Income Tax Appellate Tribunal - Indore
Acit (Central)-1, Indore vs Smt. Rajrani Mittal, Indore on 7 September, 2020
आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर
IN THE INCOME TAX APPELLATE TRIBUNAL,
INDORE BENCH, INDORE
BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER
AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER
ITA No.853/Ind/2019
Assessment Year 2015-16
Smt. Rajrani Mittal,
Indore
PAN : AGLPM0530E : Appellant
V/s
JCIT OSD (Central)-1
Indore : Respondent
ITA No.879/Ind/2019
Assessment Year 2015-16
ACIT, Central-1,
Indore : Revenue
V/s
Smt. Rajrani Mittal,
Indore
PAN : AGLPM0530E : Respondent
ITA No.852/Ind/2019
Assessment Year 2015-16
Shri. Anshul Mittal,
Indore
PAN : AFDPM4778H : Appellant
V/s
JCIT OSD (Central)-1
Indore : Respondent
Smt.Rajrani Mittal & Ors
ITA Nos. 852 to 858 & 879/Ind/2019
ITA No.854/Ind/2019
Assessment Year 2015-16
Shri. Ankit Mittal,
Indore
PAN : AGCPM0468R : Appellant
V/s
JCIT OSD (Central)-1
Indore : Respondent
ITA No.855 & 856/Ind/2019
Assessment Years 2015-16 & 2016-17
Smt. Neha Mittal,
Indore
PAN : AJBPM6080G : Appellant
V/s
JCIT OSD (Central)-1
Indore : Respondent
ITA No.857 & 858/Ind/2019
Assessment Years 2015-16 & 2016-17
Smt. Shweta Mittal,
Indore
PAN : AACGM6936F : Appellant
V/s
JCIT OSD (Central)-1
Indore : Respondent
Revenue by Shri Punit Kunar, Sr.DR
Assessee by Shri Ajay Tulsiyan & Ms. Shalini
Mehta, CAs
Date of Hearing 25.08.2020
Date of Pronouncement 07.09.2020
2
Smt.Rajrani Mittal & Ors
ITA Nos. 852 to 858 & 879/Ind/2019
ORDER
PER BENCH The above captioned appeals filed at the instances of the assessee(s) pertaining to Assessment Year 2015-16 & 2016-17 and revenue for Assessment Year 2015-16 are directed against the orders of Ld. Commissioner of Income Tax (Appeals)-3 (in short 'Ld.CIT(A)'], Bhopal evenly dated 14.06.2019 which are arising out of the order u/s 271AAB of the Income Tax Act 1961(In short the 'Act') dated 28.09.2016 framed by JCIT, OSD(Central)-1, Indore.
2. The assessee(s) has raised following grounds of appeal;
Smt. Rajrani Mittal, ITA No.853/Ind/2019 Assessment Year 2015-16
1.That on the facts and in the circumstances of the case and in law the very initiation of the penalty proceedings through an invalid and defective notice issued u/s 274 r.w.s. 271 AAB in this case is wrong, bad in law and the penalty so levied ought to have been deleted by the Learned CIT(A).
2.That the Ld. CIT(A) erred in not appreciating that the penalty notice issued u/s 274 r.w.s. 271AAB mechanically, mentioning irrelevant and inapplicable charges and not mentioning the charges on which penalty was actually levied, was bad in law and had has led to vitiation of the entire penalty proceedings, therefore, the penalty levied ought to have been deleted in its entirety.
3.That the Learned CIT(A) erred In levying the penalty under clause (c) to section 271AAB(1) @10%, whereas the Learned AO having levied the penalty under clause (a) to section 271AAB(1), clearly indicating that the penalty levied by the AO mechanically and without requisite satisfaction 3 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 was wrong and uncalled for, ought to have been deleted in full.
4.That the Ld. CIT(A) erred in confirming the penalty to the extent of Rs, 11,14,088/- u/s 271AAB. That on the facts and in the circumstances of the case and in law the penalty levied is wrong an uncalled for and prayed to be deleted.
5.That the Ld. CIT(A) erred in confirming the penalty levied u/s 271AAB by the AO on the additional income of Rs. 1,11,40,876/- offered u/s 132(4) and also offered in the return filed u/s 153A. That on the facts and in the circumstances of the case and in law the penalty levied is uncalled for and bad in law and it is prayed that the penalty very kindly be deleted.
6.That the appellant craves leave to add, to alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of appeal on or before final hearing, if necessity so arises.
Revenue has raised following grounds of appeal;
ITA No.879/Ind/2019Assessment Year 2015-16
1.On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the penalty to extent of Rs.89,48,172/- levied by the Assessing Officer u/s 271AAB(1)(c) of the Income Tax Act, 1961.
2. On the facts and in the circumstances of the case, the Ld. Income-tax Act, 1961,(A) erred in law by overlooking the fact that the undisclosed income pertained to the specific previous year whose date of filing of the return had not expired before the date of search and that the assessee had not filed such return at the time of search nor substantiated the manner in which the undisclosed income has been derived.
Shri Anshul Mittal, ITA No.852/Ind/2019 Assessment Year 2015-16
1.That on the facts and in the circumstances of the case and in law the very initiation of the penalty proceedings through an invalid and defective notice issued u/s 274 r.w.s. 271 AAB in this case is wrong, bad in law and the penalty so levied ought to have been deleted by the Learned 4 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 CIT(A).
2.That the Ld. CIT(A) erred in not appreciating that the penalty notice issued u/s 274 r.w.s. 271AAB mechanically, mentioning irrelevant and inapplicable charges and not mentioning the charges on which penalty was actually levied, was bad in law and had has led to vitiation of the entire penalty proceedings, therefore, the penalty levied ought to have been deleted in its entirety.
3.That the Learned CIT(A) erred In levying the penalty under clause (c) to section 271AAB(1) @10%, whereas the Learned AO having levied the penalty under clause (a) to section 271AAB(1), clearly indicating that the penalty levied by the AO mechanically and without requisite satisfaction was wrong and uncalled for, ought to have been deleted in full.
4.That the Ld. CIT(A) erred in confirming the penalty to the extent of Rs, 8,44,176/- u/s 271AAB. That on the facts and in the circumstances of the case and in law the penalty levied is wrong an uncalled for and prayed to be deleted.
5.That the Ld. CIT(A) erred in confirming the penalty levied u/s 271AAB by the AO on the additional income of Rs. 84,41,755/- offered u/s 132(4) and also offered in the return filed u/s 153A. That on the facts and in the circumstances of the case and in law the penalty levied is uncalled for and bad in law and it is prayed that the penalty very kindly be deleted.
6.That the appellant craves leave to add, to alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of appeal on or before final hearing, if necessity so arises.
Shri Ankit Mittal, ITA No.854/Ind/2019 Assessment Year 2015-16
1.That on the facts and in the circumstances of the case and in law the very initiation of the penalty proceedings through an invalid and defective notice issued u/s 274 r.w.s. 271 AAB in this case is wrong, bad in law and the penalty so levied ought to have been deleted by the Learned CIT(A).
2.That the Ld. CIT(A) erred in not appreciating that the penalty notice issued u/s 274 r.w.s. 271AAB mechanically, mentioning irrelevant and inapplicable charges and not mentioning the charges on which penalty was actually levied, was bad in law and had has led to vitiation of the 5 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 entire penalty proceedings, therefore, the penalty levied ought to have been deleted in its entirety.
3.That the Learned CIT(A) erred In levying the penalty under clause (c) to section 271AAB(1) @10%, whereas the Learned AO having levied the penalty under clause (a) to section 271AAB(1), clearly indicating that the penalty levied by the AO mechanically and without requisite satisfaction was wrong and uncalled for, ought to have been deleted in full.
4.That the Ld. CIT(A) erred in confirming the penalty to the extent of Rs, 5,24,296/- u/s 271AAB. That on the facts and in the circumstances of the case and in law the penalty levied is wrong an uncalled for and prayed to be deleted.
5.That the Ld. CIT(A) erred in confirming the penalty levied u/s 271AAB by the AO on the additional income of Rs. 52,42,960/- offered u/s 132(4) and also offered in the return filed u/s 153A. That on the facts and in the circumstances of the case and in law the penalty levied is uncalled for and bad in law and it is prayed that the penalty very kindly be deleted.
6.That the appellant craves leave to add, to alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of appeal on or before final hearing, if necessity so arises.
Smt. Neha Mittal, ITA No.855/Ind/2019 Assessment Year 2015-16
1.That on the facts and in the circumstances of the case and in law the very initiation of the penalty proceedings through an invalid and defective notice issued u/s 274 r.w.s. 271 AAB in this case is wrong, bad in law and the penalty so levied ought to have been deleted by the Learned CIT(A).
2.That the Ld. CIT(A) erred in not appreciating that the penalty notice issued u/s 274 r.w.s. 271AAB mechanically, mentioning irrelevant and inapplicable charges and not mentioning the charges on which penalty was actually levied, was bad in law and had has led to vitiation of the entire penalty proceedings, therefore, the penalty levied ought to have been deleted in its entirety.
3.That the Learned CIT(A) erred In levying the penalty under clause (c) to section 271AAB(1) @10%, whereas the Learned AO having levied the penalty under clause (a) to section 271AAB(1), clearly indicating that the 6 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 penalty levied by the AO mechanically and without requisite satisfaction was wrong and uncalled for, ought to have been deleted in full.
4.That the Ld. CIT(A) erred in confirming the penalty to the extent of Rs, 3,64,285/- u/s 271AAB. That on the facts and in the circumstances of the case and in law the penalty levied is wrong an uncalled for and prayed to be deleted.
5.That the Ld. CIT(A) erred in confirming the penalty levied u/s 271AAB by the AO on the additional income of Rs. 36,42,852/- offered u/s 132(4) and also offered in the return filed u/s 153A. That on the facts and in the circumstances of the case and in law the penalty levied is uncalled for and bad in law and it is prayed that the penalty very kindly be deleted.
6.That the appellant craves leave to add, to alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of appeal on or before final hearing, if necessity so arises.
Smt. Neha Mittal, ITA No.856/Ind/2019 Assessment Year 2016-17
1.That on the facts and in the circumstances of the case and in law the very initiation of the penalty proceedings through an invalid and defective notice issued u/s 274 r.w.s. 271 AAB in this case is wrong, bad in law and the penalty so levied ought to have been deleted by the Learned CIT(A).
2.That the Ld. CIT(A) erred in not appreciating that the penalty notice issued u/s 274 r.w.s. 271AAB mechanically, mentioning irrelevant and inapplicable charges and not mentioning the charges on which penalty was actually levied, was bad in law and had has led to vitiation of the entire penalty proceedings, therefore, the penalty levied ought to have been deleted in its entirety.
3.That the Learned CIT(A) erred In levying the penalty under clause (c) to section 271AAB(1) @10%, whereas the Learned AO having levied the penalty under clause (a) to section 271AAB(1), clearly indicating that the penalty levied by the AO mechanically and without requisite satisfaction was wrong and uncalled for, ought to have been deleted in full.
4.That the Ld. CIT(A) erred in confirming the penalty to the extent of Rs, 6,50,000/- u/s 271AAB. That on the facts and in the circumstances of the case and in law the penalty levied is wrong an uncalled for and prayed to 7 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 be deleted.
5.That the Ld. CIT(A) erred in confirming the penalty levied u/s 271AAB by the AO on the additional income of Rs. 65,00,000/- offered u/s 132(4) and also offered in the return filed u/s 153A. That on the facts and in the circumstances of the case and in law the penalty levied is uncalled for and bad in law and it is prayed that the penalty very kindly be deleted.
6.That the appellant craves leave to add, to alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of appeal on or before final hearing, if necessity so arises.
Smt. Shweta Mittal, ITA No.857/Ind/2019 Assessment Year 2015-16
1.That on the facts and in the circumstances of the case and in law the very initiation of the penalty proceedings through an invalid and defective notice issued u/s 274 r.w.s. 271 AAB in this case is wrong, bad in law and the penalty so levied ought to have been deleted by the Learned CIT(A).
2.That the Ld. CIT(A) erred in not appreciating that the penalty notice issued u/s 274 r.w.s. 271AAB mechanically, mentioning irrelevant and inapplicable charges and not mentioning the charges on which penalty was actually levied, was bad in law and had has led to vitiation of the entire penalty proceedings, therefore, the penalty levied ought to have been deleted in its entirety.
3.That the Learned CIT(A) erred In levying the penalty under clause (c) to section 271AAB(1) @10%, whereas the Learned AO having levied the penalty under clause (a) to section 271AAB(1), clearly indicating that the penalty levied by the AO mechanically and without requisite satisfaction was wrong and uncalled for, ought to have been deleted in full.
4.That the Ld. CIT(A) erred in confirming the penalty to the extent of Rs, 4,57,513/- u/s 271AAB. That on the facts and in the circumstances of the case and in law the penalty levied is wrong an uncalled for and prayed to be deleted.
5.That the Ld. CIT(A) erred in confirming the penalty levied u/s 271AAB by the AO on the additional income of Rs. 45,75,143/- offered u/s 132(4) and also offered in the return filed u/s 153A. That on the facts and in the circumstances of the case and in law the penalty levied is uncalled for and 8 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 bad in law and it is prayed that the penalty very kindly be deleted.
6.That the appellant craves leave to add, to alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of appeal on or before final hearing, if necessity so arises.
Smt. Shweta Mittal, ITA No.858/Ind/2019 Assessment Year 2016-17
1.That on the facts and in the circumstances of the case and in law the very initiation of the penalty proceedings through an invalid and defective notice issued u/s 274 r.w.s. 271 AAB in this case is wrong, bad in law and the penalty so levied ought to have been deleted by the Learned CIT(A).
2.That the Ld. CIT(A) erred in not appreciating that the penalty notice issued u/s 274 r.w.s. 271AAB mechanically, mentioning irrelevant and inapplicable charges and not mentioning the charges on which penalty was actually levied, was bad in law and had has led to vitiation of the entire penalty proceedings, therefore, the penalty levied ought to have been deleted in its entirety.
3.That the Learned CIT(A) erred In levying the penalty under clause (c) to section 271AAB(1) @10%, whereas the Learned AO having levied the penalty under clause (a) to section 271AAB(1), clearly indicating that the penalty levied by the AO mechanically and without requisite satisfaction was wrong and uncalled for, ought to have been deleted in full.
4.That the Ld. CIT(A) erred in confirming the penalty to the extent of Rs, 5,35,000/- u/s 271AAB. That on the facts and in the circumstances of the case and in law the penalty levied is wrong an uncalled for and prayed to be deleted.
5.That the Ld. CIT(A) erred in confirming the penalty levied u/s 271AAB by the AO on the additional income of Rs. 53,50,000/- offered u/s 132(4) and also offered in the return filed u/s 153A. That on the facts and in the circumstances of the case and in law the penalty levied is uncalled for and bad in law and it is prayed that the penalty very kindly be deleted.
6.That the appellant craves leave to add, to alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of appeal on or before final hearing, if necessity so arises.
9Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019
3. As the issues raised in all these appeals are common and all the assessee(s) are related to the same group, therefore the appeals by the assessee(s) and that by the revenue are being taken together for the sake of convenience and brevity. We observe that there are seven appeals by various assessee(s) through ITA No.852 to 858/Ind/2019 and in one case namely Smt. Rajrani Mittal vide ITA No.879/Ind/2019, Revenue has challenged the relief given by Ld. CIT(A) sustaining the penalty u/s 271AAB of the Act @10% as against 30% levied by Ld. A.O. We have summarised the relevant details of all the assesse(s) appeal in the following manner;
Name of Assessment Date of Undisclosed Penalty Undisclosed Penalty
assessee Year filing of income u/s income u/s
return of adopted by 271AAB(B) confirmed 271AAB(1)
income A.O for @ 30% by CIT(A) sustained
levying for levying by CIT
penalty penalty u/s @10%
271AAB(A)
Rajrani 2015-16 31.10.15 33540876 10062260 11140876 1114088
Mittal
Anshul 2015-16 31.10.15 8441755 2532530 8441755 844176
Mittal
Ankit 2015-16 7.9.15 5242960 1572888 5242960 524296
Mittal
Neha 2015-16 31.10.15 3642852 1092856 3642852 364285
Mittal
Neha 2016-17 14.9.16 6500000 1950000 6500000 650000
Mittal
Shweta 2015-16 31.10.15 4575133 1372540 4575133 457513
Mittal
Shweta 2016-17 22.9.16 5350000 1605000 5350000 535000
Mittal
Total 4489358
4. Assessee(s) have challenged the following amount of penalty sustained by Ld. CIT(A).
10
Smt.Rajrani Mittal & Ors
ITA Nos. 852 to 858 & 879/Ind/2019
Name of assessee Assessment Year Penalty in dispute
u/s 271AAB
Rajrani Mittal 2015-16 1114088
Anshul Mittal 2015-16 844176
Ankit Mittal 2015-16 524296
Neha Mittal 2015-16 364285
Neha Mittal 2016-17 650000
Shweta Mittal 2015-16 457513
Shweta Mittal 2016-17 535000
Total 4489358
5. As regards Revenue is concerned it has challenged the relief of Rs. 8948172/- given by Ld. CIT(A) in the case of assessee namely Smt. Rajrani Mittal through ITA No.879/Ind/2019.
6. The issues and facts raised in all these appeals relates to the same group of cases where search and seizure operation were carried out u/s 132 of the Act on "Mittal Group' on 4.9.15. All these appeals relates to the issues challenging the legality of the penalty proceedings initiated u/s 271AAB pointing out defects in the notice issued u/s 274 r.w.s. 2371AAB of the Act and secondly challenging on merits challenging the penalty sustained u/s 271AAB(A) of the Act as against u/s 271AAB(C) of the Act applied by Ld. A.O.
7. We will first take up the appeals by various assesee(s) through ITA No. 852 to 858/Ind/2019. For the purpose of adjudication we will take up the facts of the assessee namely Smt. Rajrani Mittal, ITA No.853/Ind/2019. 11 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019
8. Brief facts relating to this issue are that the assessee is an individual belonging to the 'Mittal Group of Indore'. The return of income for this year was filed u/s 139 on 31.10.2015 declaring a total income of Rs. 3,47,20,240/-. Search and Seizure operations u/s 132 were carried on the "Mittal Group" of Indore on 04.09.2015 where in the appellant was also covered. The case of the appellant was centralized with office of the Learned AO vide order u/s 127 of the Act dated 18.02.2016. In pursuance to search proceedings, notices under section 153A were issued to the appellant for AY 2010-2011 to AY 2015-2016, which were duly complied by the appellant and return for the year under consideration was filed u/s 153A r.w.s. 139 on 06.06.2016 declaring a total income at Rs.
3,47,20,240/- including the additional income of Rs. 3,35,40,876/-
offered as business income which was offered u/s 132(4), which also included Rs. 2,24,00,000/- offered during the course of survey conducted u/s 133A on 01.09.2014. It is also pertinent to mention that the same income which was declared in the return filed u/s 139(1) was reiterated in the return filed u/s 153(A) r.w.s 139. The assessment proceedings were completed by passing a combined assessment order for all these years under section 153A r.w.s.
12Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 143(3) dated 30.11.2017. The income for this year was assessed at Rs. 3,47,55,240/- by making anominal adjustment of Rs. 35,000/-
to the returned income. The additional income offered of Rs.
3,35,40,876/- was offered as business income and was also assessed as such. Coming back to the present appeal, a notice was served on the appellant requiring to show cause as to why penalty u/s 271AAB be not imposed on the appellant. In response to the same the appellant has filed a reply dated 23.05.2018 providing detailed explanations as to why penalty is not leviable u/s 271AAB in the appellant's case. However penalty order was passed by the learned AO imposing a penalty of Rs. 1,00,62,260/- u/s 271AAB(1)(c) for this year. Being aggrieved, the appellant has preferred an appeal before Ld. CIT(A) who vide order dated 14.06.2019 in Appeal No. CIT(A)-3/BPL/IT-10189/2018-19/394 partly allowed the appeal. The Ld. CIT(A) deleted the penalty levied in respect of income of Rs. 2,24,00,000/- offered under section 133A and confirmed the penalty to the extent of 10% of Rs.1114088/- in respect of undisclosed income of Rs. 1,11,40,876/- under section 271AAB(a).
13Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019
9. Now aggrieved assessee is in appeal challenging the legality of penalty proceedings u/s 271AAB of the Act and penalty confirmed by Ld. CIT(A) and department is in appeal against the relief given by Ld. CIT(A). Since we are firstly dealing with the assessee(s) appeals, the department appeal will be taken up at the later stage.
10. Ld. Counsel for the assessee submitted as under ;
1. PENALTY NOTICE IS VAGUE AND BAD IN LAW AND INITIATION OF PENALTY PROCEEDINGS ON INCORRECT PREMISES IS BAD IN LAW.
1.1. The assessment proceedings in this case was completed by passing a combined assessment order for the AY 2010-11 to AY 2015-16 u/s 143(3) r.w.s. 153A and for AY 2016-17 u/s 143(3) dated 30.11.2017. The Learned AO initiated the penalty proceedings for this year and served a notice u/s 274 r.w.s. 271AAB dated 30.11.2017.
1.2. A copy of the said notice is enclosed in the respective paper book and a perusal of the same will show that the notice issued is vague and not in conformity with law as the same is issued on the charges applicable for levy of penalty under section 271(1)(c) as the learned AO in the penalty notice has factually stated that "It appears to me that you:-
have concealed the particulars of your income or furnished inaccurate particulars of such income."
1.3. Further section 271AAB of the Income Tax Act.1961 is as under:14
Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of July, 2012 but before the date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President], the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,--
(a) a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year, if such assessee--
(i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived;
(ii) substantiates the manner in which the undisclosed income was derived; and
(iii) on or before the specified date--
(A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein;
(b) a sum computed at the rate of twenty per cent of the undisclosed income of the specified previous year, if such assessee--
(i) in the course of the search, in a statement under sub-section (4) of section 132, does not admit the undisclosed income; and 15 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019
(ii) on or before the specified date--
(A) declares such income in the return of income furnished for the specified previous year; and (B) pays the tax, together with interest, if any, in respect of the undisclosed income;
(c) a sum which shall not be less than thirty percent but which shall not exceed ninety percent of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b).
1. The above reading of section 271AAB brings out the following important issues.
(i) The penalty u/s 271AAB is discretionary and is neither automatic nor mandatory as it uses the words "AO may direct".
(ii) The discretionary penalty u/s 271AAB(1) can be levied under clause (a) @ 10%, under clause (b) @20% and under clause (c) @30% depending upon the default and charge against the assessee.
(iii) Existence of 'undisclosed income' is a sine quo non for levying such penalty, which is defined in explanation (c) to section 271AAB.
1.4. It is amply clear from the reading of section 271AAB that the limbs mentioned in the show cause notice issued to the appellant i.e. 'have concealed the particulars of your income or furnished inaccurate particulars of such income' are not in conformity with the charges of the provisions of section 271AAB rather the appellant was show caused on the charges which fall under the scope and ambit of section 271(1)(c). This fact emphatically substantiates that the penalty show cause notice is vague and is bad in law and the charges for initiating the penalty proceedings were not correct. The penalty proceedings were initiated in a 16 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 casual and mechanical manner without requisite satisfaction and without proper application of mind.
1.5. The penalty notice issued to the appellant did not state that the assessee had any undisclosed income within the meaning of section 271AAB. Further the reading of section 271AAB also shows that there are various sub-sections and clauses specifying different charges and prescribing different rates of penalty, however, no specific sub-section/ clause of section 271AAB was mentioned in the notice, so as to enable the appellant to meet the specific charge against her during the penalty proceedings.
1.6. A perusal of Para 8 of the penalty order will show that the Learned AO has stated that, "I am satisfied that the assessee is liable to penalty under section 271AAB(1)(c) of the Income Tax Act as the addition pertains to 'specified previous year' and the assessee could not specify and substantiate the manner in which the undisclosed income has been derived."Penalty u/s 271AAB could have been levied either under clause
(a) or clause (b) or clause (c) of sub-section (1). The specific clause (c) under which the penalty has been levied and also the observation of the Learned AO that the manner of earning income was not specified and substantiated were never communicated to the appellant through the penalty notice issued u/s 274 r.w.s. 271AAB.
1.7. Thus the show cause notice issued u/s 274 is without drawing requisite satisfaction for levy of penalty u/s 271AAB and was akin to a notice which is issued u/s 271(1)(c), where the limbs of section 271(1)(c) were mentioned and the limbs of section 271AAB were not mentioned. Such notice having been issued in mechanical manner, without proper application of mind and without affording proper opportunity to the 17 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 appellant to rebut the charges is bad in law vitiating the very initiation of the penalty proceedings.
2. Case laws on defective show cause notice u/s 274 r.w.s.
271AAB:
(i) Hon'ble ITAT, Indore in the case of Dr. Rajesh Jain Vs. DCIT ITA No. 905/Ind/2018 dated 19.02.2020
(ii) Hon'ble ITAT, Indore in the case of Shri Vivek Chugh Vs. ACIT ITA No. 636/Ind/2017 dated 28.03.2019
(iii) Hon'ble Income Tax Appellate Tribunal, 'A' Bench, Chennai in case of DCIT Corporate Circle-1, Coimbatore v/s Shri. R. Elangovan (1199/CHNY/2017) dated 05.04.2018.
(iv ) Suresh Chand Mittal V/s DCIT Central 2 Jaipur (ITAT Jaipur) ITA No. 931/JP/2017 AY 2014-15, dated 02.07.2018.
(v) Shri Ravi Mathur V/s DCIT Central Jaipur (Jaipur ITAT) ITA No. 969/JP/2017 dated 13.06.2018 for AY 2015-16. 1.8. Further, the appellant places reliance on the decision of ChandigarhTribunal in the case of Gillco Developers & Builders (P.) Ltd. v. DCIT [(2017) 189 TTJ 35where Assessing Officer had intended to initiate penalty proceedings under section 271AAA(1), but assessee had been show caused on charge of furnishing of inaccurate particulars of income, which fell under scope and purview of section271(1)(c), penalty proceedings conducted against assessee under section 271AAAwere held invalid as discussed in Para 19 and 20 of the 18 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 order.(Copy enclosed at page no. 46 to 73 of common case law paper book PB-B).For a ready reference Para 20 is reproduced hereunder:-
"20. A perusal of the above notice shows that though the Assessing officer has intended to initiate penalty proceedings u/s 271AAA(1) of the Act, however, the wording written in the body of the letter does not conform to the charges of the provisions of section 271AAA of the Act, rather, the assessee has been show caused on the charge of furnishing of inaccurate particulars of income, which falls under the scope and purview of section 271(1)(c) of the Act. The assessee, therefore, is not show caused for levy of penalty under the provisions of section 271AAA, rather for doing an act inviting penalty u/s 271(1)(c) of the Act, which otherwise is neither arising out of the facts of the case nor established against the assessee. Thus, the penalty proceedings conducted against the assessee u/s 271AAA of the Act were invalid at its very inception because of the defective and invalid show cause notice, rendering the entire penalty proceedings void abnitio. The penalty levied against the assessee is thus not sustainable on this score also."
Though this decision is in context of section 271AAA but squarely applies in context of section 271AAB since both the sections are pari-materia and operate under similar circumstances.
1.9. The appellant also wish to draw support from the various decisions rendered in the context of section 271(1)(c), wherein the penalty proceedings have been held to be not validly initiated as the show cause notice issued u/s 274 was defective as it did not spelled out the ground / charge on which the penalty is sought to be imposed, such as 19 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019
(i) CIT V/s Manjunath Cotton Ginning Factory (2013) 359 ITR 0565 (Karnataka).
(ii) CIT V/s SSA'S Emerald Meadows, (2016) 73 taxmann.com 248 (SC).
(iii) Pr. CIT V/s Kulwant Singh Bhatia IT No. 9 to 14 of 2018 (MP) 1.10. The appellant further wish to further add that in the case of Kulwant Singh Bhatia (supra), the Honourable High Court of Madhya Pradesh in its latest decision dated 09.05.2018 dismissing the appeals filed by the revenue held in Para 11 of the order "on due consideration of the arguments of the Learned Counsel of the appellant, so also considering the fact that the ground mentioned in show cause notice would not satisfy the requirement of law, as notice was not specific, we are of the view that the Learned Tribunal has rightly relying on the decision of CIT V/s Manjunath Cotton Ginning Factory (supra) and CIT V/s SSA'S Emeralds Meadows (supra) rightly allowed the appeal of the assessee and set aside the order of penalty imposed by the authorities".(Copy enclosed at page no. 74 to 77 of the common case law paper book PB-B).
The case of the appellant is squarely covered by the proposition rendered by the jurisdictional High Court, which has a binding precedent, since in the instant case also the grounds / charges mentioned in the show cause notice does not satisfy the requirement of law and the show cause notice was not specific rather was issued on altogether incorrect premises. The Learned CIT(A) by relying on the decision of Hon'ble M.P High Court in the case of Kulwant Singh Bhatia (supra) held that decision was rendered in context of penalty levied under section 271(1)(c) and not under section 271AAB therefore the challenge of the appellant in respect of initiation of penalty proceedings under wrong section is not valid and dismissed the ground. It is submitted that the Learned CIT(A) erred in holding that the appellant has challenged the initiation of penalty 20 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 proceedings under wrong section whereas the appellant has challenged the initiation of penalty proceedings on account of invalid and defective notice issued u/s 274 and not under the wrong section. Further, it is submitted that though the decision of Hon'ble M.P. High Court was rendered in context of show cause notices issued u/s 274 for the purposes of levying penalty u/s 271(1)(c) however, are equally applicable in respect of the show cause notices issued u/s 274 for the purposes of levying penalty u/s 271AAB as the proposition laid down in these case is that the grounds mentioned in the show cause notice does not satisfy the requirement of law as the notice was not specific, equally applies in the present case. Also, both the sections are peri-materia and operate under the similar circumstances.
The appellant places heavy reliance on the decision of Hon'ble ITAT, Indore in the case of Shri Vivek Chugh (Supra) where the Learned CIT(A) reduced the penalty by applying the provisions of section 271AAB(1)(a) and the Hon'ble ITAT quashed the penalty order on the ground that the notice initiating the penalty is not in accordance with law as no specific charge is mention in the notice. Therefore, the contention of the Learned CIT(A) is not tenable.
Further, it is submitted that some case laws relied upon by the appellant though rendered in context of penalties levied u/s 271(1)(c) or u/s 271AAA are equally applicable in respect of penalties levied u/s 271AAB since the show cause notice in all these penalties are issued u/s 274. On a perusal of the show cause notice u/s 274r.w.s. 271AAB issued to the appellant it is amply evident that the Learned AO has issued the notice in a mechanical manner without application of mind mentioning irrelevant and inapplicable charges. No penalty has been levied on the charges mentioned in the show cause notice and the charge on which penalty has been actually levied was not mentioned in the notice. Thus the very initiation of the present penalty proceedings is not in accordance with the law and has led to 21 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 vitiation of entire penalty proceedings. It is therefore most humbly prayed that the penalty proceedings ought to be quashed and the consequent penalty levied be deleted.
2. IMPOSITION OF PENALTY ON INCOME OFFERED IN THE RETURN OF INCOME FILED U/S 153A AS BUSINESS INCOME IS BAD IN LAW.
Without prejudice to the above basic contention of the appellant that the penalty levied is without jurisdiction since the penalty notice issued was bad in law, it is submitted that the penalty has also been levied on incorrect premises which is discussed here under:-
2.1. The appellant for the year under consideration filed her return of income u/s 139(1) and again u/s 153A offering the same amount of income which included various items tabulated as under:
S. Particulars of Amount Remarks No. Additional (Rs.) Income
1. Advances given 2,24,00,000 Income initially offered in survey conducted u/s 133A on 01.09.2014 on the basis of diary and offered in the return filed u/s 139(1). This was also included in the income offered at the time of search and also in the return filed u/s 153A.
2. Renovation/Construc 78,40,876 Offered u/s 132(4) and included in tion of House the return filed u/s 139(1) as well as u/s 153A.
10. Advances given 33,00,000 Offered u/s 132(4) and included in the return filed u/s 139(1) as well as u/s 153A.
TOTAL 3,35,40,876 22 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 2.2. At the outset it is submitted that before the search operations conducted on 04.09.2015 a survey operation was carried out under section 133A on the appellant on 01.09.2014. In the said survey proceedings the appellant offered Rs.2,24,00,000/- as her additional income for the year under consideration which was accepted by the department. The appellant honoured such offer and accordingly paid the advances tax of Rs. 72,40,000/- on 13th and 15th September 2014 on the income surrendered in survey proceedings and also offered the same in the return filed by her u/s 139(1) as well as in the return filed u/s 153A r.w.s 139.
2.3. During the course of search and seizure operations u/s 132 on 04.09.2015, Shri Dinesh Chandra Mittal, husband of the appellant, in addition to the income already offered by the appellant in the survey proceedings of Rs. 2,24,00,000/- offered an additional income of Rs.
1,11,40,876/- (78,40,876+33,00,000) in the hands of the appellant for AY 2015-16. Thereby a total additional income of Rs. 3,35,40,876/- (2,24,00,000+78,40,876+33,00,000) was offered for this year as business income in the return of income filed u/s 153A.
Coming to the penalty proceedings:
2.4. It is submitted that the penalty proceedings are unwarranted on the overall facts of the case as the penalty proceedings were initiated merely on the basis of income offered by the appellant, without bringing anything adverse on record. There is no objection as to the filing of return offering additional income, moreover the income offered as business income was accepted as such. Neither the Investigation Wing nor the Learned AO pointed out any discrepancies or defect in the offering and working of the appellant. The additional income was offered to avoid penal proceedings and to buy peace of mind.23
Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 2.5. A perusal of the penalty order will show that the only reason for which the penalty has been levied is the observation of the Ld. AO that the assessee could not specify and substantiate the manner in which the said undisclosed income was derived.(Para 4 of the penalty order). Further in Para 6 it is stated that the assessee was given a chance to explain the manner in which the undisclosed income was derived during the assessment proceedings and it is also stated that the assessee could not explain the manner even during the penalty proceedings. From perusal of para 7 & 8 of the penalty order it is evident that the sole basis for levying the penalty under section 271AAB(1)(c) is the observation of the AO that the assessee could not explain the manner in which the undisclosed income was derived.
2.6. It is submitted that the above observation of the Learned AO are devoid of merits and also factually incorrect as discussed here under. During search proceedings
(i) It was explained during the search that various family members were carrying out certain trading transactions, as evident from the various seized material and notings found from the residence of the appellant and also from the residence of the accountant of the group. Proper records of the same could not be maintained by the accountant of the group, who recorded all the transactions in a wholesome manner. Considering the practical difficulty of identifying the entity of the family member, the income was offered on the basis of the application of the same in the hands of various family members. The modus operandi was explained and a systematic date wise cash flow statement was prepared incorporating various notings on all the loose papers and the resultant peak credit along with the application of income was offered as income of the family in the hands of Shri Dinesh Chand Mittal HUF and the respective family members u/s 132(4) by Shri Dinesh Mittal. Estimated profit in respect of trading transactions was also offered.
24Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019
11. A copy of the statement recorded u/s 132(4) of Dinesh Chand Mittal along with complete working of the additional income offered duly supported by detailed date wise cash flow statement as filed before the Investigation Wing is enclosed at page no. 36 to 63. This methodology was also observed and duly acknowledged and accepted by the Investigation wing, so also the working, before whom, the cash flow statement and other details were filed, which also stand accepted in the assessment proceedings of the group.
In the return filed u/s 153A
(ii) It is submitted that the said income was offered as business income in the computation of income filed u/s 153A reflecting the said income as business income, copy of which is enclosed at page no. 02 to 08 of PB. The fact that the said income was offered as business income and the same also stand assessed as business income by the AO is undisputed.
During Assessment proceedings
(iii) The Learned AO has stated in Para 6 of the penalty order that the appellant was given a chance to explain the manner during the assessment proceedings. The appellant wishes to draw Your Honours kind attention to the questionnaire issued u/s 142(1), which is enclosed at page no. 09 to 16 of the PB.A perusal of item no. A-2 of part A of this questionnaire will show that the appellant was only required to state that whether any voluntary disclosure of income was made u/s 132(4) that too in a prescribed format. Similarly through item no. B-1 to B-5 of part B the appellant was required to explain cash, jewellery etc. These facts substantiate the contention of the appellant that the appellant was never called upon to explain the manner of deriving such income during the assessment proceedings and the observations made by the Learned AO to this effect in the penalty order in Para 6 is factually incorrect.
25Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 During penalty proceedings
(iv) The allegation in the penalty order that the appellant did not explained the manner even during the course of penalty proceedings is also factually wrong as the appellant categorically mentioned in the reply filed during the course of penalty proceedings that the income was offered as business income and also explained the methodology of earning and offering the said income. Copy of the reply dated 24.05.2018 is enclosed at page no. 30 to 35 of PB.
It is further submitted that the income earned and offered for the year under consideration was properly disclosed and substantiated during the entire proceedings, right from the search proceedings and there was no adverse finding in this regard in the order passed under section 153A. The assessment was completed by accepting the income returned under section 139(1) as well as in 153A r.w.s. 139(1) by making a nominal addition of Rs. 35,000/- under section 57(iii).
(v) Moreover no further queries regarding the additional income offered were raised during the course of assessment proceedings and appellant was of a bona-fide view that the Learned AO was satisfied with the explanation provided by the appellant during the course of search and seizure proceedings and also in assessment proceedings. The appellant was not required, at any moment, to explain the manner in which the undisclosed income was derived. The contention of the AO in the penalty order that the assessee was given a chance to explain the said manner is not factually correct and this contention of the appellant is verifiable from the penalty notice, wherein no such issue was raised. This is also evident from the fact that the additional income offered as business income in the return was accepted as such without any objection and without any modification either as to the head of income or to the quantum of income.
26Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 Therefore, evidently the appellant cannot be held guilty of not specifying the manner of earning additional income, firstly for the reason that the said income was properly explained and substantiated through detailed working before the Investigation Wing and was offered as business income in the return and secondly the AO having satisfied with the same, never required the appellant to further explain / substantiate the same.
(vi) Without prejudice to the above, it is submitted that the Learned AO has also failed to record proper satisfaction while passing the penalty order, imposing vague allegations that the appellant has failed to substantiate the manner in which such income was derived. The Investigation Wing was also satisfied with the explanation provided by the appellant and no objections were raised and no further queries were put during the search proceedings as well as during the assessment proceedings, as evident from the assessment order. Further there were no queries asked at any stage to explain the manner of earning of the income.
For the above proposition the appellant places reliance on the following decisions which support the contention of appellant.
i. Honb'le Gujarat High Court in case of Principal CIT v/s.
Shahlon Silk Mills Pvt. Ltd dated 05.02.2018 wherein also no question was raised by Revenue Authorities while recording the statement about the disclosure of manner in which income was earned, relying on the decisions of the Honourable Gujarat High Court in the case of CIT V/s Mahendra Singh Shah (2008) 299 ITR 305, the penalty levied u/s 271AAA was deleted.
27Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 ii. Hon'ble ITAT, Ahmedabad in the case of ACIT v. Shreenarayan Sitaram Mundra [(2017) 166 ITD 47 where it was held that where no question was asked during statement recorded under section 132(4), in respect of earning of income declared, revenue later could not plead deficiency on part of assessee for satisfying manner of earning said income and, thus, penalty under section 271AAA could not be levied.
The Concluding observation of the Honourable ITAT are in Para 9.3 and the operative part so far as applicable to the present case before Your Honour is abstracted here under:-
"Notwithstanding, we further note that the assessee has replied to the query raised while recording the statement as called for. The revenue does not appear to have quizzed the assessee for satisfying the manner in which the purported undisclosed income has been derived. The income considered as an undisclosed income in the statement under s.132(4) has been duly incorporated in the return filed pursuant to search. Therefore, the revenue in our view now cannot plead deficiency on the part of the assessee to specify the manner which has not been called into question at the time of search. We simultaneously note that nowhere in the assessment order or in the penalty order, the revenue has made out a case that the manner of earning undisclosed income was enquired into post search stage either. The revenue has not pointed out any query which remained un-replied or evaded in the course of search or post search investigation. Therefore looking from any angle, it is difficult to hold in favour of the revenue. Accordingly, we decline to interfere in the order of the CIT(A)."28
Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 iii. Honourable Delhi High Court in the case of Principal CIT V/s Emirates Technologies Pvt. Ltd. (2017) 399 ITR 0189observed that no specific query was put to the assessee by drawing his attention to section 271AAA and asking him to specify the manner in which the undisclosed income was derived, upheld the deletion of penalty by the Honourable ITAT and dismissed the appeal filed by the department.
iv. Hon'ble ITAT, Jaipur in the case of ACIT v. Ajit Singh (2016) 76 taxmann.com 212 where it was held that Where undisclosed income was duly admitted by assessee in statements recorded during search under section 132(4) and income on basis of seized papers was calculated vide a fund flow statement and tax thereon was paid, AO could not levy penalty under section 271AAA on plea that he failed to substantiate or describe manner of earning undisclosed income.
v. Honourable ITAT Indore Bench in the case of Shri Tikamchand Garg and others while deciding the issue of levy of penalty u/s 271AAA wherein such penalty was levied solely on the issue that the assessees have not disclosed the manner or method of earning such income, discussed the issue elaborately wherein the observations and the operating part is in Para 7 to 7.6, deleted the penalties after discussing the decisions of various High Courts and ITATs concluded in Para 7.6 that:
"In view of the above facts of the present case where from it is evident that during the course of search proceedings the authorized officer of the department has not raised any specific query regarding manner in which the undisclosed income has been derived and on 29 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 the contrary the assessee has explained that undisclosed income is being surrendered in the basis of loose papers, discrepancies found in seized materials and valuables found during search. We thus respectfully following the above decisions of Honourable Allahabad High Court and Honourable Gujarat High Court and coordinate bench of various tribunal as discussed above hold that in absence of query raised by the authorized officer during the course of search recording the statement u/s 132(4) about the manner in which the undisclosed income has been derived and about its substantiation, the AO was not justified in imposing penalty u/s 271AAA of the Act specifically when the surrendered undisclosed income has been accepted and due taxes has been paid by the assessee. Hence, we hereby set aside the impugned order of the authorities below and cancelled the penalty levied u/s 271AAA of the IT Act......"
It is submitted that though the above decisions are in context of penalty levied section 271AAA but the proposition laid down therein is squarely applicable even in the context of section 271AAB since both the sections are peri materia in so far as the question of levy of penalty for want of specifying the method and manner of earning undisclosed income is concerned. The only difference is that u/s 271AAA there was a complete immunity from penalty whereas u/s 271AAB penalty is leviable @ 10% of the undisclosed income on the same set of circumstances.
In the present case penalty u/s 271AAB has been levied solely on the premises that the method and manner of earning undisclosed income was not specified by the appellant. It is submitted that in view of the above referred decisions, the appellant cannot be roped into the violation of the condition that the method and manner of earning undisclosed income was not specified. Therefore, in the most humble opinion of the assessee, since the penalty has been 30 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 levied on an altogether incorrect and wrong premises, the same ought to be deleted by the Learned CIT(A) and is prayed to be now deleted.
The Learned CIT(A) has rightly held that the appellant has disclosed the manner of earning the additional income in para 4.2.6 of his order.Once the appellant comes out of this barrier, the very premises of the AO on which penalty has been levied cease to exist and the penalty levied on this sole ground ought not have been levied.
It is submitted that the additional income offered by the appellant can be broadly categorized in two heads as explained hereunder:-
In respect of the income of Rs. 2,24,00,000/- offered during the course of survey u/s 133A is not in the nature of 'undisclosed income'.
In respect of the amount of Rs. 2,24,00,000/- offered as additional income, the relevant facts are as under:-
(i) It is reiterated that the amount of Rs. 2,24,00,000/- was offered in the course of survey proceedings u/s 133A carried out on 01.09.2014 prior to the date of search on 04.09.2015.
(ii) The said income was already recorded in the books of accounts of the appellant for the year ended on 31.03.2015 prior to the date of search on 04.09.2015.
(iii) The said income was also in the knowledge of the department as the same was already offered in the survey before the date of search.31
Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019
(iv) In respect of this income due advance tax of Rs. 72,40,000/- was already paid by the assessee on 13th and 15th September 2014, much prior to the date of search on 04.09.2015.
(v) The said income was also deposited in the bank account of the appellant before 31st March 2015 i.e. well before the date of search on 04.09.2015.
The documents substantiating the above facts such as the copy of diary which was impounded during the survey u/s 133A on 01.09.2014 and on the basis of which income was offered, copy of the statement of Shri Dinesh Chand Mittal recorded on 01.09.2014, copy of clarification filed after the survey, copies of challans of advance tax paid by the appellant etc are at page no. 77 of the paper book.
Therefore the said income of Rs. 2,24,00,000/- nevertheless also offered u/s 132(4) cannot be roped into the ambit of 'undisclosed income' and is out of the clutches of the penal provisions of section 271AAB. 2.7. The fact that this income was offered in the survey conducted u/s 133A on 01.09.2014, the relevant advance tax was deposited immediately after the survey and much prior to the date of search, the recording of the said income in the books of accounts and also deposition thereof in the regular bank account of the appellant before 31.03.2015 much ahead of the date of search i.e. 04.09.2015 were categorically brought to the knowledge of the AO through the notes forming part of the return filed u/s 153A along with the copy of computation filed for this year through first submission dated 12.07.2017 (the notes with the return are enclosed at page no. 8 of the paper book). These facts were reiterated during the assessment proceedings in reply to questionnaire issued u/s 142(1) through point no. 2. Copy of the said submission is enclosed at page no. 17 to 21, specific reference to page no.19.
32Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 These facts were also brought to the knowledge of the AO during the penalty proceedings through the written submission vide point no. 2, 8 &
9. Copy of the said submission is enclosed at page no. 30 to 35.
It is important to point out that the fact that the said income was already disclosed to the department before the search has not been disputed at any stage.
The provision of section 271AAB is applicable only when there is undisclosed income. The term 'undisclosed income' has been defined in Explanations to section 271AAB. The income already disclosed by the appellant prior to the search is not covered within the ambit and scope of undisclosed income. Since the appellant has offered the said amount during the survey, prior to the search, penalty u/s 271AAB cannot be levied.
It is submitted that if the advance tax is paid in respect of certain income and the return is not filed till the date of search, the said income cannot be clothed as an undisclosed income, merely for the reason that the return was not filed till the date of search. The advance tax reflects the income admitted by the assessee duly recorded in the books of accounts. The appellant places reliance on the following judicial pronouncements for this proposition: -
i. Hon'ble High Court of Madras in the case of Asstt. CIT v. A R Enterprises (2005) 274 ITR 110 where it was held that Assessee having paid advance tax, income of relevant assessment year could not be treated as undisclosed income in block assessment even though no return was filed till the date of search.
ii. Hon'ble High Court Of Gauhati in the case of Dr. (Mrs.) Alaka Goswami v. CIT (2004) 138 Taxman 212/ 268 ITR 178 where it 33 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 was held that the income disclosed on account of payment of the advance tax cannot be held to be undisclosed income for the purposes of block assessment. The appeals of the assessees are allowed to that extent and the assessment orders would be modified taking the income on payment of advance tax as disclosed income and not as the undisclosed income.
iii. Hon'ble High Court of Madras in the case ofCIT v. Kerala Roadways Ltd. [(2010) 322 ITR 609 where it was held that where the return is filed though after search showing income in respect of which advance tax and self- assessment tax has been paid and tax had been deducted at source, such income could not be treated as undisclosed income.
In view of the above, it is submitted that the learned AO erred in levying the penalty u/s 271AAB on income of Rs. 224 Lacs, which stood already offered in the survey u/s 133A, much before the date of search u/s 132 on which not only advance tax was also paid, but the said income was duly recorded in the books of accounts and was deposited in the regular bank account of the appellant and was also shown in the return of income filed under section 139(1) of the Act cannot, under any circumstances, be roped into the clutches of undisclosed income, as defined in the explanation (c) to section 271AAB.
The Learned CIT(A) has rightly deleted the penalty levied on income of Rs. 224 Lacs which was offered under section 133A on the ground that it does not attract any penalty u/s 271AAB in view of the definition of undisclosed income given in explanation (c) of section 271AAB. The appellant places heavy reliance on the order of Learned CIT(A) and prays that the same be upheld and the departmental appeal be dismissed.34
Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 With regard to the additional Income of Rs. 1,11,40,876/- (78,40,876+33,00,000) The above incomes in the hands of the appellant for this year were offered relating to the house renovation and construction expenses of Rs. 78,40,876/- and also relating to amounts advanced in the market on interest of Rs. 33,00,000/- found noted on various LPS. Complete detail of the same is already on record and is undisputed. It is submitted that the income so offered u/s 132(4) was not only accepted by the Investigation Wing but the said income offered in the return as business income was also accepted during the assessment proceedings.
It is also submitted that the requisite satisfaction is not drawn even in the penalty order as while calculating the amount of penalty in Para 9 emphasis has been laid on 'concealed income' which concept is relevant only in the case of penalty u/s 271(1)(c) and not u/s 271AAB.
Without prejudice to the above basic contentions that penalty is not at all leviable in this case, it is submitted that the AO has levied penalty u/s 271AAB(1)(c) which is the residuary clause not covered by provisions of clauses (a) and (b) to section 271AAB(1). It is submitted that since the appellant admitted the income u/s 132(4), paid the due taxes along with interest and furnished the return of income declaring such income as business income and also specified the manner in which such income was derived, in any case cannot be roped into the clutches of section 271AAB(1)(c) which prescribes the maximum penalty leviable.
For this reason also the penalty levied by the AO upon the appellant under clause (c) to section 271AAB(1) is wrong and uncalled for and prayed to be deleted.35
Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 Further, the Learned CIT(A) erred in confirming the penalty to the extent of 10% whereas the Learned AO levied the penalty under clause (c) of section 271AAB(1) which itself indicate that the Learned AO levied the penalty in a mechanical manner and without requisite satisfaction. Therefore, the penalty levied by the AO is uncalled for and prayed to be deleted.
The penalty u/s 271AAB is neither automatic nor mandatory and is purely discretionary. Considering the overall conduct of the appellant of honouring the offer of additional income in letter and spirit and timely payment of taxes and also considering the cooperation extended during the search proceedings and also during the assessment proceedings, the discretionary penalty ought not to have been levied.
For the proposition that penalty u/s 271AAB is discretionary and not mandatory, the appellant places reliance on the following:
(i) ACIT V/s Marvel Associates (ITAT Vizag) ITA No. 147/Vizag/2017 dated 16.03.2018. (para 7)
(ii) Shri Ravi Mathur V/s DCIT Central Jaipur (Jaipur ITAT) ITA No. 969/JP/2017 dated 13.06.2018 for AY 2015-16. (Para 4,5 & 6)
(iii) Suresh Chand Mittal V/s DCIT Central 2 Jaipur (ITAT Jaipur) ITA No. 931/JP/2017 AY 2014-15, dated 02.07.2018. (Para 6) In view of the above the appellant submits that the penalty levied is uncalled for and prays the same to be deleted.
The appellant wishes to summaries its submission as under:
A. The notice issued u/s 274 was not valid as 36 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 (i) It specified the wrong charges of 'concealment of income' or
'furnishing of inaccurate particulars of income' which charges are not at all applicable for the purposes of section 271AAB.
(ii) It did not specified the fact of 'Undisclosed income'
(iii) It did not mentioned the specific clause of section 271AAB out of the three clauses (a) or (b) or (c) prescribing different rates of penalty
(iv) The penalty u/s 271AAB was levied by the AO under clause (c ) to section 271AAB(1), which is not mentioned in the show cause.
(v) The penalty u/s 271AAB has been confirmed by the Learned CIT(A) under clause (a) to section 271AAB(1), for which no notice was ever issued to the appellant.
B. Penalty u/s 271AAB(1)(c) levied by the AO is wrong as
(i) The appellant specified the manner of earning income and offered the same as business income, which was accepted by the AO without any objection.
(ii) The appellant was never called upon at any stage to further explain and substantiate the said income and it was accepted merely on the basis of offering of the appellant.
C. The penalty u/s 271AAB neither mandatory not automatic and is purely discretionary ought not to have been levied considering the overall conduct of the appellant and other facts and circumstances of the case.
That the inapplicability of mind while issuing the statutory notice u/s 274 r.w.s. 271AAB clubbed with the vague allegation while levying the penalty that the appellant failed to specify the manner in which income is derived and imposition of penalty on the income offered in the return filed u/s 153A without any queries raised in the search as well as penalty proceedings brings the appellant out of the clutches of the 37 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 section 271AAB and therefore the order passed and the penalty imposed is wrong, uncalled for and prayed to be deleted.
11. Ld. Departmental representative opposed the submissions and submitted that the assessee has not raised any objection before the authorities below. He further contended that merely a defective notice should not be the reason of quashing the penalty proceedings when the assessee himself has participated into the proceedings. In support Ld. DR relied upon the judgment of Hon'ble Madras High Court rendered in the case of Sundaram Finance Ltd V/s ACIT.
12. We have heard rival contentions and perused the records placed before us and carefully gone through the judgments relied by both the parties. In this bunch of seven appeals filed by various assessee(s) common two issues have been raised. Firstly legal issue challenging the validity of penalty proceedings initiated u/s 271AAB of the Act being bad in law since the notice issued u/s 274 r.w.s 271AAB of the Act do not fulfill the requirement of law. Second common issue is on merits challenging the action of Ld. CIT(A) sustaining the penalty u/s 271AAB(A) @10% of the undisclosed 38 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 income surrendered during the course of search conducted u/s 132 of the Act on 4.9.15.
13. We will first take up the legal issue challenging the legality of penalty proceedings initiated by issuing notice u/s 274 r.w.s.
271AAB of the Act. At the first appellate stage the assessee was not able to succeed on the legal ground as Ld. CIT(A) decided against the assessee's observing as follows:-
"4.1 Ground No. 1 :_ Through this ground of appeal, the appellant has challenged the initiation of the penalty proceedings and it has been pointed out that the penalty notice issued is vague and is not m conformity with law as the same is issued on the charges for levy of penalty u/s 271(1)(c). A copy of the penalty notice issued is placed on page 29 of the paper book, referring to which it was pointed out that the notice in this case was issued u/s 274 r.w.s. 271AAB, however, it was mentioned that the assessee has concealed the particulars of income or furnished inaccurate particulars of such income. It is contended that the charges 'concealment of particulars of income' or 'furnishing inaccurate particulars of income' are applicable only for penalties initiated u/s 271(1)(c) and not for penalties initiated u/s 271AAB and therefore, the penalty show cause notice issued in this case is bad in law.39
Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 It is also contended that there are various sub-section and clauses specifying different charges and prescribing different rates of penalty u/s 271AAB, however, no specific sub-section or clause of section 271AAB was mentioned in the notice so as to unable the appellant to meet the specific charge during the penalty proceedings.
Thus it is contended that the penalty notice issued u/s 271 AAB was akin to notice u/s 271(1)(c) where the limbs of section 271(1)(c) were mentioned but the limbs of section 271AAB were not mentioned. The appellant, then sought to draw support from various case laws as mentioned in the submission already abstracted above. The appellant also placed heavy reliance on the decision of Honourable MP High Court in the case of Kulwant Singh Bhatia IT - 9 to 14 of 2018 (MP), wherein in context of penalty u/s 271(1)(c), it was held by the Honourable High Court that the grounds mentioned in the show cause notice does not satisfies the requirement of law as the notice was not specific. Drawing support from this decision the appellant contended that the present appeal is squarely covered by the proposition rendered by the jurisdictional High Court.
After due consideration of the various contentions raised by the appellant, I find that the appellant does not get support from the ratio decided by the Honourable MP High Court as the same was rendered in the context of penalty levied u/s 271(1)(c) and not u/s 271AAB, as in the instant case. I also find that the AO has issued notice u/s 274 r.w.s. 271AAB and therefore, the challenge of the appellant in respect of the initiation of the penalty proceedings under wrong section is not valid. Accordingly this ground of appeal is Dismissed."40
Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019
14. For adjudicating the legal issue in detail, we first need to look into the penalty notices issued to the assessee(s). It is accepted by both the parties that similar type of notices has been issued u/s 274 r.2.s. 271AAB in all these cases. We are therefore reproducing below the notice issued in the case of Smt. Rajrani Mittal for Assessment Year 2015-16:-
OFFICE OF THE Deputy Commissioner of Income Tax (Central)-I, Indore PAN. AGLPM0530E Date: 30/11/2017 To Smt. Rajrani Mittal, 15A/22, Manak, Y.N. Road Indore-452001 NOTICE UNDER SECTION 274 READ WITH SECTION 271AAB OF THE INCOME TAX ACT, 1961 Whereas in the course of proceedings before me for the assessment year 2015-16 it appears to me that you :-
have concealed the particulars of your Income or furnished inaccurate particulars of such Income.
You are hereby requested to appear before me on 29.12.2017 at 11.00 AM and show cause why an order imposing a penalty on you should not be made under section 271AAB of the Income Tax Act 1961 if you do not wish to avail yourself of this opportunity of bearing heard in person or through authorized representative you may show cause in writing on or before the side date which will be considered before any such order is made under section 271AAB.
Sd/-
((P.K. Singi) Dy. Commissioner of Income Tax (Central)-1 Indore 41 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019
15. During the course of hearing Ld. Counsel for the assessee submitted that the legal issue raised in these bunch of appeals is squarely covered by two latest decision of the I.T.A.T. Indore Bench in the case of Dr. Rajesh Jain (supra) and Vivek Chugh (supra) wherein the Tribunal has considered various judgments rendered by Hon'ble jurisdictional High Court and decisions of other Tribunals.
16. We have gone through the decision of the Tribunal in the case of Dr. Rajesh Jain (supra) and after examining the fact find that the facts are verbatim similar wherein defective notice was issued u/s 274 r.w.s. 271AAB of the Act, without specifying the charges for which penalty proceedings were initiated. In other words in the notice issued u/s 274 r.w.s. 271AAB of the Act assessee has not been given an opportunity to offer explanation against the type of penalty to be levied i.e. whether the penalty is to be under Clause
(a), (b) or (c) of Section 271AAB. The Tribunal has quashed the penalty proceedings for the defective notice issued u/s 274 r.w.s.
271AAB of the Act observing as follows:-
8. We have heard rival contentions and perused the records placed before us. The legal issue before us is that whether the notice issued u/s 274 r.w.s. 271AAB of the Act suffers from fatal error and technical defect 42 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 thereby not providing an opportunity to the assessee to plead her case.
Since the legal ground goes to be root cause of the issue levying penalty u/s 271AAB of the Act, we in view of the ratio held by the Hon'ble Apex Court in the case of National Thermal Power Company Limited (supra) admit the additional legal ground for adjudication. For levying penalty u/s 271AAB of the Act the Ld. A.O needs to primarily issue notice u/s 274 of the Act so for initiating proceedings u/s 271AAB of the Act the Ld. A.O has to first pass through the hurdle of Section 274 of the Act. For better understanding we reproduce the provisions of Section 271AAB and 274 of the Act which reads as follows:-
Section 271AAB.
'271AAB. Penalty where search has been initiated.--(1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of July, 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,--
(a) a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year, if such assessee--
(i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived;
(ii) substantiates the manner in which the undisclosed income was derived; and
(iii) on or before the specified date--
(A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein;
(b) a sum computed at the rate of twenty per cent of the undisclosed income of the specified previous year, if such assessee--43
Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019
(i) in the course of the search, in a statement under sub-section (4) of section 132, does not admit the undisclosed income; and
(ii) on or before the specified date--
(A) declares such income in the return of income furnished for the specified previous year; and (B) pays the tax, together with interest, if any, in respect of the undisclosed income;
(c) a sum which shall not be less than thirty per cent but which shall not exceed ninety per cent of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b). (2) No penalty under the provisions of clause (c) of sub-section (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1).
(3) The provisions of sections 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section. Explanation.--For the purposes of this section,--
(a) "specified date" means the due date of furnishing of return of income under sub-section (1) of section 139 or the date on which the period specified in the notice issued under section 153A for furnishing of return of income expires, as the case may be;
(b) "specified previous year" means the previous year--
(i) which has ended before the date of search, but the date of furnishing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the date of search; or
(ii) in which search was conducted;
(c) "undisclosed income" means--
(i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has--
44Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of search; or
(ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted.'.
Section 274 (1) No order imposing a penalty under this Chapter shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard.
(2) No order imposing a penalty under this Chapter shall be made-
(a) by the Income- tax Officer, where the penalty exceeds ten thousand rupees;
(b) by the Assistant Commissioner, where the penalty exceeds twenty thousand rupees, except with the prior approval of the Deputy Commissioner.] (3) An income- tax authority on making an order under this Chapter imposing a penalty, unless he is himself the Assessing Officer, shall forthwith send a copy of such order to the Assessing Officer']
9. From perusal of the above provision we observe that sub section 3 of Section 271AAB of the Act talks about issuing the notice u/s 274 of the Act. So for initiating the penalty proceedings u/s 271AAB of the Act the first step to be taken by Ld. A.O is to issue a valid notice u/s 274 of the Act. Sub-section (1) to Section 274 of the Act provides a procedure that "No order imposing a penalty under this Chapter shall be made unless the 45 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 assessee has been heard, or has been given a reasonable opportunity of being heard". To comply with this requirement the notice u/s 274 should be clear enough to convey the assessee about the charge which is to be leveled against him/her/it for levying the penalty for the contravention of the related provisions of the Act which in the instant case relates to not surrendering of undisclosed amount during the course of search which is subsequently admitted during the course of assessment and not challenged before the Ld. CIT(A). So it was incumbent for Ld. A.O that in the notice issued u/s 274 of the Act he should have mentioned that penalty u/s 271AAB of the Act may be levied @10/20/ 30% since the assessee falls in Clauses (a)/(b)/(c) of section 271AAB of the Act. He should have further mentioned that as the assessees case falls under clause-c of section 271AAB of the Act, why she should not be visited by penalty @30% of the undisclosed income. Against this charge the assessee should have been given a reasonable opportunity of being heard.
10. Now let us revert back to the fact of the instant case of the assessee and look into as to what is mentioned in the alleged notices issued u/s 274 r.w.s. 271AAB of the Act. Notice is reproduced below; NOTICE UNDER SECTION 274 READ WITH SECTION 271AAB OF THE INCOME TAX ACT, 1961 PAN. ABTPJ0870H OFFICE OF THE Asstt. Commissikoner of Income Tax (Central)-I, Indore Date: 22.03.2016 To Dr. Rajesh Jain, E-63 Saket, Indore-452001 Whereas in the course of proceedings before me for the assessment year 2014-15 it appears to me that you :-
46Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 *Have without reasonable cause failed to furnish me return of income with you were required to furnish by a notice given under section 22(1)/22(2)/34 of the India Income Tax Act, 1922 or which you were required to furnish under section 193(1) or by a notice given under section 193(2)/148 of the Income Tax Act 1961, No. .... Dated..... or have without reasonable cause failed to furnish it within the allowed and the manner required by the side section 139(1) or by such notice.
*Have without reasonable cause failed to comply with a notice under section 22(4)/23(2) of the India Income Tax Act, 1922 or under section 142(1)/143(2) of the Income Tax Act 1961, No. dated have concealed the particulars of your Income or furnished inaccurate particulars of such Income.
You are hereby requested to appear before me on 21.04.2016 at 04.00 PM and show cause why an order imposing a penalty on you should not be made under section 271AAB of the Income Tax Act 1961 if you do not wish to avail yourself of this opportunity of bearing heard in person or through authorized representative you may show cause in writing on or before the side date which will be considered before any such order is made under section 271AAB.
Sd/-
(Amit Kumar Soni) Asstt. Commissioner of Income Tax (Central)-1 Indore
11. From going through the above notice issued to the assessee, we find that there is no mention about various conditions provided u/s 271 AAB of 47 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 the Act. In the notice dated 22.03.2016 the Ld. A.O has very casually used the proforma used for issuing notice before levying penalty u/s 271(1)(c) of the Act for the concealment of income or furnishing of inaccurate particulars of income. It does not talk anything about various clauses of section 271AAB of the Act for levying penalty @10%/20%/30%. Certainly such notice has a fatal error and technically is not a correct notice in the eyes of law because it intends to penalize an assessee without spelling about the specific charge against the assessee.
12. Hon'ble Jurisdictional High Court in the case of PCIT V/s Kulwant Singh Bhatia (supra) dealt the issue of defective notice issued u/s 274 r.w.s. 271(1)(c) of the Act and Hon'ble court after relying judgment of Hon'ble Supreme Court in the case of CIT V/s Manjunatha Cotton Ginning Factory and CIT v/s SSA'S Emerald Meadows (supra) held that such show cause notices would not satisfy the requirement of law as notice was not specific. Merely issuing notice in general proforma will negate the very purpose of natural justice. Hon'ble Apex Court in the case of Dilip N Shraf 161 Taxmann 218 held that "the quasi criminal proceedings u/s 271(1)(c) of the Act ought to comply with the principles of natural justice".
13. In the case of DCIT V/s R. Elangovan Ltd (supra) , Co-ordinate Bench, Chennai while dealing with the legal ground challenging the validity of notice issued u/s 274 r.w.s. 271AAB of the Act had observed that ;
"It is clear from the Sub Section (3) of Section 271 AAB that Sections 274 and Section 275 of the Act shall, so far as may be, apply. Sub Section (1) of Section 274 of the Act mandates that order imposing penalty has to be imposed only after hearing the assessee or giving a assessee opportunity of hearing. Opportunity that is to be given to the assessee should be a meaningful one and not a farce. Notice issued to the assessee reproduced (supra), does not show whether penalty proceedings were initiated for 48 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 concealment of income or for furnishing inaccurate particulars of income or for having undisclosed income within the meaning of Section 271AAB of the Act. Notice in our opinion was vague. Hon'ble Karnataka High Court in the case of SSA's Emerald Meadows (supra) relying in its own judgment in the case of Manjunatha Cotton and Ginning Factory (supra) had held as under:-
"2. This appeal has been filed raising the following substantial questions of law.
(1) Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the penalty notice under Section 274 r.w.S. 271(1)(c) is bad in law and invalid despite the amendment of Section 271 (1 B) with retrospective effect and by virtue of the amendment, the assessing officer has initiated the penalty by properly recording the satisfaction for the same?
(3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in deciding the appeals against the Revenue on the basis of notice issued under Section 274 without taking into consideration the assessment order When the assessing officer has specified that the assessee has concealed particulars of income?
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 49 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 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 and Ginning Factory (2013) 359 ITR 565.
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".
In the earlier case of Manjunatha Cotton and Ginning Factory (supra) their lordship had observed as under:-
"Notice under section 274 of the Act should specifically state the grounds mentioned in section 271(l)(c) , 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 the requirement of law;
The assessee should know the grounds which he has to meet specifically. Otherwise, the principles of natural justice are offended. On the basis of such proceedings, no penalty could be imposed on the assessee) taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law; penalty proceedings are distinct from the assessment proceedings :
though proceedings for imposition of penalty emanate from proceedings of assessment, they are independent and a separate aspect of the proceedings;50
Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 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 proceedings on the 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 invalid in the penalty proceedings".
View taken by the Hon'ble Karnataka High Court in the above judgment was indirectly affirmed by the Hon'ble Apex Court, when it dismissed an SLP filed by the Revenue against the judgment in the case of SSA's Emerald Meadows (supra), specifically observing that there was no merits in the petition filed by the Revenue. Considering the above cited judgments, we hold that the notice issued ujs.274 r.w.s. 271AAB of the Act, reproduced by us at para 5 above was not valid. Ex-consequenti, the penalty order is set aside.
14. The view taken by the Co-ordinate Bench of Chennai in the case of DCIT V/s R. Elangovan 1199/CHNY/2017 order dated 05.04.2018 has been subsequently followed by the Co-ordinate Bench of Jaipur in the case of Ravi Mathur Vs. DCIT, ITA No.969/JP/2017 holding that such show cause notice issued u/s 274 r.w.s. 271AAB of the Act are not sustainable in law".
15. As regards to judgment of Hon'ble Allahabad High Court in the case of Pr. CIT Vs Sandeep Chandak (supra) which has been relied by the Departmental Representative is concerned, we find that in the decision rendered by the Co-ordinate Bench of Jaipur in the case of Ravi Mathur Vs DCIT (supra) wherein also similar issue of defective notice u/s 274 r.w.s. 271AAB was adjudicated, the judgment of Hon'ble Allahabad High Court in the case of Pr. CIT Vs Sandeep Chandak (supra) has been discussed 51 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 and distinguished observing as follows:-
It is further submitted that in para 5 of this judgment (Ravi Mathur), the case quoted by ld CIT(A) Pr. CIT vs Sandeep Chandak (All.) was distinguished as under:
"5. Before we proceed further, the decisions relied upon by the ld D/R are to be considered. In the case of Principal CIT vs Sandeep Chandak & Others [TS-6389-HC-2017(Allahabad)-O] (supra) the issue before the Hon'ble High Court was the defect in the notice issued under section 271AAB on account mentioning wrong provision of the Act being 271(1)(c) of the Act. The Hon'ble High Court after considering the fact that the show cause notice issued by the AO though mentions section 271(1) in the caption of the said notice, however, the body of the show cause notice clearly mentions section 271AAB, which was fully comprehended by the assessee as reveals in the reply filed by the assessee against the said show cause notice. Hence the Hon'ble High Court has held as under: - "The ld A.Rs have also challenged that the caption of the notice mentioned only section 271 and not 271AAB. In this respect, the copy of notice has been produced by the ld. A.R. before me. It is seen that the ld A.R is correct in observing that the section of penalty has not been correctly mentioned by the AO in the caption. However, the AO will get the benefit of section 292BB of the Income Tax Act, 1961 because firstly, the assessee has raised no objection before the AO in this regard. Secondly, last line of the notice clearly mentions section 271AAB. Thirdly, the assessee has given reply to said notice which shows that the assessee fully comprehended the implication of the notice that it is for section 271AAB. The assessee has also challenged that the principles of natural justice has not followed by the AO. The detailed submissions of A.R. in this regard has already been reproduced above. The A.R. did not produce any evidence to show that he was not given proper opportunity of hearing. It is clear from the penalty order that the AO has given notice and which was also replied by the assessee. Therefore, in my opinion, principle of natural 52 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 justice has not been violated. Thus in view of above discussion penalty imposed by AO u/s. 271AAB of the Act is confirmed."
Thus it was found by the Hon'ble High Court that the mistake in mentioning the section in the show cause notice is covered under section 292BB and the AO will get the benefit of the same. The said decision will not help the case of the revenue so far as the issue involves the merits of levy of penalty under section 271AAB. As regards the decision of Kolkata Benches of the Tribunal in the case of DCIT vs Amit Agrawal (TS-7675- ITAT-2017(Kolkata)-O) (Supra), we find that the said decision was subsequently recalled by the Tribunal and a fresh order dated 14th March, 2018 was passed by the Tribunal in favour of the assessee. Therefore, the decision relied upon by the Ld D/R is no more in existence."
16. We, therefore respectfully following the judgment/decision referred above and in the given facts and circumstances of the case wherein the matter written in the body of the notice issued u/s 274 of the Act does not refer to the charges of provision of Section 271AAB of the Act makes the alleged notice defective and invalid and thus deserves to be quashed. Since the penalty proceedings itself has been quashed the impugned penalty of Rs. 2,04,900/- stands deleted. We accordingly allow the legal ground raised by the assessee challenging the validity of notice issued u/s 274 r.w.s. 271AAB of the Act and quash the penalty proceeding as void ab intio. In the result appeals of the assessee(s) for Assessment Years 2014- 15 is allowed on legal ground.
17. Since the penalty u/s 271AAB has already been dealt on legal ground and deleted on the preliminary legal points, other grounds and arguments of the assessee dealing with the merits of the levy of penalty are not been dealt with, as the same are rendered academic in nature. Thus grounds raised on merits are dismissed as infructuous.
In the result appeal of the assessee is allowed on legal ground.
53Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019
17. From perusal of the above finding and examination of the instant appeal we observe that in the instant case defect is much more grave because in the penalty notice under the heading of Section 274 r.w.s. 271AAB of the Act pre printed format of issuing notice u/s 271(1)(c) of the Act is appearing which relates to levy of penalty for concealment of particulars of income or furnishing inaccurate particulars of income. In the assessee's case Ld. A.O ought to have mentioned the specific charges provided u/s 271AAB of the Act rather than the charges of Section 271(1)(c) of the Act.
We therefore are of the considered view that this decision of Indore ITAT in the case of Dr. Rajesh Jain (supra) is squarely applicable on the issues raised by the assessee(s) in these appeals.
18. Moving further we observe that in the instant case Ld. CIT(A) reduced the penalty to 10% applying provisions of Section 271AAB(a) of the Act as against penalty levied @30% by the Ld. A.O u/s 271AAB(c) of the Act but to our surprise Ld. CIT(A) has not taken pain to issue a fresh notice before reducing the penalty thus not giving reasonable opportunity of being heard as mandated under the proviso to Section 275. We find that similar issue came up before us in the case of Shri Vivek Chugh V/s ACIT ITA 54 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 No.636/Ind/2017 order dated 28.03.2019 wherein the appeal was decided in favour of the assessee and penalty proceedings were quashed since Ld. CIT(A) partly deleted the penalty by confirming the penalty @10% as against 20% levied by Ld. A.O u/s 271AAB of the Act without affording reasonable opportunity to the assessee to make necessary submission of the explanation. Since the facts and issues are same we are reproducing below the brief facts and decisions relied and the finding of Coordinate Bench in the case of Shri Vivek Chugh (supra) ;
2. Briefly stated facts are that a search and seizure operation /s 132 was carried out on the business as well as residential premises of the Chugh Group of Indore including the assessee. Thereafter, a notice u/s 153A was issued, in response thereto, the assessee filed his return of income on 22.12.2014 including additional income of Rs.35,00,000/- declared during the search. The assessing officer observed that the assessee could not specify and substantiate the manner in which the said undisclosed income has been derived hence penalty proceedings u/s 271AAB was initiated. Subsequently, the assessing officer imposed a penalty of Rs.7,00,000/- @ 20% of the concealed income.
4. Aggrieved by this the assessee preferred an appeal before the Ld. CIT(A) who however reduced the penalty and restricted the same @10% of the undisclosed income i.e. amounting to Rs.3,50,000/-.
55Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 The assessee is in present appeal against the order of the Ld. CIT(A). At the outset, Ld. counsel for the assessee submitted that initiation of penalty u/s 271AAB of the is ex facie bad in law. He drew our attention towards the notice dated 05.08.2015 and enclosed at page no.25 of the paper book. He submitted that the AO initiated penalty proceedings in a casual mechanical manner. That goes to demonstrate that assessing officer has not made a specific charge. Further Ld. counsel for the assessee relied upon the various case laws more particularly in the case of Sandeep Chandak, vs. ACIT in ITANos.416,417 and 418/Lkw/2016 dated 30.01.2017. Further reliance has made on the decision of the Hon'ble Supreme Court rendered in the case of CIT vs. M/s. SSA's Emerald Meadows (2016) 8 TMI 1145(SC), judgment of the Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning Factory (2012) 83 CCH 282 (Kar. HC). Ld. counsel has also placed reliance on the following decisions of the Tribunal rendered in the cases of:
S.no Citation
.
1 SandeepChandak&Ors. vs. ACIT (2017) 55 ITR 209 (Luck. Trib.)
2 ShriAnujMathur vs. DCIT 2018 (6) TMI 1311 ITAT Jaipur)
3
Shri Ravi Mathur vs. DCIT 2018 (6) TMI 1128 ITAT Jaipur) 4 Shri Suresh Chand Mittal vs. DCIT 2018 (7) TMI 220 (ITAT Jaipur) 5 DCITvs. Manish Agarwala 2018 (2) TMI 972 (ITAT Kol.) 6 DCITvs. Subhas Chandra Agarwala 2018 (5) TMI 1602 (ITAT Kal.) 56 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 7 PankajJalan vs. DCIT2018 (5) TMI 1591 (ITAT Kal.) 8 DCIT vs. Sanwar Mal Agarwala and Adtam Saran Khemka 2018 (5) TMI 422 (ITAT 9 ACIT vs. M/s. Amrit Hatcheries Pvt. Ltd. 2018 (3) TMI 44 (ITAT 1 DCIT vs. Subhas Chandra Agarwala & Sons (HUF) 2018 (3) TMI 214(ITAT Kol.) 1 Marvel vs. ACIT TMI 946 (ITAT Vishakhapatn To buttress his contention that notice so issued is illegal and therefore, is not sustainable in the eyes of law.
5. On the contrary Ld. DR opposes the submissions and supported the order of the authorities below. Ld. DR submitted that there no ambiguity under the law in case assessee admits amount being in disclosed then it is to be dealt with in the manner prescribed under 271AAB of the Act. In rejoinder Ld. counsel for the assessee submitted that even the Ld. CIT(A) has sustained penalty u/s 271AAB(1)(a) of the Act while the assessing officer had initiated penalty u/s 271AAB(1)(b) of the Act. No notice of initiating penalty u/s 271AAB(1)(a) was given to the assessee. This fact is sufficient to set aside the impugned order.
6. We have heard the rival submissions and perused the material available on records and gone through the orders of the authorities below. We find that the assessing officer had given a notice which enclosed in the paper book at page 25 for the sake of clarity notice is reproduced as under:
57Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 58 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019
7. A bare reading of the above notice suggests that the notice has been issued in a casual fashion. The Assessing officer has not applied his mind and no specific charge is mentioned for which the assessee was required to be show caused. In absence of the requisite contents of specific charge the initiation of proceedings cannot be sustained being bad in law. Admittedly, Ld. CIT(A) reduced the penalty by applying the provisions of section 271AAB(1)(a). There is no ambiguity under the law so far powers of Ld. CIT(A) is concerned, he can modify the penalty order by enhancing or reducing the penalty. However, where the Act provides for two different rates under different two provisions of law in our considered view, the assessee ought to have been given an opportunity of hearing on this aspect. However, in the present case at the very inception notice initiating penalty is not in accordance with mandates of law. Moreover, it is settled position of law that such defect is not curable u/s 292BB of the Act. Therefore, we hereby quash the penalty order.
8. In the result, the appeal of the Assessee in ITANo.636/Ind/2017 is allowed."
20. We therefore in the given facts and circumstances of the case and respectfully following the decisions of the Indore I.T.A.T. rendered by in the case of Dr. Rajesh Jain (supra) and Shri Vivek Chugh (supra) us adjudicating the similar issues and also applying the ratio laid down by the Hon'ble jurisdiction High Court in the case of Kulwant Singh Bhatia (supra) decided the legal issue in favour of the assessee and quash the penalty proceedings initiated u/s 274 r.w.s. 271AAB of the Act in all the seven cases ITA No.852 59 Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019 to 858/Ind/2019 since the penalty notice issued u/s 274 r.w.s.
271AAB is vague and does not fulfill the requirement of law since no specific charges provided u/s 274 r.w.s. 271AAB of the Act are appearing in the body of penalty notice. Since the penalty proceedings has been quashed and legal ground allowed in favour of the assessee(s), all the penalties sustained by Ld. CIT(A) in all these cases at Rs.11,14,088/- (in the case of Smt. Rajrani Mittal), Rs.8,44,176/- (in the case of Anshul Mittal), Rs.5,24,296/- (in the case of Ankit Mittal), Rs.3,64,285/- and Rs.6,50,000/-(in the case of Neha Mittal), and Rs.4,57,513/- and Rs. 5,35,000/- (in the case of Shweta Mittal) in ITA No.853, 852, 854 to 858/Ind/2019 stands deleted.
21. Apropos to the grounds raised on merits by the assessee challenging the quantum of penalty sustained by CIT(A) u/s 271AAB(a) of the Act we are of the view that adjudicating these grounds on merits will be merely academic in nature since we have already quashed the penalty proceedings allowing the legal ground in assessee(s) favour therefore all the grounds raised on merits are deemed to be infructuous.
60Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019
22. In the result all the appeals of the assessee(s) are allowed as per the terms indicated above.
23. Now we take up Revenue Appeal No.879/Ind/2019 for Assessment Year 2015-16. Revenue has challenged the action of Ld. CIT(A) partly deleting the penalty levied by the Ld. A.O u/s 271AAB(c) of the Act. We find that in the case of Smt. Rajrani Mittal while adjudicating the ground raised by the assessee in ITA No.853/Ind/2019 we allowed the legal ground and quashed the penalty proceedings being vague and bad in law since specific charge was not mentioned in the penalty notice issued u/s 274 r.w.s. 271AAB of the Act. For deciding so we have relied on the decision of Co-ordinate Bench in the case of Dr. Rajesh Jain (supra) and Shri Vivek Chugh (supra) and also the ratio laid down by the Hon'ble jurisdictional High Court in the case of Kulwant Singh Bhatia (supra) . Since the penalty proceedings in the case of Smt. Rajrani Mittal for Assessment Year 2015-16 stands quashed the instant appeal of revenue becomes infructuous. Thus the ground raised by the Revenue are dismissed.
61Smt.Rajrani Mittal & Ors ITA Nos. 852 to 858 & 879/Ind/2019
24. In the result all the appeals of the assessee(s) ITA No.852 to 858/Ind/2019 are allowed and that of Revenue in ITA No.879/Ind/2019 is dismissed.
The order pronounced in the open Court on 07.09.2020.
Sd/- Sd/-
( KUL BHARAT) (MANISH BORAD)
JUDICIAL MEMBER ACCOUNTANT MEMBER
दनांक /Dated : 7th September, 2020
/Dev
Copy to: The Appellant/Respondent/CIT concerned/CIT(A)
concerned/ DR, ITAT, Indore/Guard file.
By Order,
Asstt.Registrar, I.T.A.T., Indore
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