JITENDRA BABULAL SHAH-HUF, MUMBAI V. ITO-19(2)(1), MUMBAI

ITA 42/MUM/2023

AI Insights

The case involves Jitendra Babulal Shah (HUF), who appealed against the penalty levied by the Income Tax Officer (ITO) under section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2012-13. The penalty was initially imposed following an assessment that disallowed a claim of interest expenditure and subsequently increased the assessed income. The appellant contested the penalty, arguing that the notice was invalid as it did not specify the exact charge under which the penalty was being levied. The Commissioner of Income Tax (Appeals) upheld the penalty, leading to the appeal before the Tribunal. The Tribunal, referencing a decision by the Bombay High Court, found the penalty notice to be defective due to the lack of specificity in the charges, resulting in the quashing of the penalty.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299216 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 26-02-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 05-01-2023
• Other Referred Cases: CIT V/s. Samson Perinchery, Mohd Farhan A Shaikh Vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MAYANK KOTHARI
• Section: 271(1)(c); 143(3); 142(1); 143(1); 250; 274; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHIR PAVAN KUMAR GADALE, JUDICIAL MEMBER & SHRI GAGAN GOYAL ACCOUNTANT MEMBER ITA No. 42/Mum/2023 (A.Y: 2012-13) Jitendra Babulal Shah (HUF) 257-263 Shanti Sadan, D B Marg, Mumbai-400007 Vs. ITO – 19(2)(1) Matru Mandir, Tardevo Road, Mumbai-400007 ./ज आइआर ./PAN/GIR No. : AABHJ9591E Appellant .. Respondent Appellant by : Mr.Mayank Kothari.AR Respondent by : Ms.Vranda U Matkari.DR Date of Hearing 27.02.2023 Date of Pronouncement 28.02.2023 आद श / O R D E R PER PAVAN KUMAR GADALE JM: The assessee has filed the appeal against the order of the National Faceless Appeal Centre (NFAC), Delhi /CIT(A) passed u/s 271(1)(c) and 250 of the Act. The assessee has raised the grounds of appeal as under: 1(a) The learned Assessing Officer has erred in law and on f acts in not ref erring the specif ic limb of section 271(1)(c) for levy of penalty and theref ore the notice issued by the Assessing Off icer itself is bad in law and ITA No. 42/Mum/2023 Jitendra babulal Shah-HUF, Mumbai. - 2 - accordingly the order of levying the penalty is also bad in law and require to be quashed as held by various judicial authorities including Bombay High Court in the case of CIT V/s. Samson Perinchery. (b) The learned Assessing Officer has erred in law in levying the penalty of Rs.3,58,273/- u/s 271(1)(c) of Income Tax Ac t, 1961 without properly considering the f acts of the case and reply made in proper prospective. Your appellant craves leave to add, alter, and/ or amend the above ground of appeal. 2. The brief facts of the case are that the assessee is engaged in the business of export of readymade garments. The assessee has filed the return of income for the A.Y 2012-13 on 04.03.2012 disclosing a total income of Rs.8,94,764/- and the return of income was processed u/s 143(1) of the Act. Subsequently the notice u/s 143(2) and 142(1) of the Act along with questionnaire was issued. In compliance to the notice, the Ld. AR of the assessee appeared from time to time and submitted the details and the case was discussed. The AO on perusal of the financial statements found that the assessee has offered net income of Rs.8,62,401/-. The AO has called for the details of interest received and interest paid. The assessee has filed the details vide letter dated 27.12.2014 referred at Para 5.1 and 5.2 of the ITA No. 42/Mum/2023 Jitendra babulal Shah-HUF, Mumbai. - 3 - assessment order. The AO has dealt on the facts and details and the explanations in respect of loans and advances and the assessee has filed detailed submissions on 27.12.2014 referred at Para 5.1 of the order. Finally the AO has disallowed the claim of interest expenditure of Rs.43,84,686/- and assessed the total income of Rs.52,79,450/- and passed order u/s 143(3) of the Act dated 02.03.2015. 3. 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 explanations referred at Page 1 Para 2 in respect of the accrual of income, facts and findings of the assessment order but the AO was not satisfied with the explanations and levied a penalty of Rs.3,58,273/- and passed the order u/s 271(1)(c) of the Act dated 22-12-2021. 4. 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, submissions and has confirmed the penalty ITA No. 42/Mum/2023 Jitendra babulal Shah-HUF, Mumbai. - 4 - levied by the A.O and dismissed the assessee appeal. Aggrieved by the CIT(A) order, the assessee has filed an appeal before the Hon’ble Tribunal. 5. At the time of hearing, the Ld. AR of the assessee submitted that the assessee has cooperated in submitting the information with the A.O. Further the notice issued for levy of penalty is invalid and relied on the judicial decisions and prayed for allowing the appeal. Contra,the Ld. DR submitted that the CIT(A) has rightly confirmed the levy of penalty and the technicalities raised by the assessee are devoid of merits and supported the order of the CIT(A). 6. We heard the rival submissions and perused the material on record. The sole crux of the disputed issue is that the assessee has challenged the levy of penalty on legal issue as the A.O. has not applied his mind and non striking of charge in the penalty notice i.e. whether the charge is for concealment of income or furnishing of in accurate particulars of income. The Ld.AR demonstrated the copy of penalty notice dated 2-03-2015 and the submissions are realistic.We find the Jurisdictional Honble High Court of Bombay in ITA No. 42/Mum/2023 Jitendra babulal Shah-HUF, Mumbai. - 5 - Mohd Farhan A Shaikh Vs. DCIT in Tax Appeal No. 51 to 57 of 2012 dated 11.03.202 (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 bef ore us is curing a def ect in the no tice by ref erring to the assessment order, which may or not contain reason f or the penalty proceedings. The other course of ac tion is the prevention of d ef ect in the notice – and th at prevention takes just a tick mark. Prudence demands prevention is be tter than cure. Answers: Question No. 1: If the asse ssment order clearly records satisf action f or imposing penal ty on one or the other, or bo th ground s men tioned in Sec. 271(1)(c), does a mere def ect in the notice – not striking off the irrelevant matte r vitiate the penal ty proceed ings? 181. It does. The primary burden lies on the Revenue. In the asse ssment proceedings, it f orms an opinion, prima f acie or otherwise, to l aunch penal ty proceedings against the asse ssee. But that transl ates into action only through the statutory notice under Sec. 271(1)(c), r.w.s. 274 of the Act. True, the assessment proceedings f orm the basis f or the penal ty proceedings, but the y are no t composite proceed ings to draw s trength f rom each o ther. Nor can e ach cure the other’s def ect. A penal ty proceeding is a corollary; neverthel ess, it must s tand on its o wn. These proceed ings ITA No. 42/Mum/2023 Jitendra babulal Shah-HUF, Mumbai. - 6 - culminate under a def erent s tatu tory scheme that remains distinc t f rom the asse ssment proceedings. Theref ore, the asse ssee must be inf ormed of the ground s of the penalty proceed ings only th rough statu tory notice. An omnibus notice suff ers f rom the vice of vagueness. 182. More Par ticularly, a pen al provision, even with civ il consequences, must be construed stric tly. And ambiguity, if an y, must be resolved in the affected assessee’s f avour. 7. 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. 8. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 28.02.2023. Sd/- Sd/- (GAGAN GOYAL) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 28.02.2023 ITA No. 42/Mum/2023 Jitendra babulal Shah-HUF, Mumbai. - 7 - KRK, PS /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. आ र आ / The CIT(A) 4. आ र आ ( ) / Concerned CIT 5. "#$ % & &' , आ र ) र*, हमद द / DR, ITAT, Mumbai 6. % -. / 0 / Guard file. ान ु सार/ BY ORDER, " & //True Copy//() ( Asst. Registrar) ITAT, Mumbai