SHRI SANJAYKUMAR BABULAL JAIN, MUM V. DCIT, CC-6(3), MUM

ITA 32/MUM/2023

AI Insights

The case involves Shri Sanjaykumar Babulal Jain, the appellant, contesting a penalty of Rs. 75,860 levied by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2011-12. The penalty was based on additions made to the returned income during the assessment proceedings under section 143(3) read with section 153A. The Commissioner of Income-tax (Appeals) upheld the penalty, which led to the appeal before the Income Tax Appellate Tribunal. The appellant raised an additional ground during the proceedings, arguing that the penalty notice was vague and did not specify the exact nature of the alleged misconduct (concealment of income or furnishing of inaccurate particulars), which is a requirement as per the judicial precedents.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123613 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 18-04-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 04-01-2023
• Other Referred Cases: Mohd. Farhan A. Shaikh v. DCIT Central Circle 1 [2021] 434 ITR 1 (Bombay)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 271(1)(c); 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI NARENDER KUMAR CHOUDHRY (JUDICIAL MEMBER) ITA No. 32/MUM/2023 Assessment Year: 2011-12 Shri Sanjaykumar Babulal Jain, 28, Kewal Industries Estate, SB Marg, Lower Parel (W), Mumbai-400013. Vs. DCIT, CC-6(3), 19 th floor, Air India Building, Nariman Point, Mumbai-400021. PAN No. AEFPJ 7802 Q Appellant Respondent Assessee by : Mr. Karan Jain, AR Revenue by : Mr. A.S. Sant, DR Date of Hearing : 19/04/2023 Date of pronouncement : 26/04/2023 ORDER PER OM PRAKASH KANT, AM This appeal has been preferred by the assessee against order dated 29.11.2022 passed by the Ld. Commissioner of Income-tax (Appeals)-54, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2011-12, raising following grounds: On the facts and in the circumstances of the case and in law the Hon’ble CIT(A) erred in upholding the penalty levied u/s 271(1)(c) of the IT Act of Rs.75,860/- by the Ld. AO and the reason assigned for doing so are wrong and contrary to the provision of Income Tax Act and rules made there under. 2. Before us, the Ld. Counsel of application of the assessee seeking admission of the addition ground. The relevant ground is reproduced as under: "On the facts and in the circumstances of the case and in law, the notice dated 28.03.2014 issued to the without indicating that there was concealment of particulars of income or furnishing of incorrect particulars of such income will vitiate the penalty notice and subsequent proceedings and hence the same is invalid and illegal" 3. The additional g legal in nature and no investigation of the fresh facts is required therefore, same was admitted for adjudication in view of the decision of the Hon’ble Supreme Court in the case of 229 ITR 83 (SC). 4. Briefly stated, facts of the case completed u/s 143(3) r.w.s. 153 additions were made to the returned income and penalty u/s 271(1)(c) of the Income initiated. 5. On further appeal sustained addition of Rs.2,23,172/ additions made by the Assessing Officer Assessing Officer after giving opportunity of being heard penalty of Rs.75,857/ Shri Sanjaykumar Babulal Jain Before us, the Ld. Counsel of the assessee has filed an application of the assessee seeking admission of the addition ground. The relevant ground is reproduced as under: "On the facts and in the circumstances of the case and in law, the notice dated 28.03.2014 issued to the without indicating that there was concealment of particulars of income or furnishing of incorrect particulars of such income will vitiate the penalty notice and subsequent proceedings and hence the same is invalid and illegal" The additional ground raised by the assessee being and no investigation of the fresh facts is required therefore, same was admitted for adjudication in view of the decision of the Hon’ble Supreme Court in the case of Briefly stated, facts of the case are that in the assessment completed u/s 143(3) r.w.s. 153A of the Act on 21.12.2016 additions were made to the returned income and penalty u/s 271(1)(c) of the Income-tax Act, 1961 (in short ‘the Act’) On further appeal against quantum addition, the Ld. CIT(A) sustained addition of Rs.2,23,172/- and deleted the balance additions made by the Assessing Officer. Accordingly Assessing Officer after giving opportunity of being heard penalty of Rs.75,857/- vide his order dated 26.03.2019. Shri Sanjaykumar Babulal Jain. 2 ITA No. 32/M/2023 the assessee has filed an application of the assessee seeking admission of the additional ground. The relevant ground is reproduced as under: "On the facts and in the circumstances of the case and in law, the notice dated 28.03.2014 issued to the appellant without indicating that there was concealment of particulars of income or furnishing of incorrect particulars of such income will vitiate the penalty notice and subsequent proceedings and hence the same is invalid and illegal" round raised by the assessee being purely of and no investigation of the fresh facts is required therefore, same was admitted for adjudication in view of the decision of the Hon’ble Supreme Court in the case of NTPC Ltd. that in the assessment of the Act on 21.12.2016, certain additions were made to the returned income and penalty u/s tax Act, 1961 (in short ‘the Act’) was quantum addition, the Ld. CIT(A) and deleted the balance ccordingly, the Ld. Assessing Officer after giving opportunity of being heard, levied vide his order dated 26.03.2019. 6. Aggrieved, the assessee is by way of raising ground and additional ground as reproduced above. 7. Before us, the assessee has filed a paper book containing pages 1 to 71 and in support of additi the notice issued for initiating penalty u/s 271(1)(c) of the Act before 28.03.2014, t either concealment or furnishing of inaccurate particulars indicated by the Assess assessment order and submitted that in the assessment order also the Assessing Officer has not specified whether the penalty has been initiated for concealment of income or for furnishing inaccurate particulars of the i of the decision of the Hon’ble Jurisdictional High Court in the case of Mohd. Farhan A. Shaikh v. DCIT Central Circle 1 in [2021] 434 ITR 1 (Bombay) liable to be quashed. 8. On the other hand, the Ld. Departmental Representative (DR) relied on the order of the lower authorities. 9. We have heard rival submission of the parties on the issue dispute of the additional ground raised. We find that penalty proceedings have been initiated in the case of the assessee without specifying the charges concealment of the income or furnishing of inaccurate particulars of Shri Sanjaykumar Babulal Jain Aggrieved, the assessee is by way of raising ground and additional ground as reproduced above. he assessee has filed a paper book containing pages 1 to 71 and in support of additional ground submitted that in issued for initiating penalty u/s 271(1)(c) of the Act , the relevant limb for initiating the penalty i.e. either concealment or furnishing of inaccurate particulars indicated by the Assessing officer. He also referred to the assessment order and submitted that in the assessment order also the Assessing Officer has not specified whether the penalty has been initiated for concealment of income or for furnishing inaccurate particulars of the income. In the circumstances in view of the decision of the Hon’ble Jurisdictional High Court in the case Mohd. Farhan A. Shaikh v. DCIT Central Circle 1 in [2021] 434 ITR 1 (Bombay), the penalty levied is bad in law and therefore, liable to be quashed. On the other hand, the Ld. Departmental Representative (DR) relied on the order of the lower authorities. We have heard rival submission of the parties on the issue dispute of the additional ground raised. We find that penalty een initiated in the case of the assessee without specifying the charges in the notice , whether it was for concealment of the income or furnishing of inaccurate particulars of Shri Sanjaykumar Babulal Jain. 3 ITA No. 32/M/2023 Aggrieved, the assessee is by way of raising ground and he assessee has filed a paper book containing onal ground submitted that in issued for initiating penalty u/s 271(1)(c) of the Act he relevant limb for initiating the penalty i.e. either concealment or furnishing of inaccurate particulars, was not e also referred to the assessment order and submitted that in the assessment order also the Assessing Officer has not specified whether the penalty has been initiated for concealment of income or for furnishing ncome. In the circumstances in view of the decision of the Hon’ble Jurisdictional High Court in the case Mohd. Farhan A. Shaikh v. DCIT Central Circle 1 in [2021] , the penalty levied is bad in law and therefore, On the other hand, the Ld. Departmental Representative (DR) We have heard rival submission of the parties on the issue-in- dispute of the additional ground raised. We find that penalty een initiated in the case of the assessee without whether it was for concealment of the income or furnishing of inaccurate particulars of the income. Even charges for initiating penalty have not been specified in the assessment order. in he case of Mohd. Farhan A. Shaikh v. DCIT Central Circle 1 (supra) has held that the penalty u/s 271(1)(c) of the Act cannot be sustained. relevant finding of the Hon’ble reproduced as under: “178. Therefore, in every instance, it is a question of inference whether the assessment order contained any grounds for ini whenever the notice is vague or imprecise, the assessee assails it as bad; the Revenue defends it by saying that the assessment order contains the precise charge. Thus, it becomes a matter of adjudication, opening lit floodgates. The solution is a tick mark in the printed notice the Revenue is used to serving on the assessees. 179. Besides, the prima facie opinion in the assessment order need not always translate into actual penalty proceedings. These proceedings 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 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 r 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 satisfaction for imposing penalty on one or the other, or both Shri Sanjaykumar Babulal Jain ven charges for initiating penalty have not been specified in the assessment order. The Hon’ble Bombay High Court Mohd. Farhan A. Shaikh v. DCIT Central Circle 1 has held thatin such cases of not specifying the charges, /s 271(1)(c) of the Act cannot be sustained. relevant finding of the Hon’ble Bombay High Court reproduced as under: 178. Therefore, in every instance, it is a question of inference whether the assessment order contained any grounds for initiating the penalty proceedings. Then, whenever the notice is vague or imprecise, the assessee assails it as bad; the Revenue defends it by saying that the assessment order contains the precise charge. Thus, it becomes a matter of adjudication, opening lit floodgates. The solution is a tick mark in the printed notice the Revenue is used to serving on the assessees. 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 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 and that prevention takes just a tick mark. Prudence demands prevention is better than cure. Question No.1: If the assessment order clearly satisfaction for imposing penalty on one or the other, or both Shri Sanjaykumar Babulal Jain. 4 ITA No. 32/M/2023 ven charges for initiating penalty have not been The Hon’ble Bombay High Court Mohd. Farhan A. Shaikh v. DCIT Central Circle 1 in such cases of not specifying the charges, /s 271(1)(c) of the Act cannot be sustained. The Court (supra) is 178. Therefore, in every instance, it is a question of inference whether the assessment order contained any tiating the penalty proceedings. Then, whenever the notice is vague or imprecise, the assessee assails it as bad; the Revenue defends it by saying that the assessment order contains the precise charge. Thus, it becomes a matter of adjudication, opening litigious floodgates. The solution is a tick mark in the printed notice 179. Besides, the prima facie opinion in the assessment order need not always translate into actual penalty , 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 easons for the penalty proceedings. The other course of action is the prevention of defect in the and that prevention takes just a tick mark. Prudence demands prevention is better than cure. 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(l)(c), does a mere defect in the notice the penalty proceedings? 181. It does. The primary burden lies o 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 m 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. 183. Therefore, we answer t that Goa Dourado Promotions and other cases have adopted an approach more in consonance with the statutory scheme. That means we must hold that Kaushalya does not lay down the correct proposition of law. .......................................” 9.1 Respectfully following the finding of the Hon’ble Jurisdictional High Court, the penalty proceedings init therefore same is cancelled. T issue-in-dispute is set aside. The additional ground of appeal of the assessee is accordingly allowed. Shri Sanjaykumar Babulal Jain grounds mentioned in Section 271(l)(c), does a mere defect in the notice—not striking off the irrelevant matter 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 4 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. 183. Therefore, we answer the first question to the effect that Goa Dourado Promotions and other cases have adopted an approach more in consonance with the statutory scheme. That means we must hold that Kaushalya does not lay down the correct proposition of law. .......................................” Respectfully following the finding of the Hon’ble Jurisdictional High Court, the penalty proceedings initiated are held to cancelled. The order of the Ld. CIT( dispute is set aside. The additional ground of appeal of the assessee is accordingly allowed. Shri Sanjaykumar Babulal Jain. 5 ITA No. 32/M/2023 grounds mentioned in Section 271(l)(c), does a mere defect not striking off the irrelevant matter—vitiate n 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 4 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 ust 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. he first question to the effect that Goa Dourado Promotions and other cases have adopted an approach more in consonance with the statutory scheme. That means we must hold that Kaushalya does not lay down the correct proposition of law. Respectfully following the finding of the Hon’ble Jurisdictional held to invalid and he order of the Ld. CIT(A) on the dispute is set aside. The additional ground of appeal of the 9.2 Since we have already cancelled the penalty, therefore, we are not required to adjudicate upon the ground 10. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on Sd/- (NARENDER KUMAR CHOUDHRY JUDICIAL MEMBER Mumbai; Dated: 26/04/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Shri Sanjaykumar Babulal Jain Since we have already cancelled the penalty, therefore, we are not required to adjudicate upon the grounds raised by the assessee. the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 26/04/2023. Sd/- NARENDER KUMAR CHOUDHRY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Shri Sanjaykumar Babulal Jain. 6 ITA No. 32/M/2023 Since we have already cancelled the penalty, therefore, we are raised by the assessee. the result, the appeal of the assessee is allowed. 04/2023. - OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai