Rajesh Kalra, Hanumangarh Town V. DCIT, Circle-1, Bikaner

ITA 37/JODH/2023

AI Insights

The case involves Rajesh Kalra, the proprietor of M/s. Zodiac Imaging and Diagnostic Centre, who appealed against the penalty levied by the Deputy Commissioner of Income Tax (DCIT), Circle-1, Bikaner, under section 271(1)(c) of the Income Tax Act. The penalty was imposed following a survey under section 133A and subsequent assessments which led to an additional income assessment. The assessee contested the penalty in the CIT(A), which was upheld, leading to the appeal in the Tribunal. The main legal issue was the procedural validity of the penalty notice, specifically the failure to strike off the irrelevant charge in the notice.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125597 (ITAT-JODHPUR)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-08-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 13-02-2023
• Other Referred Cases: Mohd Farhan A Shaikh Vs. DCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 271(1)(c); 143(3); 133A; 250; 274; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “DB” BENCH, JODHPUR BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER & SHRI DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER ITA No. 37/JODH/2023 (A.Y: 2014-15) Rajesh Kalra, Prop. M/s. Zodiac Imaging and Diagnostic Centre, Hanumangarh -335513, Rajasthan. Vs. DCIT, Circle – 1, Bikaner – 334001, Rajasthan. PAN/GIR No. : AKAPK9599E Appellant .. Respondent Assessee by : None Revenue by : Ms. Prerana Choudhary, JCIT DR Date of Hearing 17.08.2023 Date of Pronouncement 17.08.2023 आदेश / O R D E R PER PAVAN KUMAR GADALE JM: The assessee has filed the appeal against the order of the order of the National Faceless Appeal Centre (NFAC), Delhi/ CIT(A) and passed u/s 271(1)(C) and U/sec 250 of the Act. 2. There is a delay of 85 days in filing the appeal before the Honble Tribunal and the assessee has filed an affidavit for condonation of delay. Whereas, the facts mentioned in the affidavit are reasonable and the Ld.DR has no specific ITA No. 37/Jodh/2023 Rajesh Kalra, Hanumangarh. - 2 - objections. Accordingly, we condone the delay and admit the appeal. The assessee has filed the appeal challenging the levy of penalty U/sec271(1)(C) of the Act. 3. The brief facts of the case are that the assessee is engaged in the business of providing services and health care services. The assessee has filed the return of income for the A.Y 2014-15 on 28.02.2015 disclosing a total income of Rs. 57,60,353/-.There was a survey u/s 133A of the Act conducted at the premises of the assessee. The Assessing Officer (AO) considered the facts of survey operations and issued notice u/s 143(2) and U/sec142(1) of the Act. In compliance, the Ld. AR of the assessee appeared from time to time and submitted the details of computation income, tax audit report and other details. Further the AO has dealt on the disclosures made by the assessee during the survey and the facts with respect to the Gross profit percentage, net profit and gross collections of the assessee and has estimated the net profit @ 13% as against @12.10% offered by the assessee and made the addition of differential amount of Rs 7,64,812/- and passed the assessment order u/s 143(3) of the Act dated 30.12.2016. ITA No. 37/Jodh/2023 Rajesh Kalra, Hanumangarh. - 3 - 4. Subsequently, the AO has initiated penalty proceedings u/s 271(1)(c) of the Act, whereas in the penalty proceedings the assessee was issued show cause notice and the assessee has filed the detailed submissions referred at Page 1 of the order but the AO was not satisfied with the explanations and levied a penalty of Rs.66,950/- and passed the order u/s 271(1)(c) of the Act dated 06-11-2020. 5. Aggrieved by the penalty order, the assessee has filed an appeal before the CIT(A). In the appellate proceedings, the CIT(A) has considered the grounds of appeal, findings of the proceedings and confirmed the levy of penalty and dismissed the assessee appeal. Aggrieved by the CIT(A) order, the assessee has filed an appeal before the Hon’ble Tribunal. 6. At the time of hearing, none appeared on behalf of the assessee. Whereas the assessee has challenged the levy of penalty U/sec271(1)(C) of the Act. The Ld.DR supported the order of the CIT(A). 7. We heard the Ld. DR submissions and perused the material on record. The sole crux of the disputed issue is that the assessee has challenged the levy of penalty and legal issue of non striking of charge in the penalty notice i.e. whether the charge is for concealment of income or ITA No. 37/Jodh/2023 Rajesh Kalra, Hanumangarh. - 4 - furnishing of in accurate particulars of income and the impugned notice was filed. We find the Honble High Court of Bombay in Mohd Farhan A Shaikh Vs. DCIT in Tax Appeal No. 51 to 57 of 2012 dated 11.03.2021 (2021) 125 .taxmann. com 253 /434 ITR 1 (Bombay) has dealt on this disputed issue of not striking off charge in the penalty notice would vitiate the penalty proceedings. The Hon’ble High Court has made observations at page 56 as under; 180. One course of before us is curing a defect in the notice by referring to the assessment order, which may or not contain reason 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 Sec. 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 Sec. 271(1)(c), r.w.s. 274 of the 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 deferent statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through ITA No. 37/Jodh/2023 Rajesh Kalra, Hanumangarh. - 5 - 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. 8. We have considered the facts, circumstances and ratio of the decision of Honble High Court and are of the view that in the present case the A.O has not strike off the charge for levy of penalty for concealment of income or for furnishing of inaccurate particulars of income. Accordingly, we set aside the order of the CIT(A) and quash the penalty notice. And allow the grounds of appeal in favour of the assessee. 9. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 17.08.2023. Sd/- Sd/- (DR DIPAK P RIPOTE) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Jodhpur Dated 17.08.2023 KRK, PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. Concerned CIT 5. DR, ITAT, Jodhpur ITA No. 37/Jodh/2023 Rajesh Kalra, Hanumangarh. - 6 - 6. Guard file. आदेशानुसार/ BY ORDER, //True Copy// 1. ( Asst. Registrar) ITAT, Jodhpur