MUKESH DESAI, MUMBAI V. CIRCLE 25(3), MUMBAI

ITA 3030/MUM/2022

AI Insights

The case involves Mukesh Desai, an individual and proprietor of M/s. Pathik Computers, who appealed against the penalty imposed by the Income Tax Officer (ITO) under section 271(1)(c) for concealment of income and furnishing inaccurate particulars. The penalty was initially confirmed by the Commissioner of Income Tax (Appeals) at the National Faceless Appeal Centre (NFAC). The primary contention in the appeal was the procedural defect in the issuance of the show cause notice, which did not strike out the inappropriate limb under section 271(1)(c). The Tribunal, referencing a decision by the Hon'ble Jurisdictional High Court, held that such a procedural error invalidates the penalty.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125786 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 20-03-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 29-11-2022
• Other Referred Cases: Mohd. Farhan A. Shaikh v. ACIT [2021] 125 taxmann.com 253 (Bom)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard
• Section: 271(1)(c); 143(3); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI B R BASKARAN, AM AND MS. KAVITHA RAJAGOPAL, JM IT A N o s . 3 030/ M u m / 20 22 (A s s ess me nt Y e a r s : 20 10 - 1 1) Mukesh Desai 9, Madhu Kunj, Tejpal Road, Vile Parle (E), Mumbai-400 057 V s. ITO, Ward-25(3)(1) Mumbai P A N / G I R N o. AA BP D 77 88 D (Appellant) : (Respondent) Assessee by : Shri Akash Kumar Revenue by : Ms. Mahita Nair D a te o f H e a r i n g : 21.03.2023 D ate of P ro n ou n ce me n t : 31.03.2023 O R D E R Per Kavitha Rajagopal, J M: This appeal has been filed by the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) (‘ld.CIT(A) for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2010-11. 2. The solitary issue involved in this appeal is that the assessee has challenged the penalty levied u/s. 271(1)(c) of the Act amounting to Rs.65,61,479/-. 3. The brief facts of the case are that the assessee is an individual and proprietor of M/s. Pathik Computers. The assessee filed its return of income for the impugned year dated 14.10.2010, declaring total income at Rs.18,33,430/-. The assessee’s case was selected for scrutiny in the assessment order u/s. 143(3) of the Act passed on 30.03.2013, determining the total income at Rs.2,31,88,490/- where the Assessing Officer had made 2 ITA No. 3 0 3 0 / M u m / 2 0 2 2 ( A . Y . 2 0 1 0 - 1 1 ) Mukesh Desai vs. ITO various additions on bogus purchases, foreign travel expense, depreciation and cash deposits aggregating to Rs.2,13,55,059/-. 4. The A.O. initiated the penalty proceedings u/s. 271(1)(c) of the Act vide order dated 31.03.2018 and the penalty of Rs.65,61,479/- was levied. 5. The assessee has challenged the said order before the ld. CIT(A) on the ground that the assessee was not given opportunity of being heard. The ld. CIT(A) confirmed the penalty levied by the A.O. on the ground that the assessee has failed to furnish the documents to substantiate his contention inspite of several opportunities. 6. The assessee is in appeal before us, challenging the impugned order. 7. The learned Authorised Representative (ld. AR for short) for the assessee contended that the assessee was not given sufficient opportunity before the ld. CIT(A) and further contended that the penalty order was levied for concealment of income and that the assessee had made wrong claim bogus expenses by way of bogus purchases, foreign travel, cash deposit and depreciation of home theatre. The ld. AR further stated that the impugned show cause notice dated 30.03.2013 was invalid for the reason that the A.O. has failed to strike out inappropriate limb u/s. 271(1)(c) of the Act. The ld. AR relied on the decision of the Hon'ble Jurisdictional High Court in the case of Mohd. Farhan A. Shaikh v. ACIT [2021] 125 taxmann.com 253 (Bom). 8. The learned Departmental Representative (ld. DR for short) for the Revenue had nothing to controvert on the said fact. 3 ITA No. 3 0 3 0 / M u m / 2 0 2 2 ( A . Y . 2 0 1 0 - 1 1 ) Mukesh Desai vs. ITO 9. Having heard the rival submissions and perused the materials on record. It is evident that the impugned show cause notice dated 30.03.2013 issued to the assessee by the A.O., it is observed that the A.O. has failed to strike out the irrelevant limb, i.e., whether ‘concealment of particulars of income’ or ‘furnished inaccurate particulars’. The A.O. is said to have issued the impugned notice mechanically without following the mandatory criteria of the statutory provision. It is observed that the notice issued to the A.O. must specific whether the A.O. has levied penalty for concealment of particulars of income or for furnishing of inaccurate particulars of income precisely. It is a settled position that non striking of inapplicable limb vitiates the penalty proceedings. Though the assessee has not raised this issue as a ground of appeal, the ld. AR for the assessee relied on the said legal ground during the appellate proceeding. It is pertinent to point out that it is a settled proposition of law where various courts have taken the view that the non striking of the irrelevant limbs tantamount to the deletion of levy of penalty u/s. 271(1)(c) of the Act. The Hon'ble High Court in Mohd. Farhan A. Shaikh (supra) has held that the non striking of irrelevant limb u/s. 271(1)(c) of the Act as to whether it was for concealment of particulars of income or furnishing of inaccurate particulars would vitiate the penalty proceedings. 10. By respectfully, following the above said decision, we are of the considered opinion that the penalty levied by the A.O. and confirmed by the ld. CIT(A) ought to be deleted on the legal ground. As these issues has been decided on this ground it is not necessary to adjudicate the same on merits of the case. 4 ITA No. 3 0 3 0 / M u m / 2 0 2 2 ( A . Y . 2 0 1 0 - 1 1 ) Mukesh Desai vs. ITO 11. In the result, this appeal filed by the assessee is allowed. Order pronounced in the open court on 31.03.2023 Sd/- Sd/- (B. R. Baskaran) (Kavitha Rajagopal) Accountant Member Judicial Member Mumbai; Dated : 31.03.2023 Roshani , Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT - concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai