MEENA GUPTA,DELHI V. ACIT CENTRAL CIRCLE-14,NEW DELHI, NEW DELHI

ITA 1418/DEL/2024

AI Insights

The case involves Meena Gupta, the appellant, who appealed against the penalty imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income-tax Act, 1961, for the assessment year 2012-13. The penalty was levied following the disallowance of renovation expenses claimed by the assessee, which were not supported by any documents. The CIT(A) upheld the penalty, which led to the appeal before the Income Tax Appellate Tribunal. The primary contention of the assessee was the vagueness of the penalty notice, which did not clearly specify the grounds for the penalty. The Tribunal, referencing several judicial precedents, concluded that the notice was indeed defective and thus the penalty could not be sustained.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 470260 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Other Referred Cases: Pr. CIT Vs. Mr. Zoheb Hosain and others, CIT Vs. Manjunath Cotton and Ginning Factory, SSA Emerald Meadows, Sahara India Life Insurance Company Ltd V PCIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT KATOCH
• Assessee Lawyers: MADHAV KAPOOR
• Keywords: Cost of acquisition; Principle of natural justice
• Section: 271(1)(c); 153C; 274; 73

Judgement Text

"Page 1 of 9 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘E’ BENCH, NEW DELHI BEFORE MS. MADHUMITA ROY, JUDICIAL MEMBER, AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 1418/DEL/2024 [A.Y. 2012-13] Meena Gupta Vs. The A.C.I.T 27/29, 1st Floor, Gali No. 9 Central Circle – 14, Vishwas Nagar, Delhi New Delhi PAN – AAGPG 6925 J (Applicant) (Respondent) Assessee By : Shri Madhav Kapoor, Adv Department By : Shri Amit Katoch, Sr. DR Date of Hearing : 12.03.2025 Date of Pronouncement : 21.03.2025 ORDER PER NAVEEN CHANDRA, A.M:- This appeal by the assessee is preferred against the order of the ld. ld. CIT(A), new Delhi dated 16.01.2024 for A.Y 2012-13. ITA No. 1418/DEL/2024 [A.Y. 2012-13] Meena Gupta Page 2 of 9 2. The solitary grievance of the assessee is that the ld. CIT(A) erred in confirming the penalty of Rs. 12,36,814/- levied by the Assessing Officer u/s 271(1)(c) of the Income-tax Act, 1961 [the Act, for short]. 3. There is a delay of 11 days in filing appeal by the assessee. Finding the reasons stated by the assessee to be plausible and reasonable, we condone the delay. 4. Brief facts of the case are that the assessee while filing return of income u/s 153C of the Act had declared capital gain of Rs 20,84,508/-on sale of property for a total consideration of Rs 71,50,000/-. The assessee while calculating capital gain, had taken an amount of Rs. 48,84,524/- as construction/renovation expenses during different years for calculating cost of acquisition. As the assessee had not been able to furnish any documents in support of her claim on cost of improvement/renovation, the same were disallowed by the AO and added to the total income of the assessee. This disallowance was sustained by the CIT(A). 5. In the assessment order u/s 153C/144 of the Act, the Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the Act on the said disallowance of Rs 48,84,524/- without mentioning under which limb of section 271(1)(c) the penalty is being initiated. In the penalty proceedings, ITA No. 1418/DEL/2024 [A.Y. 2012-13] Meena Gupta Page 3 of 9 the Assessing Officer, being not impressed with the explanation of the assessee levied penalty on the said disallowance. The AO however, while levying the penalty u/s 271(1)(c) of the Act mentioned that it is for “concealment of income by way of furnishing inaccurate particulars”. 6. Aggrieved the assessee is before us. At the very outset, the ld. counsel for the assessee vehemently stated that the penalty on account of concealment of income is not in accordance with the show cause notice u/s 271(1)(c) of the Act. The ld. AR for the assessee challenging the impugned penalty order contended that show-cause notice issued by the AO is not a valid notice to initiate the penalty proceedings as the assessee has not been made aware if it has concealed the particulars of income or has furnished inaccurate particulars of such income. The ld. counsel for the assessee reiterated that the penalty notice is defective as no specific charge has been pointed out. The ld AR further argued that the additions made in the assessment are made on estimate basis and presumptions and therefore no penal provisions can be initiated and penalty order needs to be quashed. The ld AR relied on the following decisions: i) Pr. CIT Vs. Mr. Zoheb Hosain and others vide judgment dated 22.11.2024 ii) CIT Vs. Manjunath Cotton and Ginning Factory 359 ITR 565(Karn) ITA No. 1418/DEL/2024 [A.Y. 2012-13] Meena Gupta Page 4 of 9 7. Per contra, the ld. DR relied upon the orders of the authorities below. The ld. DR responding to the arguments made by the ld. AR contended inter alia that the notice issued by the AO is not standalone document which is based on assessment order and that the notice has been issued in respect of concealment of income. 8. We have heard the rival submissions and have perused the relevant material on record. Undisputedly, penalty of Rs. 12,36,814/- has been levied u/s 271(1)(c) of the Act. The entire quarrel revolves around the penalty notice, which according to the assessee, does not specify the limb under which the penalty is levied. We find that while recording satisfaction, for initiating penalty u/s 271(1)(c) of the Act, the Assessing Officer has not mentioned on what account penalty is being levied–whether for concealment of income or for furnishing inaccurate particular of income. We further find that the notice issued u/s 271(1)(c) of the Act does not score off the relevant portion and is not specific regarding the charge leveled on the assessee. We find that the AO has recorded in the penalty order that penalty has been imposed for “concealment of income by furnishing inaccurate particulars”. ITA No. 1418/DEL/2024 [A.Y. 2012-13] Meena Gupta Page 5 of 9 9. We find for a fact that the additions made against the assessee during quantum proceedings have already been confirmed. It is however, settled principle of law that penalty proceedings are separate from assessment proceedings and that the penalty cannot be imposed merely on the ground that additions made in the income of the assessee has been confirmed. It is incumbent on the AO to prove that there was concealment of particulars of income or assessee has furnished inaccurate particulars of such income for imposition of penalty u/s 271(1)(c). 10. In the backdrop of the aforesaid facts and circumstances of the case, and from the bare perusal of the notice issued to the assessee, we are of the opinion that the assessee has not been called upon to explain if he has concealed the particulars of income or furnished inaccurate particulars of such income. In such a situation the decision of Hon’ble Karnataka High Court in case of CIT vs. Manjunatha Cotton and Ginning Factory & Ors. 359 ITR 565 (Karn) is illuminating. It dealt with the identical issue threadbare and came to the following conclusion :- “63. In the light of what is stated above, what emerges is as under: ********* p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income ITA No. 1418/DEL/2024 [A.Y. 2012-13] Meena Gupta Page 6 of 9 q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. t) The penalty proceedings are distinct from the assessment proceedings. The proceedings for imposition of penalty though emanate from proceedings of assessment, it is independent and separate aspect of the proceedings. u) The findings recorded in the assessment proceedings in so far as \"concealment of income\" and \"furnishing of incorrect particulars\" would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings.” 11. Similar view was taken by the Hon’ble High Court of Karnataka in the case of SSA Emerald Meadows ITA No. 380 of 2015. The SLP of the revenue against this judgement of the Hon’ble High Court of Karnataka was dismissed by the Hon’ble Supreme Court in 73 taxmann.com 248. The relevant findings of the above judgement read as under: “Notice issued by the Assessing Officer u/s 274 r.w.s 271(1)(c) of 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 issue was decided in favour of the assessee.” ITA No. 1418/DEL/2024 [A.Y. 2012-13] Meena Gupta Page 7 of 9 12. In identical circumstances, the Hon'ble High Court of Delhi in the case of Sahara India Life Insurance Company Ltd V PCIT [2019] 108 taxmann.com 597 (Delhi) order dated 02.08.2019 has held as under: “21. The Respondent had challenged the upholding of the penalty imposed under Section 271(1)(c) of the Act, which was accepted by the ITAT. It followed the decision of the Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar) and observed that the notice issued by the AO would be bad in law if it did not specify which limb of Section 271(1) (c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. The Karnataka High Court had followed the above judgment in the subsequent order in Commissioner of Income Tax v. SSA's Emerald Meadows (2016) 73 Taxman.com 241 (Kar) , the appeal against which was dismissed by the Supreme Court of India in SLP No. 11485 of 2016 by order dated 5th August, 2016.” 13. We have noted above that the AO has not placed any reason for initiating penalty u/s 271(1)(c) in the assessment order u/s 153C/144. In such a situation the Hon'ble High Court of Delhi in the case of Virgo Marketing Pvt Ltd [2008] 171 Taxmann 156 [Delhi] had disapproved the levy of penalty holding as under: “We are unable to discern from a reading of the assessment order why the Assessing Officer chose to initiate penalty proceedings against the assessed and under which part of Section 271(1)(c) of the Act. In other words, we are unable to discern from the assessment order the reason for initiating penalty proceedings. Therefore, the concurrent view held by both the authorities below must be accepted.” ITA No. 1418/DEL/2024 [A.Y. 2012-13] Meena Gupta Page 8 of 9 14. In the light of above judicial precedents and pronouncements, we find ourselves as having a considered view that when the assessee has not been specifically made aware of the charges leveled against him as to whether there is a concealment of income or furnishing of inaccurate particulars of income on his part, the penalty u/s 271(1)(c) of the Act is not sustainable. We therefore hold that the AO/CIT(A) have erred in levying/confirming the penalty of Rs 12,36,814/- u/s 271(1)(c) which is not sustainable in the eyes of law and accordingly the same is directed to be deleted. Consequently, the appeal filed by the assessee is hereby allowed. 15. In the result, the appeal of the assessee in ITA No. 1418/DEL/2024 is allowed. The order is pronounced in the open court on 21.03.2025. Sd/- Sd/- [MADHUMITA ROY] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 21st MARCH, 2024. VL/ ITA No. 1418/DEL/2024 [A.Y. 2012-13] Meena Gupta Page 9 of 9 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) Asst. Registrar, 5. DR ITAT, New Delhi Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order… 2. Date on which the typed draft Tribunal Order is placed before the Dictation Member 3. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 4. Date on which the approved draft Tribunal Order comes to the Sr. P.S./P.S. 5. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr. P.S./P.S 7. Date on which the final Tribunal Order is uploaded by the Sr. P.S./P.S. on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing off the disposed of files on the judiSIS portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial 11. The date on which the file goes to the Assistant Registrar for endorsement of the order 12. Date of Dispatch of the Order "