Referred Sections:
Section 274. of the Act
Section 271 Of The Income Tax Act, 1961.
Section 142{1)/143(2) of the Income Tax Act, 1961
Section 271(l)(c)
Referred Cases / Judgments:
CIT Vs. M/s. Manjunath Cotton & Ginning reported in 359 ITR 565
CIT Vs. M/s. SSA’s Emerald reported in (2016) 73 taxman.com 241,
Shobhit Gupta (HUF) Vs. ITO vide ITA No.6765/Del/2018 order dated 03.04.2019
CIT Vs. Reliance Petroproducts reported in 322 ITR 158
INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565.
N. Shroff vs. JCIT, 291 ITR 519(SC)
PCIT Vs. Sahara India Life Insurance Company Limited in ITA No.475/2019 order dated 02.08.2019
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `SMC', NEW DELHI
BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER
ITA No.853/Del/2019
Assessment Year: 2014-15
Subhash Chand Gupta & ITO
Sons (HUF) Vs Ward 35 (4)
43/1, Rajpura Road, New Delhi
New Delhi-110054
PAN No.AABHS2009G
(APPELLANT) (RESPONDENT)
Appellant by Sh. P. C. Yadav, Advocate
Respondent by Sh. S. L. Anuragi, Sr. DR
Date of hearing: 13/08/2019
Date of Pronouncement: 07/10/2019
ORDER
PER R.K. PANDA, AM:
This appeal filed by the assessee is directed against the
order dated 27.07.2018 of the CIT(A)-12, New Delhi relating to
A. Y. 2014-15.
2. Levy of penalty of Rs.3,59,591/- by the Assessing Officer
u/s.271(1)(c) of the IT Act which has been confirmed by the CIT(A)
is the only issue raised by the assessee in the grounds of appeal.
3. Facts of the case, in brief, are that the assessee is an HUF
and filed the return of income on 29.07.2014 declaring total
income of Rs.12,47,740/-. The Assessing Officer completed the
assessment u/s.143(3) on 23.12.2016 determining the total
income at Rs.18,57,743/- wherein he made addition of
Rs.18,57,743/- u/s. 68 r.w.s. 115 BBE of the IT Act on account
of sale of shares of M/s.CCL International Limited which were
purchased at a cost of Rs.6,10,000/- but sold at Rs.18,57,743/-
within a period of 8 months from the date of purchase and on
which concessional rate of tax was claimed. The Assessing
Officer thereafter initiated penalty proceedings u/s. 271 (1) (c) of
the IT Act. Rejecting the various explanation given by the
assessee and relying on various decisions the Assessing Officer
levied penalty of Rs.3,59,591/- u/s. 271 (1) (c) of the IT Act. being
100% of the tax sought to be evaded. In appeal the Ld. CIT(A)
sustained the penalty so levied by the Assessing Officer.
4. Aggrieved with such order of the CIT(A), the assessee is in
appeal before the Tribunal by raising the following grounds of
appeal :-
1. The order of CIT (A) is bad in law and on facts.
2. The CIT(A) has failed to appreciate that the proceedings of
271(1)(C) are void ab initio as the same has been initiated on the
basis of non specific notice issued under section 274.
3. The CIT(A) has erred in not appreciating that the impugned
penalty has been initiated and levied without asking any reply
from the assessee/ without issuing any show cause to explain,
during the course of assessment proceeding as evident from order
sheet entry.
4. The CIT(A) has further erred in not appreciating that the Ld AO
is void ab initio as the Ld AO has failed to specify the charge
against the assessee under which the notice under section 274 of
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the Act has been issued.
5. The Ld CIT(A) has failed to appreciate that furnishing of
inaccurate particular and concealment of income are two separate
connotation and hence it is incumbent upon the AO to specify the
particular charge against such assessee who has to be penalized
under section 271(1)(C) of the Act.
6. Without Prejudice to the above the CIT (A) has failed to appreciate
that all particulars of income were fully disclosed by the assessee
at the time of filing of return of Income and hence it cannot be said
that assessee has filed wrong particulars of his income.
7. The CIT(A) has further failed to appreciate that assessee has fully
disclosed the income from short term capital gain in its (ROI) filed
originally and hence it is not a case of concealment of income.
8. Without prejudice to the above, the CIT(A) has erred in law and
on facts in sustaining the penalty under the provisions of section
271 (1)(C) ignoring that it is a case where there is only change of
head on income and no concealment of income at all.
9. The CIT(A) has erred in law and on facts in sustaining the levy of
penalty of Rs 3,59,591/- ignoring that assessee has made
disclosed the particulars of income in an open and bonafide
manner.
10. The assessee craves leave to add alter modify and ground of appeal at
the time of hearing of the appeal.
5. The Ld. Counsel for the assessee, at the outset, submitted
that the notice issued by the Assessing Officer at the time of
initiation of penalty proceedings, which is jurisdictional notice,
shows that it is not clear as to under which limb of the
provisions the penalty has been levied. Relying on various
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decisions including the decision of Hon'ble Karnataka High
Court in the case of CIT Vs. M/s. Manjunath Cotton & Ginning
reported in 359 ITR 565 and in the case of CIT Vs. M/s. SSA's
Emerald reported in (2016) 73 taxman.com 241, he submitted
that the penalty so levied was held to be not valid when the
inappropriate words in the notice were not stuck off. He
submitted that the SLP filed by the revenue against the order of
the Hon'ble Karnataka High Court has been dismissed by the
Hon'ble Supreme Court. Referring to the decision of the
coordinate bench of the Tribunal in the case of the sister
concern namely Shobhit Gupta (HUF) Vs. ITO vide ITA
No.6765/Del/2018 order dated 03.04.2019 he submitted that
under identical circumstances the Tribunal has cancelled the
penalty so levied by the Assessing Officer and sustained by the
CIT(A). He accordingly submitted that this being a covered
matter in favour of the assessee the penalty so levied and
sustained by the CIT(A) is not in accordance with law and,
therefore, has to be deleted.
6. So far as the merit of the case is concerned he submitted
that the assessee has shown the transaction of sale and
purchase of shares in an open and bonafide manner and,
therefore, it cannot be said to be a case of concealment of
income. Further the assessee has already paid the tax by
surrendering the amount and the various documents filed by
the assessee during the course of assessment proceedings have
not been found to be false or untrue. Referring to the decision
of Hon'ble Supreme Court in the case of CIT Vs. Reliance
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Petroproducts reported in 322 ITR 158 and various other
decisions he submitted that the penalty levied by the Assessing
officer and sustained by the CIT(A) should be deleted.
7. The Ld. DR on the other hand heavily relied on the order of
the CIT(A). He submitted that the assessee during the course of
assessment proceedings had surrendered the income of
Rs.18,57,743/- to be taxed under the head "income from other
source" as against the claim of "short term capital gain". The
assessee could not contradict the findings given by the
Assessing Officer that assessee had obtained accommodation
entry to introduce its unaccounted income in the form of short
term capital gain on penny stocks of M/s. CCL International.
Relying on various decisions the Ld. DR submitted that the
penalty levied by the Assessing Officer and sustained by the
CIT(A) should be upheld and the ground raised by the assessee
should be dismissed.
8. So far as the non striking of the inappropriate words in the
penalty notice is concerned he submitted that the Assessing
Officer in the assessment order has clearly mentioned the twin
defaults i.e. furnishing of inaccurate particulars of income and
also concealment of particulars of income. The penalty order
also mentions both the defaults and, therefore, the contention of
the assessee that the Assessing Officer has not clearly
mentioned the default for which penalty proceedings were
initiated is not correct.
9. I have considered the rival arguments made by both the
sides and perused the orders of the authorities below. I find the
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Assessing Officer in the instant case has levied penalty of
Rs.3,59,591/- u/s. 271 (1) (c) of the IT Act which has been
upheld by the CIT(A). It is the submission of the Counsel for the
assessee that the notice issued u/s. 274 r.w.s. 271 (1) (c) of the
IT Act does not specify the exact charge for which penalty has
been levied. The copy of the notice issued u/s. 274 r.w.s. 271
(1) (c) of the IT Act 1961 dated 23.12.2016 reads as under :-
NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE
INCOME TAX ACT, 1961.
"To,
M/s Subhash Chand Gupta and Sons (IIUF)
43/1, Rajpur Road
Civil Lines, Delhi-110054
PAN: AABHS2009G
Whereas in the course of proceedings before me for the assessment
year 2014-15 it appears to me that you:-
Have without reasonable cause failed to comply with a notice under
section 142{1)/143(2) of the Income Tax Act, 1961 dated 14.09.2016.
*Have concealed the particulars of your income or furnished inaccurate
particulars of such income in terms of explanation 1,2,3,4 and 5.
You are hereby requested to appear before me at 11:30 A.M. on
23.01.2017 and show cause why an order imposing a penalty on you
should not be made under section 271 of the Income Tax Act, 1961. If
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you do not wish to avail of this an opportunity of being heard in person or
through authorised representative you may show cause in writing on or
before the said date which will be considered before any such order is
made under section 271 of l.T. Act, 1961.
(Archana Chaturvedi)
Income Tax Officer
Ward-35(4), New Delhi"
10. I find under identical circumstances the coordinate Bench
of the Tribunal in the case of Sohbit Gupta (HUF) a sister
concern of the assessee has cancelled the penalty levied u/s.
271 (1) (c) of the Act by observing as under :-
6. We have heard the rival submissions perused the orders of
lower authorities and materials available on record. We find
that the facts in the present appeal are not in dispute and the
Assessing Officer in the notice issued u/s 274 read with
section 271(l)(c) dated 23.12.2016 has not specified the exact
charge, viz., whether the charge is that the assessee has
furnished inaccurate particulars of income or "concealed
particulars of income" by striking out the irrelevant portion of
printed show cause notice.
7. Hon'ble Apex Court vide judgment in case of M/s. SSA's
Emerald Meadows, (2016) 73 taxmann.com 248(SC)
dismissed the Special Leave Petition filed by the Revenue
against the judgment rendered by Hon'ble High Court of
Karnataka whereby identical issue was decided in favour of
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the assessee. Operative part of the judgment in case of M/s.
SSA's Emerald Meadows (supra) decided by Hon'ble High
Court of Karnataka is reproduced below:-
"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 oj
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 Sec tion 274 r.w.s. 271(l)(c) is had in
law and. invalid inspite the amendment of Sec tion 27 1 (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 S ec tion 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 S ec tion 271 (l)(c ) of the Income Tax
Act, 1961 (for short 'the Act') to be bad in law as it did not
specify which limb of Sec tion 27 1(l)(c ) of the Act, the
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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 01 the derision of the
Division Bench of this Court rendered In the case of
COMMISSIONER or 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."
8. Bare perusal of the notice issued u/s 27I(l)(c)
apparently goes to prove that the Assessing Officer
initiated the penalty proceedings by issuing the notice
u/s 274/271(l)(c) of the Act without specifying whether
the assessee has concealed "particulars of income" or
assessee has furnished "inaccurate particulars of
income", so as to provide adequate opportunity to the
assessee to explain the show cause notice. Rather notice
in this case has been issued in a stereotyped manner
without applying any mind which is bad in law, hence is
not a valid notice sufficient to impose penalty u/s 271 (1
)(c) of the Act.
9. The penalty provisions of section 271(l)(c) of the Act
are attracted where the assessee has concealed the
particulars of income or furnished inaccurate particulars
of such income. It is also a well-accepted proposition that
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the aforesaid two limbs of section 271 (1 )(c) of the Act
carry different meanings. Therefore, it was imperative for
the Assessing Officer to strike- off the irrelevant limb so
as to make the assessee aware as to what is the charge
made against him so that he can respond accordingly.
The Hon'ble Karnataka High Court in the case of
Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Kar)
observed that the levy of penalty has to be clear as to the
limb under which it is being levied. As per Hon'ble High
Court, where the Assessing Officer proposed to invoke
first limb being concealment, then the notice has to be
appropriately marked. The Hon'ble High Court held that
the standard proforma of notice under section 274 of the
Act without striking of the irrelevant clauses would lead
to an inference of non-application of mind by the
Assessing Officer. The Hon'ble Supreme Court in the case
of Dilip N. Shroff vs. JCIT, 291 ITR 519(SC) has also
noticed that where the Assessing Officer issues notice
under section 274 of the Act in the standard proforma
and the inappropriate words are not deleted, the same
would postulate that the Assessing Officer was not sure
as to whether he was to proceed on the basis that the
assessee had concealed the particulars of his income or
furnished inaccurate particulars of income. According to
the Hon'ble Supreme Court, in such a situation, levy of
penalty suffers from non-application of mind. In the
background of the aforesaid legal position and, having
regard to the manner in which the Assessing Officer has
issued notice under section 274 r.w.s. 271(l)(c) of the Act
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dated 23.12.2016 without striking off the irrelevant
words, the penalty proceedings show anon-application of
mind by the Assessing Officer and is, thus,
unsustainable.
10. The facts of the present appeal are identical to the
facts of the case before the Hon'ble Karnataka High Court
in the case of SSA's. Emarld Meadows (supra). In the
instant case the AO in the notice issue u/s 274 read with
section 271(l)(c ) of the Act has not specified as to
whether the assessee has furnished inaccurate
particulars of his income or concealed his income. Hence,
respectfully following the quoted decision of Hon'ble
Karnataka High Court, we cancel the order of the
Assessing Officer dated 28.06.2017 levying penalty of
Rs.3,63,590/- and allow the ground of appeal of the
assessee.
11. I find the Hon'ble Delhi High court in the case of PCIT Vs.
Sahara India Life Insurance Company Limited in ITA
No.475/2019 order dated 02.08.2019 has observed as under :-
"21. The Respondent had challenged the upholding of the penalty imposed
under Section 271 (1) (c) of the Act, which was accepted by the ITAT. It
followed the decision of the Karnataka High Court in CIT v. Manjunatha
Cotton & Ginning Factory 359ITR 565 (Kar) and observed that the notice
issued by the AO would be bad in law if it did not specify which limb of
Section 271(1) (c) the penalty proceedings had been initiated under i.e.
whether for concealment of particulars of income or for furnishing of
inaccurate particulars of income. The Karnataka High Court had followed
the above judgment in the subsequent order in Commissioner of Income
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Tax v. SSA's Emerald Meadows (2016) 73 Taxman.com 241 (Kar) , the
appeal against which was dismissed by the Supreme Court of India in SLP
No. 11485 of2016 by order dated 5th August, 2016. "
12. Respectfully following the decisions cited above I am of the
considered opinion that levy of penalty by the Assessing Officer
u/s. 271 (1) (c) of the IT Act which has been upheld by the
CIT(A) is bad in law since the notice does not specify under
which limb of section 271 (1) (c) of the IT Act the penalty
proceedings have been initiated. Therefore, the penalty levied by
the Assessing Officer and sustained by Ld. CIT(A) is cancelled.
The grounds raised by the assessee are allowed.
13. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 07.10.2019.
Sd/-
(R.K PANDA)
ACCOUNTANT MEMBER
*Neha*
Date:- 07.10.2019
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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Date of dictation 29.08.2019
Date on which the typed draft is placed before the dictating 02.09.2018
Member
Date on which the approved draft comes to the Sr.PS/PS 07.10.2019
Date on which the fair order is placed before the Dictating 07.10.2019
Member for Pronouncement
Date on which the fair order comes back to the Sr. PS/ PS 07.10.2019
Date on which the final order is uploaded on the website of 07.10.2019
ITAT
Date on which the file goes to the Bench Clerk 07.10.2019
Date on which file goes to the Head Clerk.
The date on which file goes to the Assistant Registrar for
signature on the order
Date of dispatch of the Order
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