Income Tax Appellate Tribunal - Delhi
Shri Sanjay Mittra, New Delhi vs Dcit, New Delhi on 1 October, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "G", NEW DELHI
BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER
AND
MS. SUCHITRA KAMBLE, JUDICIAL MEMBER
ITA No.5206/Del/2016
Assessment Year : 2009-10
Sanjay Mittra, DCIT, Central Circle- 26,
G-25, Green Park, New Delhi.
Vs.
New Delhi.
PAN : AAGPM2907G
(Appellant) (Respondent)
Assessee by : Shri Ashok Kumar Jain, CA
Department by : Shri S. S. Rana, CIT-DR
Date of hearing : 10-09-2018
Date of pronouncement : 01-10-2018
ORDER
PER R. K. PANDA, AM :
This appeal filed by the assessee is directed against the order dated 03.08.2016 of the CIT(A)- 29, New Delhi relating to assessment year 2009-10.
2. Grounds raised by the assessee read as under :-
"1. That the order of ld. CIT(A) confirming the action of ld. AO in levying penalty U/s 271(1)(c) is against the provisions of law, facts, circumstances, principle of natural justice as such deserves to be quashed.
2. That Ld. CIT(A) has erred in law in confirming penalty U/s 271(1)(c) levied by Ld. AO which is arbitrary and contrary to provisions of law as Show Cause Notice issued by Ld. AO is general in nature without mentioning specific charge for imposition of penalty.
3. That the Ld. CIT(A) is not justified in confirming penalty U/s 271(1)(c) of the Income Tax Act, 1961 amounting to Rs.3,79,637/- levied by Ld. AO which is arbitrary, perverse, whimsical and contrary to facts and provisions of law and against the principles of natural justice as such action of Ld. CIT(A) needs to be undone and penalty of Rs.3,79,637/- levied by Ld. AO deserves to be deleted.
4. That appellant craves right to amend, add, delete or withdraw any of the ground of appeal either before or at the time of hearing of this appeal."2 ITA No.5206/Del/2016
3. Facts of the case, in brief, are that the assessee is an individual and derives income from salary, house rent and income from other sources. He filed his return of income on 30.07.2009 declaring total income of Rs.40,25,560/-. In this case, a search and seizure operation u/s 132 of the I.T. Act, 1961 was carried out on 20.01.2012. In response to notice u/s 153A, the assessee filed his return of income on 10.10.2013 declaring total income of Rs.43,95,120/-. In the computation of income filed along with return of income, the assessee has submitted as under :-
"The other income of Rs.1,50,000/- declared under the head "Income from other sources" is to cover up any addition on account of any entry in the seized material seized on account of search."
4. Since the assessee himself admitted of having earned income to the tune of Rs.1,50,000/- and has declared the same under the head "Income from other sources", the Assessing Officer held that the assessee is liable for penalty u/s 271AAA on the undisclosed income of Rs.1,50,000/-. Similarly, since the assessee had declared income of Rs.43,95,120/- in the return of income filed in response to notice u/s 153A as against the original income of Rs.40,25,560/-, the Assessing Officer held that the assessee would not have disclosed this additional income of Rs.3,69,560/- had there been no search. He, therefore, initiated penalty proceedings u/s 271(1)(c) on this amount. The Assessing Officer further noticed that a diary was found during the course of search which was marked as A-4. Since the assessee could not reconcile the entries found in 3 ITA No.5206/Del/2016 the diary so seized and could not give any explanation, the Assessing Officer made addition of Rs.8,97,350/-. Thus, the Assessing Officer determined the total income of the assessee at Rs.52,92,470/-.
5. Subsequently, the Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the I.T. Act. Rejecting the various explanations given by the assessee, the Assessing Officer levied penalty of Rs.4,30,622/- u/s 271(1)(c) being the minimum penalty at the rate of 100% of the tax sought to be evaded.
6. In the appeal, the ld. CIT(A) confirmed the penalty so levied by the Assessing Officer.
7. Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before the Tribunal.
8. The ld. counsel for the assessee, at the outset, referred to the notice issue u/s 274 r.w.s. 271 dated 31.03.2017 and submitted that the inappropriate words in the said notice have not been struck off. Therefore, it is not understood as to under which limb of provisions of section 271(1)(c) the Assessing Officer has levied penalty since the said show-cause notice issued u/s 274 did not specify the charge against the assessee as to whether it was for concealing the particulars of income or for furnishing inaccurate particulars of income. Therefore, the penalty order passed u/s 271(1)(c) in pursuance to the said notice deserves to be set-aside. For the above proposition, he relied on the following decisions :-
4ITA No.5206/Del/2016
i. SSA'S Emerald Meadows 242 Taxman 180.
ii. Dilip N Shroff, 291 ITR 519.
iii. Manjunatha Cotton & Ginning Factory, 359 ITR 565.
iv. Samson Perinchery, 392 ITR 4.
v. Sahiwal Investment & Trading Co., ITA No.4913/Del/2015 dated 18.07.2018.
vi. Dr. Sarita Milin Davare, 184 TTJ 9.
vii. Jeetmal Choraria, 91 taxmann.com 311.
viii. Shri Sachin Arora, ITA No.118/Agra/2015 dated 19.12.2017.
9. Referring to the following decisions, he submitted that the show-cause notice u/s 274 is a mandatory notice without which the initiation of penalty proceedings would become non-est in the eye of the law and the charge should be specific in said notice. In absence of the same, the notice will be invalid even if there is specific charge in assessment order and penalty order passed by the Assessing Officer :-
i. Shri Sachin Arora, ITA No.118/Agra/2015 dated 19.12.2017.
ii. Dr. Sarita Milind Davare, 184 TTJ 9.
iii. Pennzoil Quaker State India Ltd., ITA 7386/Mum/2014 dated 12.01.2018.
iv. Kwality Ltd., ITA No.150/Kol/2017 dated 04.04.2018.
10. He accordingly submitted that the penalty levied by the Assessing Officer and sustained by the ld. CIT(A) should be cancelled.
11. The ld. DR on the other hand strongly supported the order of the ld.
CIT(A). Referring to the decision of the Hon'ble Madras High Court in the case of Sundaram Finance Ltd. vs. CIT reported in 403 ITR 407, he submitted that the Hon'ble High Court in the said decision has held that where notice did not show nature of default, it was a question of fact. The assessee had understood the purport and import of notice and hence no prejudice was caused to the 5 ITA No.5206/Del/2016 assessee. The Hon'ble High Court while referring to this decision has considered the decision of the Hon'ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning Factory reported in 359 ITR 565.
12. Referring to the decision of the Hon'ble Bombay High Court in the case of CIT vs. Smt. Kaushalya reported in 216 ITR 660 he submitted that the Hon'ble High Court in the said decision has held that mere mistake in language used or mere non-striking off of inaccurate portion cannot by itself invalidate the notice u/s 274 of the I.T. Act. It was accordingly held that the penalty orders passed by the ITO for assessment years 1968-69 to 1969-70 were perfectly valid and there was no justification for quashing the same on ground of absence of jurisdiction. He also relied on various other decisions to the proposition that mere non-striking off of inappropriate words does not invalidate the penalty proceedings.
13. The ld. counsel for the assessee, in his rejoinder, submitted that if two views are possible on an issue, the view which is favourable to the assessee has to be followed. For the above provision, he relied on the decision of the Hon'ble Supreme Court in the case of Vegetable Products Limited reported in 88 ITR 192. Referring to following decisions, he submitted that section 292BB would not come to the rescue of the revenue when the notice was not in substance and in conformity with or according to the intent of the I.T. Act :-
i. Shri Sachin Arora, ITA No.118/Agra/2015 dated 19.12.2017.
ii. Dr. Sarita Milind Davare, 184 TTJ 9.
iii. Shri K. Prakash Shetty, ITA No.265 to 267/2014 dated 05.06.2014.6 ITA No.5206/Del/2016
14. He accordingly submitted that the order of the ld. CIT(A) be set-aside and the penalty levied u/s 271(1)(c) be deleted.
15. We have considered the rival arguments made by both the sides and perused the material available on record. We have also considered the various decisions cited before us. We find the only issue to be decided in the grounds of appeal is regarding the sustainable of penalty levied u/s 271(1)(c) when the inappropriate words in the notice issued u/s 274 r.w.s. 271 have not been struck off. A perusal of the notice issued u/s 274 r.w.s. 271 dated 31.03.2004 shows that the inappropriate words in the said notice have not been struck off and it is a printed notice. Even the last line of the said notice only speaks of section 271 and does not even mention of section 271(1)(c) of the I.T. Act. We find an identical issue had come up before this Bench of the Tribunal in the case of Sahiwal Investment & Trading co. vs. ITO vide ITA No.4913/Del/2015 for assessment year 2006-07 order dated 18.07.2018 to which both of us parties.
We find the Tribunal in the said decision while allowing the additional ground filed by the assessee has decided the issue in favour of the assessee by observing as under :-
"12. Additional Ground No. (ii) is relating to absence of specific charge pointing out in the notice. It is pertinent to note here that the penalty order is based on furnishing of inaccurate particulars but the notice is not specifying exactly on which limb the penalty u/s 271(1)(c) has been initiated. From the notice dated 30.06.2013 produced by the Ld. AR during the hearing, it can be seen that the Assessing Officer was not sure under which limb of provisions of Section 271 of the Income Tax Act, 1961, the assessee is liable for penalty. The issue is squarely covered by the decision of the Hon'ble Supreme Court in case of M/s SSA' Emerald Meadows. The extract of 7 ITA No.5206/Del/2016 the decision of the Hon'ble Karnataka High Court in M/s. SSA' Emerald Meadows are as under which was confirmed by the Hon'ble Apex Court:
"3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (for short 'the Act') to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the ITA No. 4913/Del/2015 decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX -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."
Thus, Additional Ground No. (ii) of the assessee's appeal is allowed. Since the inception of the notice issued u/s 271(1)(c) has become null and void, there is no need to comment on merit of the case. The Penalty u/s 271(1)(c) of the Act is quashed."
16. Since in the instant case also the inappropriate words in the penalty notice has not been struck off and the notice does not specify as to under which limb of the provisions, the penalty u/s 271(1)(c) has been initiated, therefore, we are of the considered opinion that the penalty levied u/s 271(1)(c) is not sustainable and has to be deleted. Although the ld. DR has relied on various decisions to the proposition that mere non-striking off of the inappropriate words will not invalidate the penalty proceedings, however, all these decisions are of non- jurisdictional High Court decisions. The decision of the Delhi Bench of the Tribunal relied on by the ld. DR is prior to the decision of the Hon'ble Karnataka High Court in the case of SSA'S Emerald Meadows (supra) where the SLP filed by the Revenue has been dismissed. Since there is no decision of 8 ITA No.5206/Del/2016 the Jurisdictional High Court on this issue, therefore, we find merit in the argument of the ld. counsel for the assessee that if two views are available on a particular issue, the view which is favourable to the assessee has to be followed in the light of the decision of the Hon'ble Supreme Court in the case of Vegetable Products Limited (supra). We, therefore, set-aside the order of the ld. CIT(A) and direct the Assessing Officer to cancel the penalty so levied.
17. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on this 01st October, 2018.
Sd/- Sd/-
(SUCHITRA KAMBLE) (R. K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 01-10-2018.
Sujeet
Copy of order to: -
1) The Appellant
2) The Respondent
3) The CIT
4) The CIT(A)
5) The DR, I.T.A.T., New Delhi
By Order
//True Copy//
Assistant Registrar
ITAT, New Delhi