Ramjilal Construction Pvt. Ltd., New Delhi V. ITO, Ward- 21(1), New Delhi

ITA 4736/DEL/2019

AI Insights

Ramjilal Construction Pvt. Ltd. appealed against the penalty imposed by the Income Tax Officer under section 271(1)(c) for alleged concealment and furnishing of inaccurate particulars of income related to the undervalued closing stock. The company had voluntarily disclosed additional income during the assessment proceedings, attributing the initial undervaluation to the health issues of one director and the financial inexperience of another. The Tribunal, referencing several High Court judgments, ruled that the notice for penalty did not meet the legal requirements as it failed to specify the exact grounds for the penalty, leading to the obliteration of the penalty.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131833 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 07-12-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 23-05-2019
• Other Referred Cases: CIT vs. Manjunatha Cotton and Ginning Factory, Mr. Mohd. Farhan A. Shaikh Vs ACIT, PCIT vs. Sahara India Life Insurance Co. Ltd., CIT vs. SSA'S Emerald Meadows
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 271(1)(c); 143(3); 274; 73

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL DELHIBENCH ‘F’, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member Sh. Yogesh Kumar US, Judicial Member ITA No. 4736/Del/2019 : Asstt. Year: 2012-13 Ramjilal Construction Pvt. Ltd., L-1/288A, DDA Flats, Kalkaji, New Delhi-110019 Vs. Income Tax Officer, Ward-21(1), New Delhi (APPELLANT) (RESPONDENT) PAN No. AACCR0292G Assessee by : None Revenue by : Sh. K. K. Mishra, Sr. DR Date of Hearing: 08.12.2022 Date of Pronouncement: 03.03.2023 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the assessee against the order of the ld CIT(A)-7, New Delhi dated 04.04.2019. 2. The assessee has raised the following grounds of appeal: “1. In sustaining the penalty u/s 271(1)(c) on the addition of Rs.31,11,206/- representing the closing stock which had been surrendered by the assesse voluntarily during the assessment proceedings, before detection by the Assessing Officer, as the quantitative details of stocks were not available during the audit due to health problem of the director of the company looking after the financial matters and the other director of the company being not literate enough to be conversant with the financial matters.” ITA No. 4736/Del/2019 Ramjilal Construction Pvt. Ltd 2 3. The submission of the assessee as mentioned in para no. 2 of the Assessment Order reads as under: “2. ..................The opening stock includes Rs.1,40,194/- understated and taxed in the previous year ended on 31.3.2011. That in view of the position stated above and pursuance of the assessee company decision to offer the undervalued stock as its additional income and the assessee company offers the above said income as its additional income. The assessee hereby discloses voluntarily and in good faith a total sum of Rs.31,11,206/- as his additional income during the A.Y. 2012-13. The assessee is filing a revised computation of income, disclosing the working of the interest and tax on total income including the additional income offered by the assessee. That the assessee company prays that having regard to the facts and circumstances stated above and the full and true disclosure of additions income herein made voluntarily and good faith by the assessee, your goodself is requested to waive penalty if any u/s 271(1)(c) of the Income Tax Act, 1961 and no prosecution proceedings be initiated in consequence of assessment to be made bringing to charge the additional income as disclosed.” .....................”I am satisfied that the assessee has concealed particulars of income/furnished inaccurate particulars of its income for which penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 are being initiated separately.” 4. Para No. 6 of the Assessment Order reads as under: “6. Assessed u/s 143(3) at Rs.47,41,410/-. Issue necessary forms. Charge interest as per Rule. Give credit for prepaid taxes. Initiate penalty proceedings u/s 271(1)(c) for furnishing inaccurate particulars of income and concealment of such income.” ITA No. 4736/Del/2019 Ramjilal Construction Pvt. Ltd 3 5. We have perused the para 2 of the penalty order which is as under: “2. Penalty proceedings were initiated by issuing notice u/s 274 read with section 271(1)(c) of the Income Tax Act, 1961 vide notice dated 20.03.2015 for furnishing inaccurate particulars and concealment of income at the time of passing of the order u/s 143(3) on issues addition on account of under valuation of stock.” 6. On this issue, we are guided by the following judgments: 1) Karnataka High Court: CIT vs. Manjunatha Cotton and Ginning Factory: 359 ITR 565 held that notice under section 274 should specifically state the grounds mentioned in section 271(1)(c) of the Act, i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy requirement of law. 2) Bombay High Court: Mr. Mohd. Farhan A. Shaikh Vs ACIT Section 271(1)(c): Penalty-Concealment-Non-striking off of the irrelevant part while issuing notice u/s 271(1)(c) of the Income Tax Act, order is bad in law. Assessee must be informed of the ground of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness. 3) The Hon’ble jurisdictional Delhi High Court in the case of PCIT vs. Sahara India Life Insurance Co. Ltd. in ITA No. 475 of 2019, reiterated that notice under section 274 should specifically state the grounds on which penalty was ITA No. 4736/Del/2019 Ramjilal Construction Pvt. Ltd 4 sought to be imposed as the assessee should know the grounds which he has to meet specifically. 4) The aforesaid principle has been reiterated in the in the case of CIT vs. SSA'S Emerald Meadows: 73 taxmann.com 241 (Kar) [Revenue’s SLP dismissed in 242 Taxman 180] 7. Hence, respectfully following the order of the Hon’ble Jurisdictional High Court, since the AO has not been specified u/s 274 as to whether penalty is proposed for alleged ‘concealment of income’ OR ‘furnishing of inaccurate particulars of such income’, the penalty levied is hereby obliterated. 8. In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 03/03/2023. Sd/- Sd/- (Yogesh Kumar US) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 03/03/2023 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR