DCIT Vs Scooters India Ltd. (ITAT Lucknow)
Facts- Appeal is preferred by the revenue against the deletion of penalty of INR 1,00,00,000 levied under section 271(1)(c) by CIT(A). Department majorly relied on the judgement of Honorable Madras High Court in Sundaram Finance Ltd. wherein the issue of striking of the limb was decided in favour of the Revenue.
On the other hand, assessee submitted that notice under section 274 read with section 271(1)(c) is not specific about the charge or limb under which penalty is being levied under section 271(1)(c), then any penalty levied on the basis of such notice is bad in law and liable to be deleted.
Conclusion- We find charge on which penalty under section 271(1)(c) is levied is not specific. The notice has specified both charges i.e. concealment of income and furnishing of inaccurate particulars of income and has not specified the charge for which action has been taken against assessee. The non specific nature of notice indicates non application of mind by Assessing Officer. It is a settled position of law that if notice under section 274 read with 271(1)(c) is not specific about the charge or limb under which penalty is being levied under section 271(1)(c) of the Act, then any penalty levied on the basis of such notice is bad in law and liable to be deleted.
FULL TEXT OF THE ORDER OF ITAT LUCKNOW
These six appeals have been filed by Revenue against the order of learned CIT(A)-2, Lucknow dated 07/02/2019 pertaining to assessment year 2002-2003 and dated 11/02/2019 pertaining to assessment years 2003-04 to 2007-08. The Revenue has taken similar grounds in all these appeals which were heard together therefore, for the sake of convenience, a common and consolidated order is being passed. For the sake of convenience, the grounds of appeal taken by the Revenue in I.T.A. No.265 are reproduced below:
“1. The Ld. CIT(A) has erred in law and on facts in deleting the penalty amounting to Rs. 1,00,00,000/- levied u/s 271(1)(c) of the I.T. Act, 1961 ignoring the fact that the additions made by the AO had been confirmed in the appellate proceedings. The reliance is also placed on Hon’ble Supreme Court in the case of Union of India Vs Dharmendra Textile Processors (2008) 306 ITR 277/174 Taxman 571 and Hon ‘ble High court of Madras Order in the case of Sundaram Finance Ltd. Vs Assistant Commissioner of Income Tax Co. Circle -VI(4), Chennai, 93 taxmann.com 250 (Madras) (2018)403 ITR 407 where it had been held that mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities and that even assuming that there was defect in the notice, it had caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued under section 274 r/w section 271 of the I.T. Act.
2. The appellant craves leave to add or amend any one or more of the grounds of appeals, as stated above, as and when need to doing so arises with the prior permission of the Court.”
2. At the time of hearing Learned D. R. vehemently argued that the CIT(A) has erred in deleting the penalty overlooking the fact that the additions on which the penalty has been levied has been upheld in appeal and has also ignored the decision of Hon’ble Supreme Court in the case of Union of India Vs Dharmendra Textile Processors (2008) 306 ITR 277/174 Taxman 571 and Hon’ble High court of Madras Order in the case of Sundaram Finance Ltd. Vs Assistant Commissioner of Income Tax Co. Circle -VI(4), Chennai, 93 taxmann.com 250 (Madras), wherein the penalty levied u/s 271(1)(c) has been upheld. Learned D. R. drew our specific attention to the decision of Hon’ble Madras High Court in the case of Sundaram Finance Ltd. (supra) wherein the issue of striking of the limb has been decided in favour of the Revenue.
3. On the other hand, Learned counsel for the assessee invited our attention to the paper book filed wherein show cause notice for penalty under section 274 read with 271(1)(c) of the Act was placed. It was submitted that from a perusal of this notice, it is crystal clear that the charge is not specific for which penalty is levied under section 271(1)(c) of the Act, whether for concealment of income or for furnishing of inaccurate particulars of income. The learned A.R. of the assessee vehemently argued that it is settled position of law that if notice under section 274 read with 271(1)(c) is not specific about the charge or limb under which penalty is being levied under section 271(1)(c) of the Act, then any penalty levied on the basis of such notice is bad in law and liable to be deleted. Learned counsel for the assessee placed reliance on the following case laws:
i) PCIT vs. Sahara India Life Insurance Co. Ltd. ITA No. 475/2019 Order dt. 02.08/2019.
ii) CIT (Central) vs. Goa Coastal Resorts & Recreation Pvt. Ltd. ITA No. 24 of 2019 Order dt. 11.11.2019 High Court of Bombay at Goa.
iii) International Tractors Ltd. vs. Dy.CIT ITA No. 6098/Del/2016 Order dt. 21.02.2020 ITAT, Delhi.
iv) DCIT vs. Metro Tyres Pvt. Ltd.ITA No. 2874/Del/2016 Order dt. 24.06.2020 ITAT, Delhi.
v) Radhika Surgical Pvt. Ltd. vs. ACIT – ITA No. 5089/Del/2017 Order dt. 31.05.2021 – ITAT Delhi.
vi) Singh Consultancy Pvt. Ltd. vs. ITO – ITA No. 3061/Del/2017 Order dt. 09.04.2021- ITAT Delhi.
vii) Sachin Arora vs. ITO – ITA No. 118/Agra/2015 Order dt. 12.2017 –ITAT, Agra.
viii) M/s. Risha Tour & Travels vs. ITO-2(3), Kanpur – ITA No. 606/LKW/2018 Order dt. 23.01.2020, ITAT, Lucknow
ix) Shri Suraj vs. Dy.CIT, CC-1, Kanpur – ITA No. 331/LKW/2019 Order dt. 26.06.2020, ITAT, Lucknow
x) Off late the decision of Hon’ble ITAT Delhi Bench in the case of Addl.CIT, Spl. Range I vs. Airports Authority of India, ITA No. 369/Del/2018 Order dt. 13.08.2021
Learned counsel for the assessee submitted that relying upon the decision of Hon’ble Supreme Court in the case of CIT vs. SSA’s Emerald Meadows [2016] 73 Taxmann.com 248 and also of the decision of Hon’ble Karnataka High Court in the case of CIT and Another vs. Manjunath Cotton & Ginning Factory [2013] 359 ITR 565 (Kar), I.T.A.T. Lucknow Bench in various cases have held that that in absence of specific charge in the notice issued u/s 274 read with section 271(1)(c), the penalty cannot be levied. Learned counsel for the assessee submitted that the decision of Dharmendra Textile Processors, relied on by Learned D. R., is not applicable as that case was under Central Excise wherein the duty payable had not been paid and there was issue with respect to mens rea and the issue of validity of notice and the proceeding based thereon was not in question and it was submitted that the decision of Dharmendra Textile Processors has been considered by Hon’ble Apex Court in the case of Reliance Petrochemicals Ltd. and further the Agra Bench of the Tribunal in the case of Sachin Arora in I.T.A. No.118/Agra/2015, vide order dated 19/12/2017 in para 39 of its order has considered such decision and after considering such decision has allowed relief to the assessee. As regards the reliance placed by Learned D. R. on the judgment of Hon’ble Madras High Court in the case of Sundram Finance Ltd., Learned counsel for the assessee submitted that the plea of notice being invalid was raised before Hon’ble High Court for the first time after a lapse of ten years at the time of hearing and therefore, the Hon’ble High Court was of the view that if the assessee had any grievance with respect to the validity of notice, it should have been raised before the lower appellate authority and moreover, Hon’ble High Court had decided the appeal on the merits of the case whereas in the present case, the issue regarding validity of notice has been raised before the authorities below therefore, learned CIT(A), after considering the legal position and after considering the decision of Hon’ble Apex Court in the case of SSA Emerald has held the notice issued u/s 271(1)(c) of the Act not a valid notice. It was submitted that the notice u/s 271(1)(c) is a jurisdictional notice and for levy of penalty, jurisdiction has to be assumed and for assuming jurisdiction, a valid notice has to be issued and if the notice itself is not valid, the Assessing Officer cannot assume jurisdiction and hence cannot impose penalty. Learned counsel for the assessee submitted that the case laws of Sundram Finance Limited has also been considered by the Lucknow Bench of the Tribunal in the case of Risha Tour and Travels vs. Income Tax Officer in I.T.A. No.606/Lkw/2018 vide order dated 23/01/2020 and after considering this decision, the issue has been decided in favour of the assessee and therefore, it was prayed that the order of learned CIT(A) be upheld.
5. We have perused the case records and heard the rival contentions and as apparent from notices under section 274 read with 271(1)(c) of the Act, we find that the charge on which penalty is levied is not specific. The copy of show cause notice issued for the assessment year 2002-03, which is similar in all the assessment years, has been made part of this order, which is as under:
