AI Structured Summary
Not yet generated for this judgment
Judgment
Per Raj Kumar Chauhan, Judicial Member:
The appeal o f the assessee is directed against the order dated 26.02.2026 of ld. CIT(A)/NFAC, Delhi passed u/s 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) wherein the penalty of Rs.28,14,140/- is imposed by the Assessing Officer u/s 271(1)(c) of the Act.
The brief facts as culled out from the order of the authorities below are that assessment was completed u/s 143(3) on 27.12.2016 determining total income at Rs.96 ,73,920/- after making additions of Rs.79 ,00,000/- and Rs.12 ,42,000/- u/s 68 of the Act. Consequent to the additions made in the assessme nt, penalty procee dings u/s 271(1)(c) of the Act were initiated and penalty of Rs.28,14,14 0/- was levied by the Assessing Officer. The said penalty was subsequently confirmed by the ld. CIT(A).
Aggrieve d by the impugned order, the assessee is in appeal before us and has raised the following grounds of appeal:
“1.That the I d. A.O. at the time o f issuing no tice u/s 274 r.w.s. 271(1)(c) could no t make out precisely as to for which act the penalty procee dings were initiated against the appellant i.e. for the fault of concealment of his income or fo r furnishing of inaccurate particulars o f such income as none of the limbs in the s how cause no tice had been cut and therefore the penalty under appeal as imposed on the basis of such show cause no tice is illegal and deserves to be cancelle d in view of various judicial pronouncements o n the issue including that of Honorable Apex cour t o f the Country.
2.That the L d. CIT( A) has erred in law as well as on the facts o f the case by confirming the penalty of Rs.28,14,140/-, without cons ide ring the submissio n of the appe llant and completely ignoring the order passed by the Hon’ble ITAT in the quantum appe al.
3.That the penalty order passe d by the Ld. A.O. is unjust and unlaw ful as the appellant neither concealed his income nor furnished inaccurate particulars the reof and, therefore, the impugne d penalty dese rves to be cancelled.”
We have heard the ld. AR and the ld. DR. The ld. AR submitted that the penalty proceedings were initiated u/s 271(1)(c) of the Act by issuing notice u/s 274 r.w.s. 271(1)(c) dated 27.12 .2016 contains both the charges, namely, concealment of particulars of income and furnishing of inaccurate particulars of such income, without specifying the particular limb under which the assessee was required to show cause . It was accordingly contended that the penalty proceedings were vitiated for want o f a valid and specific notice.
The ld. DR, on the other hand, supported the orders of the ld. lo wer authorities and submitted that the penalty has been rightly levied and confirmed in view of the additions made in the assessment.
We have heard the rival submissions and peruse d the material available on record. From the perusal of the notice issue d on 27.12.2016 for initiation of the penalty procee dings, it is observed that AO has not specified the limb on which the satisfaction is recorde d for initiation of penalty proceedings. The assessee was no t show caused to explain whether the penalty proceedings were initiated for “have conceale d the particulars of your income or furnished inaccurate particulars of such income”. The same is reproduced herein belo w:
As per Section 271(1)(c) o f the Act, the AO should record his satisfactio n that the assessee has either conceale d the income or fur nished inaccurate particulars of his income. From the perusal of the notice issued u/s.274(1) r.w .s.271(1)(c) of the Act, as reproduced above , it is clear that it was not specifically pointed o ut as to whether the assessee has concealed the particulars of income or furnished the inaccurate particulars of income. In this regard, reliance can be placed on the decision of the Hon’ble Apex Court in case of M/s. SSA's Emerald Meadows repor ted in (2016) 73 taxmann.com 248 (SC) wherein the Hon’ble Supreme Court has dismissed the Special Leave Petition filed by the Revenue against the judgment rendered by Hon'ble High Cour t of Karnataka whereby identical issue was decided in favour of the assessee. Operative part of the judgment in case of M/s. SSA's Emerald Meadows decided by Ho n'ble High Court of Karnataka in ITA No. 380/2015 order dated 23.11.2015 is repro duced below:
"2.This appeal has been filed raising the following substantial questions o f law:
(1)Whether, omissio n if asse ssing o fficer to explicitly mention that penalty proceedings ar e being initiated for fur nishing o f inaccurate particulars o r that for concealment of income makes the pe nalty orde r liable for cancellation even when it has been proved beyo nd 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 o f the case , the Tribunal was justified in law in. holding that the pe nalty notice under Section 274 r.w.s. 271(1)(c) is had in law and. invalid in spite the amendment o f Section 271( 1 B) with retrospective effe ct and by virtue of the amendment, the assessing officer has initiated the penalty by pro perly recording the satisfaction for the same?
(3)Whether on the facts and in the circumstances of the case, the Tr ibunal was justified in deci ding the appe als against the Re venue on the basis o f notice issued, under Section 274 without tak ing into conside ration the assessment order when the assessing officer has specified that the assessee has concealed par ticulars of inco me?
3.The Tribunal has allowe d the appeal filed by the assessee holding the notice issued by the Assessing Office r unde r Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (fo r sho rt 'the Act') to be bad in law as it did not specify which limb o f Section 271(1)(c) of the Act, the penalty proceedings had been initiate d i.e, whe ther fo r co ncealm ent of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has re lie d on the derision of the Division Bench of this Court rendered in the case of CO MMISSIONER INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565.
4.In our view , since the matter is covere d by judgment o f the Division Bench of this Co urt, we are of the opinion, no substantial question of law arises in this appe al for dete rmination by this Court, the appe al is accordingly dismissed."
As observed above, the Assessing Officer initiate d the penalty proceedings by issuing the notice u/s 27 4/271(1)(c) of the Act without specifying whether the assessee has ‘concealed the particular s of income’ or assessee has ‘furnished inaccurate particulars of such income’, so as to provide adequate opportunity to the assessee to explain its case. Rather notices in this case have been issued in a stereotyped manner without applying mind which is bad in law, hence is not a valid notice sufficient to impose pe nalty u/s 271(1)(c) of the Act.
The penalty provisions of section 271(1)(c) of the Act are attracted where the assessee has concealed the particulars of income or fur nished inaccurate particulars of such income . It is also a well-accepted proposition that the aforesaid two limbs of section 271(1)(c) of the Act carry differe nt 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 re spond accor dingly. The Hon'ble Karnataka High Court in the case of CIT Vs Manjunatha Cotton and Ginning Fact oryrepor ted in (2013) 359 I TR 565 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, w here the Assessing Office r proposed to invoke first limb being concealment, then the no tice has to be appropriately marked. The Hon'ble High Court held that the standard pro forma of notice under se ction 274 of the Act witho ut striking of the irrelevant clauses would lead to an inference of non-application of mind by the Assessing O fficer. The Hon'ble Supreme Court in the case of Dilip N. Shroff vs. JCIT reported in 291 ITR 519(SC) has also noticed that where the Assessing Officer issues notice under section 274 of the Act in the standard profor ma 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 particular s 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 positio n and having regard to the manner in which the Assessing Officer has issued notices under section 274 r.w.s. 271(1)(c) of the Act without str iking off the irrele vant wor ds, as reproduced above, the penalty procee dings shows the non-application of mind by the Assessing Officer and is, thus, unsustainable .
In view of the facts and circumstances of the case, particularly looking to the fact that the AO has failed to record the satisfaction about any limb at the time of initiation of penalty proceedings u/s.271(1)(c) of the Act, therefore , the penalty levied u/s.271(1)(c) of the Act is hereby deleted.
In the re sult, the appeal of the assessee is allowed.