SHANTILAL BALUBHAI PAREKH, MUMBAI V. INCOME TAX OFFICER-3(4), KALYAN

ITA 684/MUM/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5382 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 17-04-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 271(1)(c); 274; 73

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL “SMC” Bench, Mumbai Shri B.R. Baskaran (AM) I.T.A. No. 684/Mum/2022 (A.Y. 2010-11) Shantilal Balubhai Parekh 24, Gaurav Apartment Nahur Village Road Sarvoday Nagar, Mulund- W Mumbai-400 080. PAN : AKCPP9255C Vs. ITO-Ward 3(4) 2 nd Floor Rani Mansion Above Canara Bank, Murbad Road, Kalyan Pincode-421 301. (Appellant) (Respondent) Assessee by Shri Devendra Jain Department by Ms. Naina Krishnakumar Date of Hearing 19.07.2022 Date of Pronouncement 20.07.2022 O R D E R The assessee has filed this appeal challenging the order dated 9.7.2021 passed by learned CIT(A), National Faceless Appeal Centre, Delhi confirming the penalty of Rs.11,90,065/- levied by the Assessing Officer under section 271(1)(c) of the I.T. Act. 2. At the time of hearing, the learned AR submitted that the Assessing Officer has not struck off inapplicable portion out of the two types of charges mentioned in the notice issued to the assessee for initiating penalty proceedings u/s 271(1)(c) of the Act. The Ld A.R also furnished a copy of the said notice. He further submitted that the Assessing Officer levied penalty under section 271(1)(c) of the Act for A.Y. 2009-10 also and the division Bench of Mumbai ITAT, vide its order dated 28.6.2022, passed in ITA No. 580/Mum/2022 has deleted the penalty for non-striking off inapplicable portion in the penalty notice. He submitted that the Tribunal has rendered its decision following, inter alia, the decision rendered by Jurisdictional Bombay High Court in the case of Mohd. Farhan A. Shaikh Vs. DCIT (2021) 434 ITR 1. Shantilal Balubhai Parekh 2 Accordingly, the learned AR submitted that the facts are identical in this year also and accordingly prayed for deleting the penalty. 3. I have heard learned DR and perused the record. I noticed that the penalty levied in the hands of the assessee for A.Y. 2009-10 has been deleted by the Coordinate Bench on the reasoning that the Assessing Officer has not struck off inapplicable portion out of the two charges mentioned in the notice issued for initiating penalty proceedings. For the sake of convenience I extract below the order passed by the division bench of Mumbai ITAT in the hands of the assessee for Assessment year 2009-10: 2. The main grievance of the assessee is against the action of Ld. CIT(A), confirming the penalty levied u/s 271(1)(c) of the Act to the tune of Rs.83,282/-. 3. At the outset, the Ld. AR of the assessee Ms. Radha Halbe brought to our notice that the impugned penalty levied by AO is bad in law for issuing defective notice before levying the penalty. To buttress this contention, she drew our attention to the show cause notice (SCN) issued by the AO u/s 274 read with section 271(1)(c) of the Act dated 19.01.2015 which according to her is defective, since both the faults/charges i.e. have “concealment of income” or “furnishing inaccurate particulars of such income” are both featuring in the show cause notice; and since the AO has not stricken out the inapplicable fault/charges, the assessee was unable to know for what fault/charge the AO was proposing to levy the penalty. So according to her, the show cause notice is bad in law and therefore, the penalty levied pursuant to it is also bad in law, and therefore the penalty should be deleted and relied on the decisions of the Full bench of the Hon’ble Jurisdictional of High Court in the case of Mohd. Farhan A. Shaikh Vs. DCIT (2021) 434 ITR 1 (Bombay) dated 11.03.2021 wherein their Lordships has held that the show cause notice issued prior to levy of penalty without specifying the fault/charge against which the assessee is being proceeded against would vitiate the penalty itself. And thus the Hon’ble Court upheld the view of the division bench order in the case of PCIT Vs. Goa Dourado Promotions (P.) Ltd. (Tax Appeal No.18 of 2019, dated 26.11.2019) and held that the contrary view taken by another division bench in the case of CIT Vs. Smt. Kaushalya (1995) 216 ITR 660 (Bom) does not lay down the correct proposition of law. 4. We note that the notice in the instant case was issued by AO u/s 274 r.w. Section 271(1) (c) of the Act dated 19.01.2015 calling upon the assessee to show cause as to why the penalty should not be imposed u/s 271(1)(c) of the Act for the following faults viz, “to have concealed the particulars of his income” or ‘furnished inaccurate particulars of such income”. And further we note from perusal of the notice that a tick mark has been put on the first limb i.e. concealment of particulars of income. At the same time, it is also Shantilal Balubhai Parekh 3 taken note that the AO has not stricken down the other limb of the default/charge i.e. “furnishing of inaccurate particulars”. Thus, we note that the tick portion denote only the charge/fault of “concealment of particulars of its income”. However, on perusal of the penalty order, we find that the fault against which assessee has been proceeded against (as discerned from para no. 6 of the penalty order dated 26.03.2019) that it was for “furnishing of inaccurate particulars of income”. Therefore, we find that the specific fault/charge against which the assessee was called upon to explain vide the notice dated 19.01.2015 did not explicitly convey to the assessee for which fault/charge the assessee is being proceeded against. Resultantly, the show cause notice is vague, so is defective/invalid, and therefore bad in law as held in similar/identical cases wherein the Tribunal has held that when the notice itself is found invalid, the penalty levied thereafter is also bad in law and deleted the penalty. For that we note the decision of the Hon’ble Karnataka High Court in the case of CIT vs Manjunatha Cotton and Ginning Factory reported in (2013) 359 ITR 565 (Kar) and the Department’s SLP against it has been dismissed by the Hon’ble Supreme Court. We also find that Hon’ble Karnataka High Court in the case of CIT Vs. SSA’s Emerald Meadows, reported in (2016) 73 taxmann.com 241 (Kar) endorsed the same view in Manjunatha Cotton and Ginning Factory (supra) and held as under:- “3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (for short ‘the Act’), to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of CIT Vs. Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565/218 Taxman 423/35 taxmann.com 250(Kar). 4. In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court. The appeal is accordingly dismissed.” 6. Respectfully following the judicial precedents as well as the binding decision of the Full bench decision of the Hon’ble jurisdiction High Court’s in the case of Mohd. Farhan A. Shaikh (supra), we direct the deletion of the penalty levied in this case.” 4. In the instant year also, there is no dispute that the AO has not struck off the inapplicable portion out of the two charge mentioned in the notice issued for initiating penalty proceedings u/s 271(1)(c) of the Act, i.e., the penalty under the above said section is levied either for concealment of particulars of income or for furnishing of inaccurate particulars of income. The Courts have held that the assessee should be made known the specific Shantilal Balubhai Parekh 4 charge for which the penalty proceeding has been initiated, which is conveyed to the assessee by striking out inapplicable charge mentioned in the penalty notice. If the AO does not strike out the inapplicable portion out of two charges mentioned in the notice, then the said notice acquires An omnibus notice suffers from the vice of vagueness.acquires the character of omnibus notice and would suffer from the vice of vagueness, as held by Hon’ble Bombay High Court in the case of Mohd Farhan Shaik (supra). Hence the penalty order shall become bad in law and is liable to be quashed. 5. Accordingly, following the above said order passed by the division bench, which has, in turn, followed the binding decision of Hon’ble jurisdictional Bombay High Court, I hold that the penalty proceeding initiated by the AO is vitiated. Accordingly, the impugned penalty order is held as bad in law. Accordingly, I quash the impugned orders passed by Ld CIT(A) & AO. 6. In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on 20.07.2022. Sd/- (B.R. BASKARAN) ACCOUNTANT MEMBER Mumbai; Dated : 20/07/2022 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumbai