MUTHURATHINAM,TIRUPPUR V. ITO, WARD-1(2), TIRUPPUR

ITA 2656/CHNY/2024

AI Insights

The case revolves around a penalty appeal by the assessee, Muthurathinam, against the order of the National Faceless Appeal Centre (NFAC), which upheld a penalty under Section 271(1)(c) of the Income Tax Act, 1961. The primary contention was the inconsistency between the penalty notice, which cited 'furnishing of inaccurate particulars of income', and the penalty order, which cited 'concealment of income'. The Tribunal examined the procedural adherence in issuing the penalty and found that the penalty did not align with the grounds specified in the notice and the assessment order, leading to the allowance of the assessee's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 29359 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Other Referred Cases: Principal Commissioner of Income Tax vs. Sahara India Life Insurance Co. Ltd., CIT v. Manjunatha Cotton and Ginning Factory, Commissioner of Income Tax v. SSA's Emerald Meadows, Mr. Mohd. Farhan A. Shaikh v. 2021 SCC OnLine Bom
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANITHA; IRS
• Assessee Lawyers: S. SRIDHAR; ERODE
• Keywords: Revised return; Competent authority; Reason to believe
• Section: 148; 143(3); 142(1); 143(2); 271(1)(c); 44AD; 274; 73

Judgement Text

" आयकर अपीलीय अिधकरण ‘सी’ Ɋायपीठ चेɄई मŐ। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI माननीय ŵी मनोज क ुमार अŤवाल ,लेखा सद˟ एवं माननीय ŵी मनु क ुमार िगįर, Ɋाियक सद˟ क े समƗ। BEFORE HON’BLE SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER AND HON’BLE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER आयकरअपील सं./ ITA No.2656/Chny/2024 (िनधाŊरणवषŊ / Assessment Year: 2013-2014) Muthurathinam, 27/29, Kumarappapuram, 1st Street, Rayapuram Extension, Tirupur 641 601. [PAN: AVYPM 0862D] Vs. The Income Tax Officer, Ward 1(2) Tirupur. (अपीलाथȸ/Appellant) (Ĥ×यथȸ/Respondent) अपीलाथȸ कȧ ओर से/ Appellant by : Shri. S. Sridhar, (Erode) Advocate by virtual. Ĥ×यथȸ कȧ ओर से /Respondent by : Ms. Anitha, IRS, Addl. CIT. सुनवाई कȧ तारȣख/Date of Hearing : 31.12.2024 घोषणा कȧ तारȣख /Date of Pronouncement : 27.01.2025 आदेश / O R D E R PER MANU KUMAR GIRI (Judicial Member) This penalty appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre (NFAC), DELHI [CIT(A)] dated 21.08.2024 for Assessment Year 2013-14. 2. The issue sought to be urged by the assessee in this appeal is whether the CIT(A) was justified in upholding the penalty under Section 271(1)(c) of the Income Tax Act, 1961 [\"Act\"] by ignoring the fact that the assessing officer (‘AO’ in short) in 2 ITA No.2656/Chny/2024 assessment order dated 28.09.2021 has satisfied that penalty proceeding is being initiated separately for “furnishing of inaccurate particulars of such income” where as penalty order u/s 271(1)(c) dated 04.01.2022 levied penalty for “concealment of income”, although in the notice under Section 274 read with Section 271(1) (c), the AO has marked the specified limb as “that you have furnished inaccurate particulars of such income”. 3. For the sake of convenience, it will be apposite to refer to the facts of the case. Shorn of all necessary details, the facts are that assessee filed return on 25.09.2014, declaring income of Rs. 6,47,928/- as per provisions of section 44AD of the Act. The brief facts of the case are that the appellant filed the return of income on 25.09.2014 declaring total income of Rs. 6,47,928 as per provision of section 44AD of the Act for the assessment year, 2013-14. The appellant shown total business turnover of Rs. 92,83,302 in his return of income. As per information available with the Department, the appellant had deposited cash to the tune of 2,65,03,090/- in his bank account during the FY 2012-13. In view of this, the assessing officer had a reason to believe that the income otherwise chargeable to tax has escaped assessment. Therefore, with the sanction of competent authority u/s 151 of the Act, a notice u/s 148 dated 28.02.2020 was issued and served upon the appellant. In response, the appellant filed his Income Tax Return on 24.07.2020 declaring total income of Rs. 26,46,770/- by disclosing additional income of Rs.19,98,843/- under the head \"Income from other sources\". Thereafter, notices u/s. 143(2) and 142(1) were issued and the appellant had submitted his replies. 3 ITA No.2656/Chny/2024 The assessment was completed u/s. 143(3) r.w.s. 147 of the Act on 28.09.2021 by accepting revised total income as disclosed in the return of income filed against notice u/s. 148. However, while completing the assessment, the assessing officer treated the additional income of Rs.19,98,843 offered by the appellant as 'business income' as against his claim as \"Income from Other Sources\" in the return of income. Penalty proceedings under section 271(1)(c) were separately initiated for 'furnishing. inaccurate particulars of such income vide notice dated 28.09.2021 and an order under section 271(1)(c) dated 04.01.2022 was passed levying minimum penalty impossible of Rs.5,66,143 being 100% of tax sought to be evaded. 4. Penalty proceedings u/s 271(1)(c) was initiated by the AO and after recording his satisfaction in original assessment dated 28.09.2021, notice u/s 274 read with 271(1)(c) dated 28.09.2021 was issued, whereby, the assessee was asked to show cause as to why penalty u/s 271 (1) (c) may not be imposed upon it. 05. On 04.01.2022, after considering the reply of the assessee, a penalty order u/s 271(1)(c) was passed and penalty at the rate of 100% of the tax sought to be evaded under Section 271(1) (c) amounting to Rs.5,66,143/- was imposed. 06. Feeling aggrieved, assessee preferred an appeal before Commissioner of Income Tax (Appeal) [\"CIT (A)\"] against the penalty order. However, G.No.2 of the appeal of the assessee was dismissed vide order dated 21.08.2024 holding as under: 4 ITA No.2656/Chny/2024 ‘’7. In Ground No. 2, the appellant contended that the notice u/s. 271(1)(c) is vague and not specific about the default. However, I have gone through the notice of penalty u/s 274 r.w.s. 271(1)(c) of the Act dated 28.09.2021 bearing DIN No. ITBA/PNL/S/271(1)(c)/2021-22/1035962429(1) and found that in para 1 of the said notice, it is categorically mentioned as under: \"1. In the course of e-Assessment proceedings for the assessment year 2013- 14, it appears that you have furnished inaccurate particulars of such income\". As can be seen from the above, the notice clearly mentioned \"furnishing of inaccurate particulars of income\" as the reason of issue of notice. Even in the assessment order also it was specified that \"penalty proceedings under sec. 271(1)(c) of Income-tax Act 1961 are initiated for furnishing inaccurate particulars of income.\" Hence, there is no ambiguity about the limb for which the penalty proceedings are initiated. Therefore, I do not find any vagueness in the notice as contended by the appellant in this ground of appeals. 8.1 The appellant contended in his response dated 08.10.2022 that the notice was issued for \"furnishing inaccurate particulars of income\", while the order levying penalty was for \"concealment of income\" and that the penalty order is liable to be squashed for this sole reason. For this proposition, the appellant relied on the decision of jurisdictional High Court reported in 430 ITR 259. Hon'ble High Court in this decision held that Penalty Notice must specify whether there has been concealment of income or furnishing of inaccurate particulars of income. It is undisputed that in the present case, the penalty notice dated 28.09.2021 clearly specified that it has been issued for 'furnishing inaccurate particulars of income'. Even in the assessment order clearly mentions the limb as \"furnishing inaccurate particulars of income.\" Further, the appellant participated in the penalty proceedings without disputing the reason (default) for which the penalty was initiated. Thus, it is proven beyond doubt that the appellant was aware of the charges levelled against him. In view of the facts of the case, I hold that the impugned notice has specified the limb i.e., 'furnishing of inaccurate particulars of income' for which the penalty proceedings are being initiated and as such there is no vagueness in the notice. 8.2 As regards the mention of other limb i.e., 'concealment of income' in the impugned penalty order, I am of the view that the assessing officer reached the conclusion during the penalty proceedings that there is concealment of income in the case at hand, owing to the fact that an amount of Rs.19,98,843 is offered as additional income in the revised return, which was concealed in the original return of income. I do not find any infirmity or wrong in the penalty order. The penalty order Cannot become nullity, Just because it is passed on a different limb, while the notice was issued on a different limb. At this juncture, it is useful to note the following observations of Hon'ble Hyderabad Tribunal in Jyothirmoy Yamsani, Hyderabad vs. Dcit, Circle-1, Warangal in ITA No. 1519/Hyd/2016 dtd. 28 November, 2017 (ITAT, Hyderabad): \"In the instant case, the assessee having declared the additional income only after discovery of the Assessing Officer with regard to total deposits not 5 ITA No.2656/Chny/2024 reflected in the balance sheet, it was a clear case of 'concealment of income and non- recording of the deposits in the balance sheet would amount to furnishing of inaccurate particulars of income. Under these circumstances, the order passed by the Ld CIT (A), in levying penalty, does not call for any interference. Accordingly, appeal of the assessee is dismissed.\" 8.3 In the instant case, revised income (offered in the return filed in response to the notice under section 148) is more than the income returned in the original return of income. This clearly shows that appellant has concealed particulars of income. Even though the additional income was declared as 'Income from Other Sources', the assessing officer taxed the income as 'Income from business'. Thus, the limb furnishing inaccurate particulars of income' was satisfied. Therefore, I hold that notice of penalty under section 271(1)(c) of the Act is valid and levy of penalty is also justified. 8.4 The case laws relied upon by the appellant are not useful to support his case, as the appellant's case can be differentiated based on facts. Therefore, the same are not discussed here. In the light of above discussion, I dismiss Ground No. 2 of the appellant holding that there is no vagueness in the notice under section 274 rws 271 (1)(c) dated 28.09.2021 issued by the assessing officer’. 07. Aggrieved by the order of CIT (A), assessee is in appeal before us. We have carefully considered the arguments of both the sides and perused the material placed before us. We find force in the assessee's contention that the levy of penalty is illegal because in the penalty notice it is specified “that you have furnished inaccurate particulars of such income” where as penalty order u/s 271(1)(c) dated 04.01.2022 levied penalty for “concealment of income”. The penalty order u/s 271(1)(c) dated 04.01.2022 held as under: ‘’4. In view of the above facts, I am satisfied that the assessee has concealed his income within the meaning of Section 271 (1) (c) of the Income Tax Act, 1961. Therefore, the assessee’s case is fit for levy of penalty u/s.271 (1) ( c) of the Income Tax Act, 1961’’. Settled law on the issue in controversy 08. The Hon’ble Delhi High Court in the case of Principal Commissioner of Income Tax vs. Sahara India Life Insurance Co. Ltd., (2021) 432 ITR 84 Delhi, followed the 6 ITA No.2656/Chny/2024 decision of the Karnataka High Court in CIT v. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar.) and held as under:- \"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 date 5th August, 2016.\" 09. The Karnataka High Court had followed the judgment of CIT v. Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar) 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 date 5th August, 2016.\" 10. An identical issue came up for consideration before the Bombay High Court (Full Bench at Goa) in Mr. Mohd. Farhan A. Shaikh v. 2021 SCC OnLine Bom 345. 11. We also find that the AO in the assessment order dated 28.09.2021 has satisfied that penalty proceeding is being initiated separately for “furnishing of inaccurate particulars of such income” and not for the “concealment of particulars of his income”. Therefore, in this case, penalty levied for the concealment of income does not commensurate with the original assessment order or the penalty notice u/s 274 read with 271(1)(c) dated 28.09.2021. In this case, 7 ITA No.2656/Chny/2024 we do not find proper application of mind by the AO while issuing notice or levying penalty u/s 271(1)(c) of the Act. 12. Hence, respectfully following the decision of the Karnataka High Court in the case of Manjunath Cotton and Ginning Factory (supra) and the other decisions of different High Courts, we held that the levy of penalty under Section 271(1)(c) of the Act in the case of the assessee was not valid. 13. In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on 27th day of January, 2025 at Chennai. Sd/- Sd/- (मनोज क ुमार अŤवाल) (मनु क ुमार िगįर) (MANOJ KUMAR AGGARWAL) लेखा सद˟ / ACCOUNTANT MEMBER (MANU KUMAR GIRI) Ɋाियक सद˟ / JUDICIAL MEMBER चेɄई Chennai: िदनांक Dated : 27-01-2025 KV आदेश कȧ ĤǓतͧलͪप अĒेͪषत /Copy to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT, Chennai/Coimbatore/Madurai/Salem. 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF "