 5 1 1 9, 5 1 2 0 a n d 5 1 2 l/De l/2 0 1 7 w h e re in th e id e n t ica l fa ct s itu a tio n th e p e n a lty h a s b e e n q u a sh e d . A f u rth e r re fe re n ce w a s ma d e to th e de cis io n o f th e Ho n ’b le H ig h Co u rt in ca se o f ( i ) P CI T v s. S a h a r a In d ia L ife In su ra n ce Co . L td . a s re p o rte d in 4 3 2 ITR 8 4 (De l. ); (i i ) CIT & A n r. v. Ma n ju n a th a Co t to n a n d G in n in g Fa cto r y, 3 5 9 ITR 56 5 (K a rn ) ; ( H i ) Mo h d . Fa rh a n A . S h a i kh v s. D y. CI T [2 0 2 1 ] 4 3 4 ITR 1 [B o m ( F B ] fo r th e p ro p o sit io n th a t n o tice issu e d u n d e r Se ct i o n 2 7 4 r.w . S e ctio n 2 7 1 (1 )( c) o f th e A ct is b a d in la w w h e re it d id n o t sp e cify u n d e r w h ich li mb o f S e ctio n 2 7 1 (l ) (c ) o f th e A ct, pe n a lty p ro ce e d in g s h a d b e e n in itia te d , i.e ., w h e th e r fo r co n ce a l me n t of p a rti cu la rs o f in co me o r fu rn i sh in g o f in a ccu ra te p a r ticu la rs o f in co me . It w a s th u s u rg e d th a t th e w h o le p ro ce e d in g s se e kin g to i mp o se p e n a lty is n o n - e st a n d b a d in la w a t th e th re sh o ld a n d co n se q u e n tly th e p e n a lty o rd e r in p u rsu a n c e o f th e d e fe ctive n o tice re q u ire s t o b e stru c k d o w n .” I.T.A. No. 146/Asr/2023 Assessment Year: 2015-16 4 5. Having heard both the sides, and perusal of the record and the impugned order, we find that the AO issued penalty notice u/s 274 r.w.s 271(1)(c) of the Act on 10.08.2017. Admittedly, the said notice was defective one, as both the limbs of section 271(1)(c) of the Act are mentioned therein. The Assessing Officer has not struck off the irrelevant clause in the said notice. Reliance is placed on the decision of Hon'ble Bombay High Court in the case of Ventura Textiles Vs. CIT (2020) 426 ITR 478 CBom) wherein it has been held that for the imposition of penalty under section 271(l)(c) there are two limbs i.e. concealment of particulars of income or furnishing inaccurate particulars of income, therefore it is necessary to struck off the inapplicable portion of limb which is not applicable in the case. As the AO has failed to struck off the inapplicable portion in the show-cause notice which was in printed format, thereby not indicating therein under which limb of section 271(l)(c) penalty was proposed to be imposed and thus it would lead to an inference of non- application of mind, thus vitiating the imposition of penalty. Recently, the Ld. ITAT, Mumbai Bench in the case of I.G. International Pvt. Ltd. Vs. ACIT IT A No. 123/Mum/2023 vide order dated 30.05.2023 has taken the similar view by setting aside the impugned penalty order based on the defective notice. The copy of notice issued u/s 274 r.w.s. 271 of the Act is reproduced for reference as under: I.T.A. No. 146/Asr/2023 Assessment Year: 2015-16 5 I.T.A. No. 146/Asr/2023 Assessment Year: 2015-16 6 6. The Hon’ble ITAT Delhi Benches Delhi in the case of Aesthetica Enteprises Pvt. Ltd. v. ACIT in ITA Nos. 5132 & 5132/Asr/2017 vide order dated 07.11.2022 deleted pending u/s 271(1)(c) by observing as under: “7 . W e h a ve h e a rd b o th th e p a rtie s a n d p e ru se d a l l t h e re le va n t ma te r ia l s a va i la b le o n re co rd . Fi rst o f a ll, in th e n o tice issu e d u / s 2 7 4 r.w .s 2 7 1 (1 )( c ) o f th e In co me . Ta xi A ct, 1 9 6 1 , th e re w a s n o sp e cif ic ch a rg e s a s re la te s to co n ce a l me n t o f in co me o r fu rn ish in g o f in a ccu ra te p a rt icu la rs o f in co me . Fro m th e n o ti ce d a te d 2 0 / 0 6 /2 0 1 4 p ro d u ce d b y th e L d . A R d u r i n g th e h e a rin g , i t ca n b e se e n th a t th e A sse ssin g O ffice r w a s n o t su re u n d e r w h ich li mb o f p ro vi sio n s o f S e c ti o n 2 7 1 o f th e In co me Ta x A ct, 1 96 1 , th e a sse sse e is l ia b le fo r p e n a lty . B e sid e s th a t th e A sse ss me n t O rd e r a lso d id n o t sp e cif y th e ch a rg e a s to w h e th e r th e re is co n ce a l men t o f in co me o r fu rn i sh in g o f in a cc u ra te p a rt icu la rs o f in co me in asse s se e 's ca se . B e sid e s th i s, th e p r e se n t ca se is re la t i n g to se a rch co n d u cte d b y th e Re ve n u e in th e p r e mise s o f th e a sse sse e , w h ile th e d e cis io n re lie d b y th e A sse ss in g O ffice r a s w e l l a s C1 T (A ) th a t o f Ho n ’b l e S u p re me Co u rt in ca se o f M a k Da ta P . L td . vs. CIT 3 5 8 I TR 5 9 3 i s re la t in g to su rve y a n d th e re i s n o issu e in vo lve d a b o u t th e n o tice is su e d u /s 2 7 1 (l )( c) r.w .s. 2 7 4 o f th e A ct. Th is ca se re l ie d by th e Re ve n u e is n o t a p p lica b le in t h e p re se n t ca se d u e to th e d istin g u i sh in g fa ct s. Th e re i s se p a ra te p ro vi sio n fo r p e n a l ty in se a rch ca se s g ive n u n d e r th e sta tu te a fte r 0 1 .0 7 .2 0 1 2 th a t o f S e ctio n 2 7 1 A A B o f th e A ct w h i ch w a s to ta lly ig n o re d b y th e A sse ssin g O ffice r. Th u s , th e p e n a lty it se lf is b a se d o n in co r re ct S e ctio n . Th e r e fo re w e a re ta ki n g u p th e co n te n tio n o f th e a sse sse e th a t th e re is n o p a rti cula r li m b me n tio n e d in th e n o tice issu e d u n d e r S e ctio n 2 7 1 (l )( c) r.w .p . 2 7 4 o f th e A ct. Th is i ssu e is sq u a re ly co ve re d b y th e d e c isio n o f th e Ho n ’b le S u p re me Co u rt in c a se o f M/s S S A ’ E me ra ld Me a d o w . Th e e xtra ct o f th e d e cis io n o f th e Ho n ’b le K a rn a ta ka Hig h Co u rt in M/s S S A ’ E me ra ld Me a d o w s a re a s u n d e r w h ich w a s co n fir me d b y th e Ho n ’b le A p e x Co u rt: I.T.A. No. 146/Asr/2023 Assessment Year: 2015-16 7 " 3 . Th e T rib u n a l h a s a l lo w e d th e a p p e a l fi le d b y the a sse sse e h o ld in g th e n o t ice issu e d b y th e A s se ss in g O ffi ce r u n d e r S e ct io n 2 7 4 re a d w ith S e ctio n 2 7 1 (l )( c) o f t h e In co me Ta x Act, 1 9 6 1 fo r sh o rt ’th e A ct ’) to b e b a d in la w a s it d id n o t sp ecify w h ich l i mb o f S e ctio n 2 7 1 ( i) (c ) o f th e A ct, th e pe n a lty p ro ce e d ing s h a d b e e n in it ia te d i.e ., w h e th e r fo r co n ce a l me n t o f p a rt icu la rs o f in co me o r fu rn i sh in g o f in a c c u ra te p a rt icu la rs o f in co me . Th e Tr ib u n a l, w h ile a llo w in g th e a p p e a l o f th e a sse s se e , h a s re l ie d o n t h e 1 TA No . 4 9 1 3 /De l/2 0 1 5 d e c i sio n o f th e D iv is io n B e n ch o f th is Co u rt re n d e re d in th e ca se o f CO MM IS S IO N E R O F INCO ME TA X -V S - MA N JU NA T HA C O TTO N A N D G I NNI NG FA CTO RY (2 0 1 3 ) 3 5 9 ITR 5 6 5 . 4 . In o u r v ie w , s i n ce th e ma tte r i s co ve re d b y ju d gme n t o f th e Div is io n B e n ch o f th is Co u rt ) w e a re o f th e o p in io n, n o su b sta n tia l q u e stio n o f la w a ri se s in th is a p p e a l f o r d e te r min at io n b y th is Co u rt. Th e a p p e a l i s a c co rd in g ly d is mis se d . " Th u s, A d d it io n a l G r o u n d No . (ii ) o f th e a sse sse e 's a p p e a l is a llo w e d . S in ce th e in ce p t io n o f th e n o tice is s u e d u /s 2 7 1 ( l)(c ) h a s b e co me n u ll a n d vo id , th e re is n o n e e d to co m me n t o n me r it o f th e ca se . Th e P e n a lty u /s 2 7 1 (1 ) (c ) o f th e A c t i s q u a sh e d . ” S in ce in th e in sta n t ca se a lso th e in a p p ro p r ia te w ord s in th e p e n a lty n o tice h a s n o t b e e n stru c k o ff a n d th e n o tice d o e s n o t s p e cify a s to u n d e r w h ich li mb o f th e p ro v is io n s, th e p e n a lty u / s 2 7 1 (1 ) (c ) h a s b e e n in it ia te d , th e r e fo re , w e a re o f th e co n sid e re d o p in i o n th a t th e p e n a lty le v ie d u /s 2 7 1 (l )( c) i s n o t su s ta in a b le a n d h a s to b e d e le te d . A lth o u g h th e L d . DR su b mitte d th a t me re n o n - str ik ing o ff o f th e in a p p ro p ria te w o rd s w il l n o t in va l id a te th e p e n a lty p ro ce e d in g s, h o w e ve r, th e d e cis io n o f th e Ho n ’b le K a rn a ta ka H ig h C o u rt in th e ca se o f S S A ’S E me ra ld Me a d o w s (su p ra ) w h e re th e S L P file d b y th e Re ve n u e h a s b e e n d is mi sse d is d ir e ctly o n th e i ssu e co n te ste d h e re in b y th e A sse sse e . Fu rth e r, w h e n th e n o ti ce is n o t me n t io n in g th e co n ce a l me n t o r th e fu rn ish in g o f i n a ccu ra te p a rticu la rs, th e ra t io la id d o w n b y th e Ho n ’b le H ig h Co u r t in ca se o f M /s. S a h a ra In d ia L ife In su ra n ce Co mp a n y L td . (su p r a ) w il l b e a p p l ic ab le in th e p re se n t ca se . Th e Ho n ’b le De lh i Hig h Co u rt h e ld a s u n d e r: I.T.A. No. 146/Asr/2023 Assessment Year: 2015-16 8 “2 1 . Th e Re sp o n d e n t h a d ch a l le n g e d th e u p h o ld in g o f th e p e n a lty i mp o se d u n d e r S e c tio n 2 7 1 ( l )( c) o f th e A ct, w h i ch wa s • a cce p te d b y th e ITA T. It fo l lo w e d th e d e cis io n o f th e K a rn a ta ka Hig h Co u rt in CI T v. Ma n ju n a th a Co t to n & G in n in g Fa cto ry 3 5 9 I TR 5 6 5 (K a r ) a n d o b se rve d th a t th e n o tice i ssu e d b y th e A O w o u ld b e b a d in la w if i t d id n o t sp e c ify w h ich l i mb o f S e ctio n 2 7 1 ( l )( c) t h e p e n a lty p ro ce e d in g s h a d b e e n in it ia te d u n d e r i.e . w h e th e r fo r c o n ce a l me n t o f p a rt icu la rs o f in co me o r fo r fu rn i sh in g o f in a ccu ra te p a rti cu la rs o f in co me . Th e K a rn a ta ka Hig h Co u rt h a d fo llo w e d th e ab ove ju d g me n t in th e su b se q u e n t o rd e r in Co mmi ss io n e r o f In co me Ta x v. S S A 's E me ra ld Me a d o w s (2 0 1 6 ) 7 3 Ta x ma n .co m 2 4 1 (K a r ), th e a p p e a l a g a in st w h ich w a s d is mis se d b y th e S u p re me Co u rt o f In d ia in S L P No : 1 1 4 8 5 o f 2 0 1 6 b y o rd e r d a te d 5 th A u g u st, 2 0 1 6 . 2 2 . O n th is is su e a g a in th is Co u rt i s u n a b le to find a n y e rro r h a vin g b e e n co mmitte d b y th e IT A T. No su b st a n tia l q u e s tion o f l a w a rise s . Th u s, n o t ice u n d e r S e ctio n 2 7 1 (l ) (c ) r.w .s. 2 7 4 o f th e A ct it se lf is b a d in la w . W e , th e re fo re , se t -a sid e th e o rd e r o f th e C1 T (A ) a n d d ire c t th e A s se ss in g O ffice r to ca n ce l th e p e n a lty so le v ie d . 9 . B e fo re u s , n o d ist in g u ish in g fe a tu r e in th e fa c ts o f t h e ca se in th e -ye a r u n d e r co n sid e ra t io n a n d th a t o f e a r lie r yea r h a s b e e n p o in te d o u t b y th e Re ve n u e . Fu rth e r i t h a s a lso n o t b ro u g h t o n re co rd a n y ma te r i a l to sh o w th a t the d e cisio n o f the Co -o rd in a te b e n ch o f th e Trib u n a l in a sse s se e ’s o w n ca se fo r A .Y . 2 0 0 8 -0 9 h a s b e e n se t a sid e / st a ye d o r o ve r ru le d b y th e h ig h e r ju d icia l fo ru m. Co n sid e rin g th e t o ta lit y o f th e a fo r e sa id fa ct s a n d f o llo w in g th e d e cis io n o f th e Co -o rd in a te b e n ch in th e a sse sse e ’s o w n ca se fo r 2 0 0 8 -0 9 a n d fo r si mi la r re a so n s, w e a re o f th e vie w th a t th e le vy o f p e n a lty u /s 2 7 1 (1 )( c) w a s n o t ju st ifie d . W e th e re fo r e d ire ct i ts d e le tio n . Thus t he gro unds of t he a s s e s s e e a re a llow e d. ” 1 0 . In p a rity w i th a vie w ta ke n b y t h e Co -o rd in a te B e n ch , w e a re in cl in e d to a cce p t t h e p le a o f th e a sse sse e th a t the n o ti c e is su e d fo r th e p u rp o se s o f i mp o sitio n o f p e n a lt y, w h ich su ffe rs fro m th e vi ce o f va g u e n e ss, d o e s n o t p ro v id e so u n d le g a l b a si s fo r imp o si tio n o f p e n a lty. Co n se q u e n tly, w e se t a s id e th e o rd e r o f the CIT (A ) a n d q u a sh th e i mp u g n e d p e n a lty o rd e r. 11. In the result, the appeal of the assessee is allowed.” I.T.A. No. 146/Asr/2023 Assessment Year: 2015-16 9 7. In the instant case, since the AO has failed to strike off the inapplicable portion in the show-cause notice in printed format, and hence, he failed to indicate therein under which limb of section 271(l)(c) penalty was proposed to be imposed. Thus, it would lead to an inference of non- application of mind, and as such vitiating the imposition of penalty. 8. In the above view, we accept the plea of the assessee as justified that the notice issued for the purposes of imposition of penalty, suffers from the vice of vagueness, and does not provide a sound legal basis for imposition of penalty. Consequently, we set aside the order of the CIT(A) and quash the impugned penalty order. 9. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 23.08.2023 Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr.PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T. True Copy By Order