Rahul Jain Vs DCIT (ITAT Chandigarh)
No Specific Charge, No Penalty- Defective Notice Dooms Revenue: ITAT Chandigarh Deletes 271AAB Penalty
Pursuant to search action on assessee on 29-09-2015, Assessee made surrender of cash & bullion. Assessee filed return of income declaring income of Rs.326.90 Lacs which was accepted by AO. However, AO initiated penalty u/s 271AAB on the allegation that Assessee failed to substantiate the manner in which the undisclosed income was derived. During the course of penalty proceedings, a SCN was issued to Assessee proposing levy of penalty. Though Assessee assailed proposed penalty on the ground that sources of investment / cash were explained at the time of search, AO levied penalty of Rs.98.07 Lacs u/s 271AAB(1) which was computed at 30% of undisclosed income of Rs.326.90 Lacs.
Before CIT(A), Assessee assailed penalty on merits as well as on legal grounds by contending that there was no valid satisfaction for the default for which penalty proceedings were initiated against the assessee. The three alternative clauses (a), (b)& (c) of Sec.271AAB(1) had distinct implication qua the default committed by Assessee & the quantum of penalty would vary under each of the clauses. Therefore, it was imperative for AO to communicate to Assessee as to the applicability of specific clause 3 of Sec.271AAB(1) under which AO had proposed to impose the penalty. It was also contended that the provisions of Sec.271AAB(3) specifically stipulate issuance of notice u/s 274 wherein specific charge has to be framed. Nothing was specified in the notice as to specific clause which was applicable to the case of Assessee. Therefore, the notice was liable to be quashed since the notice did not meet the requirement of law. Reference was made to the decision in R. Elangovan (TCA Nos.770 & 771 of 2018- Madras HC ), Industrial Safety Products Pvt. Ltd. (ITA No.88 of 2022 Calcutta HC ) , Happy Steels Pvt. Ltd. (ITA No.398/Chd/2023 dated 05-06-2024 Chandigar Trib).
