MALLA APPALARAJU, VISAKHAPATNAM V. INCOME TAX OFFICER, WARD-5(1), VISAKHAPATNAM

ITA 253/VIZ/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2163 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-04-2024
• Assessment Year: 2011-2012
• Appeal Filed On: 11-10-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA VILLURI
• Section: 69; 271(1)(c); 143(3); 274

Judgement Text

आयकरअपीलीयअधिकरण, विशाखापटणमपीठ, विशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्रीद ु व्ि ू रुआरएलरेड्डी, न्याययकसदस्यएिंश्रीएसबालाक ृ ष्णन, लेखासदस्यकेसमक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./ I.T.A. No.253/Viz/2023 (निर्धारणवर्ा/ Assessment Year : 2011-12) Malla Appalaraju, Visakkhapatnam. PAN: AZRPM 6152 F Vs. Income Tax Officer, Ward-5(1), Visakhapatnam. (अपीलधर्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलधर्थीकीओरसे/ Assessee by : Sri GVN Hari, AR प्रत्यधर्थीकीओरसे/ Revenue by : Dr. Aparna Villuri, Sr. AR स ु िवधईकीतधरीख/ Date of Hearing : 01/05/2024 घोर्णधकीतधरीख/Date of Pronouncement : 28/05/2024 O R D E R PER S. BALAKRISHNAN, Accountant Member : This appeal filed by the assessee is against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“Ld. CIT(A)-NFAC”] in DIN & Order No. ITBA/nfac/s/250/2023-24/1055126515(1), 14/08/2023 arising 2 out of the order passed U/s. 271(1)(c) of the Income Tax Act, 1961 [“the Act”] for the AY 2011-12. 2. Briefly stated the facts of the case are that the assessee, an individual, was engaged in the business of Indian Made Foreign Liquor (IMFL) in the name and style of “Ravi Wines” for the AY 2011-12. The assessee has e-filed his return of income on 27/09/2011 by admitting total income from the said business at Rs. 5,98,610/- on gross receipts of Rs. 3,14,06,199/-. Thereafter, the case was selected for scrutiny manually with the approval of the competent Authority and accordingly, the Ld. AO completed the assessment U/s. 143(3) on 28/03/2014 wherein the Ld. AO (i) estimated the income from IMFL business at Rs. 11,45,268/- and (ii) made addition of Rs. 39,58,613/- U/s. 69 of the Act under explained investment. Thus, the Ld. AO determined the assessed income of the assessee at Rs. 51,03,881/-. Aggrieved by the assessment order passed by the Ld. AO U/s. 143(3) of the Act and the additions made therein, the assessee filed an appeal before the Ld. CIT(A). On appeal, the Ld. CIT(A), with regard to the estimation of income from IMFL business of Rs. 11,45,268/-, directed the Ld. AO to re-compute the income @ 5% of the purchase price of the stock which was put to sale, net of all the 3 deduction. With regard to addition made by the Ld. AO towards unexplained investment U/s. 69, the Ld. CIT(A) has upheld the decision of the Ld.AO. Thereafter, the Ld. AO issued a show cause penalty notice U/s. 274 r.w.s 271(1)(c) of the Act, dated 28/03/2014 which was served on the assessee on 7/4/2011 and the assessee has submitted his reply on 21/03/2018. However, the Ld. AO did not consider the explanation and submissions of the assessee and observed as under: “Keeping in view the facts and circumstances of the case as discussed above and also the decision of the Ld. CIT(A), it is held that the addition made on account of estimation of income is not considered for levy of penalty U/s. 271(1)(c) of the Act as the same is done on estimation basis. However, the total addition made of Rs. 39,58,613/- towards unexplained investment U/s. 69 attracts the provisions of section 27(1)(c) as the same amount to ‘concealment of income’ because the assessee was unable to explain the sources for the same with any material evidences and the Ld. CIT(A) has also upheld this addition with his observations..........” Accordingly, the Ld. AO levied the penalty of Rs. 12,23,211/- U/s. 271(1)(c) of the Act and passed the order on 27/03/2018. Against the penalty order passed by the Ld. AO, the assessee filed an appeal before the Ld. CIT(A). On appeal, the Ld. CIT(A)- NFAC dismissed the appeal of the assessee and upheld the penalty levied by the Ld.AO. Aggrieved by the order of the Ld. 4 CIT(A)-NFAC, the assessee is in further appeal before the Tribunal by raising the following grounds of appeal: “1. The order of the Ld. CIT(A) is contrary to the facts and also the law applicable to the facts of the case. 2. The Ld. CIT(A) is not justified in upholding the penalty of Rs. 12,23,211/- levied by the AO U/s. 271(1)(c) of the Act. 3. The Ld. CIT(A) ought to have considered that the penalty is not warranted as appellant neither concealed the particulars of income nor furnished inaccurate particulars of income. 4. Any other grounds may be urged at the time of hearing.” 3. Further, the assessee has also filed an additional ground vide letter dated 04/12/2023 which reads as under: “The notice dated 28/03/2014 issued without mentioning the charge for the proposed penalty is invalid and is liable to be quashed as void ab initio”. 4. At the outset, the Ld. AR drawn our attention to the penalty notice issued U/s. 271(1)(c) of the Act and submitted that the Ld. AO did not mention the charge for the proposed penalty ie., whether it is for “concealment of particulars of income” or “furnishing of inaccurate particulars of income” which is required to be mentioned to decide the validity of the notice. Since the Ld. AO has not mentioned the reason in the notice issued U/s. 271(1)(c) as to why the penalty was being proposed to be imposed, the penalty notice itself is null and void and the penalty 5 order passed by the Ld. AO based on such invalid notice is liable to be quashed. 5. On the other hand, the Ld. Departmental Representative [DR] heavily relied on the order of the Ld. AO. The Ld. DR further submitted that the assessee has clearly understood the nature of charge against him as it is evident from his reply to the notice U/s. 274 r.w.s 271(1)(c) of the Act and therefore no prejudice is done to the assessee by simply not mentioning the reason in the notice and that solely does not render the notice invalid. 6. We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities. As per the provisions of section 271(1)(c) of the Act, it is mandatory to mention the reason in the notice as to whether the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. We have also carefully gone through the notice issued U/s. 274 r.w.s 271(1)(c) of the Act, dated 28/03/2014. On perusal of the said notice, we find that this is not the case of non-striking off of the relevant limb in the penalty notice issued to the assessee. This is the case where the Ld. AO has not even mentioned the reason as to why they are invoking the penalty provisions. It is a settled law that a 6 defect in the notice vitiates the entire proceedings. Therefore, considering the facts and circumstances of the case, we are of the considered view that since there is no proper notice stating whether it is for “concealment of particulars of income” or “furnishing of inaccurate particulars of income”, we have no hesitation to come to a conclusion that since the notice itself is not valid, the penalty order passed on the basis of such invalid notice is void ab initio. It is ordered accordingly. 7. In the result, appeal of the assessee is allowed. Pronounced in the open Court on 28 th May, 2024. Sd/- Sd/- (द ु व्ि ू रु आर.एल रेड्डी) (एस बालाक ृ ष्णन) (DUVVURU RL REDDY) (S. BALAKRISHNAN) न्याययकसदस्य/JUDICIAL MEMBER लेखासदस्य/ACCOUNTANT MEMBER Dated : 28/05/2024 OKK - SPS आदेशकीप्रतिलिपिअग्रेपिि/Copy of the order forwarded to:- 1. निर्धाररती/ The Assessee–Malla Appalaraju, D.No. 8-171/1, Pedamadaka, Aganampudi, Visakhapatnam, Andhra Pradesh – 530046. 7 2. रधजस्व/The Revenue –The Income Tax Officer, Ward-5(1) O/o. ITO, Pratyakshakar Bhavan, MVP Double Road, Visakhapatnam, Andhra Pradesh – 530017. 3. The Principal Commissioner of Income Tax, 4. आयकरआय ु क्त (अपील)/ The Commissioner of Income Tax 5. ववभधगीयप्रनतनिधर्, आयकरअपीलीयअधर्करण, ववशधखधपटणम/ DR,ITAT, Visakhapatnam 6. गधर्ाफ़धईल / Guard file आदेशधि ु सधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam