Case Law Details
Bengal Bonded Warehouse Ltd. Vs ACIT (ITAT Kolkata)
We have heard the rival contentions and perused the material on record including the impugned notice u/s 274 read with Section 271(1)(c ) dated 31.3.2015. We observe that the notice u/s 274 read with Section 271(1)(c ) dated 31.3.2015 was issued in a mechanical manner and in standard format without mentioning one of the two limbs on which the penalty was proposed to be levied.
The AO finally imposed penalty u/s 271(1)(c ) of the Act of Rs. 4,04,350/- being 100% of the tax sought to be evaded by the assessee for furnishing of inaccurate particulars and concealment of income.
The ld CIT(A) confirmed the order of AO imposing the penalty by holding that the imposition of penalty is imperative once the it is established that assessee has deliberately and consciously furnished in accurate particulars of income.
We note that even ld CIT(A) has also failed to appreciate the legal issue and messed up both limbs together and therefore we are not in agreement with the conclusion of the ld CIT(A).
We peruse from the notice issued for initiation of penalty proceedings u/s 274 r.w.s. 271(1)( c) of the Act, that even the AO is not certain as to under which limb the penalty was to be levied. Considering these facts of the case ,we are of the view that non-mentioning of relevant limb in the penalty notice is a substantive defect and infirmity which goes to the root of the matter and is not curable a the later stage.
The case of the assessee is squarely covered by the decision of the Hon’ble Apex Court case of CIT vs. SSA’s Emerald Meadows (supra). In the said decision , the Hon’ble Court has dismissed the SLP filed by the Revenue by observing that there is no merit in the petition of the revenue upholding the order of Hon’ble High Court wherein the decision of the coordinate division bench of Hon’ble Karnataka High Court in the case of CIT Vs Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565 has been followed.
In all the above decision it has been held that non mentioning of relevant limb or non striking off of irrelevant limb in the penalty notice is a substantive defect in the imitation of proceedings itself and the consequent penalty levied on the basis of such defective notice can not be sustained.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is an appeal preferred by the assessee against the order of the Commissioner of Income Tax(Appeals)-NFAC-Delhi [hereinafter referred to as ‘CIT(A)’] dated 30.11.2021 for the assessment year 2012-13.
2. The assessee has challenged the appellate order passed by the ld. CIT(A) on legal issue as well on merits. We are inclined to first adjudicate the legal issue raised in ground no.3 which is reproduced as under:
3. That, the Ld. CIT(A) further erred in upholding the penalty in spite of the fact that the statutory notice issued u/s 274 r.w.s 271(1)(c ) of the Act was without striking out in appropriate words/charge, meaning thereby that penalty proceeding u/s 271(1)(c ) had been initiated for both the offences, which is not permissible under law as it suffers from the vice of non-application of mind.
3. Vide this ground, the assessee has challenged the order of Ld. CIT(A) confirming the penalty of Rs. 4,04,350/- as imposed by the AO u/s 271(1)(c ) of the Income Tax Act, 1961 (hereinafter referred to as the Act) by issuing notice u/s 274 r.w.s. 271(1(c) of the Act in a mechanical manner and in standard format as it does not specify the limb on which the penalty was proposed to be levied.
4. At the outset, the ld counsel for the assessee submitted before the bench that the AO has issued show cause notice u/s 274 r.w.s. 271(1)(c) of the Act dated 31.03.2015 calling upon the assessee to show cause as to why penalty should not be imposed for concealment of particulars of income or for furnishing inaccurate particulars of income a copy of which is placed at page no. 1 of the PB. The ld counsel Shri S.K. Tulsyan argued that the said notice has been issued in a standard format and in a mechanical manner without application of mind by the AO. The ld counsel argued that the notice has been issued without indicating the limb on which the penalty was proposed to be levied thereby depriving the assessee to reply to the specific charge on which the penalty was levied. In other words the AO has mentioned both the limbs as contemplated by in section 271(1)( c) of the Act which is a substantive defect going to the root of the matter and therefore the penalty notice is bad in law . The ld AR argued that consequent penalty order is also bad in law and invalid and has to be quashed. The ld AR in defense of his arguments relied on the decision of Hon’ble Apex Court in the case of CIT vs. SSA’s Emerald Meadows (2016) 73 Taxman 248. Finally the ld counsel prayed that in view of the foregoing facts penalty may kindly be deleted as the penalty notice is suffering from the vice of invalidity of not specifying the relevant limb on which the penalty was proposed to be levied and is bad in law. The ld. DR , per contra, submitted that though the AO has mentioned both the limbs in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act but the assessee has been given proper and sufficient opportunity to respond to the said notice and therefore it cannot be said that the assessee was deprived of the opportunity to reply to the specific charge.
4. We have heard the rival contentions and perused the material on record including the impugned notice u/s 274 read with Section 271(1)(c ) dated 31.3.2015. We observe that the notice u/s 274 read with Section 271(1)(c ) dated 31.3.2015 was issued in a mechanical manner and in standard format without mentioning one of the two limbs on which the penalty was proposed to be levied. The AO finally imposed penalty u/s 271(1)(c ) of the Act of Rs. 4,04,350/- being 100% of the tax sought to be evaded by the assessee for furnishing of inaccurate particulars and concealment of income. The ld CIT(A) confirmed the order of AO imposing the penalty by holding that the imposition of penalty is imperative once the it is established that assessee has deliberately and consciously furnished in accurate particulars of income. We note that even ld CIT(A) has also failed to appreciate the legal issue and messed up both limbs together and therefore we are not in agreement with the conclusion of the ld CIT(A). We peruse from the notice issued for initiation of penalty proceedings u/s 274 r.w.s. 271(1)( c) of the Act, that even the AO is not certain as to under which limb the penalty was to be levied. Considering these facts of the case ,we are of the view that non-mentioning of relevant limb in the penalty notice is a substantive defect and infirmity which goes to the root of the matter and is not curable a the later stage. The case of the assessee is squarely covered by the decision of the Hon’ble Apex Court case of CIT vs. SSA’s Emerald Meadows (supra). In the said decision , the Hon’ble Court has dismissed the SLP filed by the Revenue by observing that there is no merit in the petition of the revenue upholding the order of Hon’ble High Court wherein the decision of the coordinate division bench of Hon’ble Karnataka High Court in the case of CIT Vs Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565 has been followed. In all the above decision it has been held that non mentioning of relevant limb or non striking off of irrelevant limb in the penalty notice is a substantive defect in the imitation of proceedings itself and the consequent penalty levied on the basis of such defective notice can not be sustained. In view of these facts and circumstances of the case, we are inclined to set aside the order passed by the Ld. CIT(A) and direct the AO to delete the penalty. The ground no. 3 is allowed.
6. Since we have allowed the appeal of the assessee on legal issue, the other grounds raised by the assessee need no adjudication.
7. In the result, the appeal of the assessee is allowed.
Order is pronounced in the open court on 11th May, 2022
