SUNDEK INDIA LIMITED,AHMEDABAD V. THE DY.CIT, CIRCLE-4(1)(1), AHMEDABAD

ITA 1706/AHD/2024

AI Insights

Sundek India Limited appealed against the order of the Commissioner of Income-tax (Appeals), which upheld the penalty imposed by the Assessing Officer for furnishing 'inaccurate particulars' of income under Section 271(1)(c) of the Income-tax Act, 1961. The penalty was based on the transfer of Rs. 5,02,98,118 to 'General Reserves', which the Assessing Officer considered as income chargeable to tax. The Tribunal's decision was influenced by the procedural requirement that the notice under Section 274 must clearly state the grounds for the penalty, which was not met in this case.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126834 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Other Referred Cases: CIT vs. Manjunatha Cotton and Ginning Factory, Mr. Mohd. Farhan A. Shaikh Vs ACIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAVAN LIMBASIYA
• Assessee Lawyers: TUSHAR HEMANI
• Keywords: Business income; Principle of natural justice; Initiation of penalty proceedings; Grounds of appeal; National Faceless Appeal; Judgment; Commissioner; Perquisite; Transfer; Incorrect particulars; Vagueness; Karnataka High Court; Department; Explanation; Incorrect particulars of income
• Section: 250; 271(1)(c); 274

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT MS. SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A. No. 1706/Ahd/2024 (Assessment Year: 2013-14) Sundek India Limited, 204, Lalita Complex, Rasala Marg, Navrangpura, Ahmedabad-380009 [PAN : AACCS 0897 A] Vs. Deputy Commissioner Of Income-tax, Circle 4(1)(1), Ahmedabad (Appellant) .. (Respondent) Appellant by : Shri Tushar Hemani, Sr. Advocate, & Shri Parinmalsinh B. Parmar, AR Respondent by: Shri Kavan Limbasiya, Sr DR Date of Hearing 13.03.2025 Date of Pronouncement 22.04.2025 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:- This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as \"CIT(A)\" for short) dated 30.08.2024 passed under Section 250 of the Income-tax Act, 1961 [hereinafter referred to as \"the Act\" for short], for Assessment Year (AY) 2013-14. 2. The grounds of appeal raised by the Assessee are as follows:- 1. The learned CIT(A) has erred in law and on facts of the case in upholding initiation of penalty proceedings u/s 271(1)(c) of the Act. ITA No. 1706/Ahd/2024 Sundek India Ltd Vs. DCIT Asst. Year : 2013-14 - 2– 2. The learned CIT(A) has erred in law and on facts of the case in upholding levy of penalty of Rs.1,63,19,220/- u/s 271(1)(c) of the Act. 3. The Ld. CIT(A) has erred in law and on facts of the case in upholding the order u/s 271(1)(c) of the Act which is ex-facie non-est and bad in law on account of not containing the DIN (Document Identification Number) in the body of the order as mandated by departmental instructions issued from time to time. 4. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.” 3. We have heard the rival contentions and perused the material available on record. The pertinent facts relevant for adjudication of this case are that the Assessing Officer, vide para 5.11 of the order, initiated penalty proceedings u/s 271(1)(c)/r.w.s. 274 of the Act for furnishing ‘inaccurate particulars’ of income. For the sake of ready reference, the relevant paragraph is reproduced hereunder:- “….. …… 5.11 Hence in view of the above provision of the Act i.e. section 2(24) r.w.s 28(iv) of the Act. The amount of Rs. 5,02,98,118/- is ITA No. 1706/Ahd/2024 Sundek India Ltd Vs. DCIT Asst. Year : 2013-14 - 3– also income of the assessee and chargeable to tax. The amount as transferred by the assessee to 'General Reserves' is not only a benefit or perquisite but it is also arising from the business of the assessee, hence a business income and liable to be taxed. The penalty proceedings U/s. 271(1)(c)/r.w.s 274 is also initiated separately for inaccurate particulars of income.” 4. We also find that a show-cause notice has been issued to the assessee on 12.02.2016 proposing levy of penalty for furnishing ‘inaccurate particulars’ of income. For the sake of ready reference, the relevant paragraph No.2 of the penalty order is reproduced hereunder:- “2. A show-cause notice to the assessee was issued on 12.02.0216 to explain why penalty u/s 271(1)(c) of the Act should not be levied for furnishing inaccurate particulars of income. In response to the notice, the assessee has failed to furnish the reply. Therefore, it is clear that the assessee has nothing to say in this regard.” 5. Further, we find that the Assessing Officer levied penalty u/s 271(1)c) of the Act for ‘concealment’ of particulars of income. For the sake of ready reference, the relevant part of the penalty order is reproduced hereunder:- “11. In view of the above. I am satisfied that the assessee has furnished inaccurate particulars of income and thereby concealed its income. The assessee has concealed the particulars of income to the extent of Rs. 5,02,98,118/-. Therefore, minimum penalty leviable @ 100% of tax sought to be evaded comes to Rs. 1,63,19,220/- and maximum penalty @ 300% of tax sought to be evaded comes to Rs. 4,89,57,660/-. Therefore, looking to the facts ITA No. 1706/Ahd/2024 Sundek India Ltd Vs. DCIT Asst. Year : 2013-14 - 4– of the case, I hereby levy minimum penalty of Rs. 1,63,19,220/-u/s. 271(1)(c) of the Act.” 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. 7. Hence, respectfully following the orders of the Hon’ble High Courts, since the Assessing Officer 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. The order is pronounced in the open Court on 22.04.2025 Sd/- Sd/- (SUCHITRA KAMBLE) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 22/04/2025 btk ITA No. 1706/Ahd/2024 Sundek India Ltd Vs. DCIT Asst. Year : 2013-14 - 5– आदेश की \u0007ितिलिप अ ेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u0007 / The Appellant 2. \b थ\u0007 / The Respondent. 3. संबंिधत आयकर आयु\u0015 / Concerned CIT 4. आयकर आयु\u0015(अपील) / The CIT(A)- 5. िवभागीय \bितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, True Copy उप/ / / /सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, , , , अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation …17.04.2025…….….. 2. Date on which the typed draft is placed before the Dictating Member …21.04.2025… 3. Other Member… …21.04.2025…………… 4. Date on which the approved draft comes to the Sr.P.S./P.S … 21.04.2025. …………. 5. Date on which the fair order is placed before the Dictating Member for pronouncement .... 22.04.2025.... 6. Date on which the fair order comes back to the Sr.P.S./P.S …22.04.2025……………. 7. Date on which the file goes to the Bench Clerk …22.04.2025…….…. 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order 10. Date of Dispatch of the Order…………………………………… "