Case Law Details
Thakur Dass (since deceased) Through legal heir Karan Harjani Vs ITO (ITAT Delhi)
It can be observed from penalty notice that the AO had failed to distinguish and inform the Assessee as to if the notice was issued for concealment of income or for furnishing inaccurate particulars and a proforma in a mechanical manner the notice was issued. The judgment relied by the ld counsel for the Assessee in the case of Ganga Iron & Steel Trading Co. Vs. CIT (supra) reiterates the settled provision of law that if notice is vague then the penalty proceedings initiated on that basis were vitiate and for that purpose Hon’ble High court relied its full bench judgment in Mohd. Farhan A Shaikh Vs. CIT (2021) 424 ITR 1. In the light of the aforesaid, the penalty proceedings are void ab initio.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. The appeal has been preferred by the Assessee against the order dated 07.06.2019 of Ld. Commissioner of Income Tax (Appeals)-12, New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in appeal No. 42/18-19 arising out of an appeal before it against the penalty order dated 28.06.2018 passed u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the ld AO, ITO, Ward-36(2), New Delhi (hereinafter referred as the Ld. AO).
2. Facts in brief are that the assessment order was passed making disallowances u/s 14A of the Act read with Rule 8D of the Rules making a disallowance of Rs. 11,10,840/- but the exempt dividend income earned by the Assessee being Rs. 7,33,393/-. The disallowances was restricted to this amount and a penalty proceedings u/s 271(1)(c) of the Act was initiated with a notice issued on 30.12.2017 and 30.05.2018. The ld AO while passing the impugned order dated 28.06.2018 observed that the Assessee has used the business borrowed fund and he himself knows that interest paid on these sums up to the use of earning exempt dividend income. The same are not allowable and as the Assessee had not preferred appeal against the assessment order passed u/s 143(3) of the Act a penalty of Rs. 2,26,918/-to the extent of 100% of the tax sought to be evaded was levied and the ld CIT(A) had sustained the same while passing the impugned order.
3. As the case was called for hearing an application was filed on behalf of the Assessee and informed that Assessee has expired on 03.05.2021, let he be represented as legal heir on behalf of the Assessee being grandson of the Assessee. Copy of the death certificate and the amended form 36 filed is made part of the record.
4. Heard and perused the record.
5. The Assessee has raised following grounds of appeal:-
“1. That the Ld. CIT(A) has erred both on facts and in law in upholding the penalty of Rs.2,26,618/- imposed by the A.O. U/s 271(1)(c) of the Income Tax Act, 1961 (“The Act”)
2. That the Ld. CIT(A) has erred in upholding the levy of penalty both on the legal ground as also on merits, without considering or dealing with the detailed written submissions filed including the judgements cited therein.
3. That the CIT(A) failed to consider the penalty proceedings being vitiated in law at the outset due to an invalid notice, the subsequent levy of penalty by the A.O. suffered due to lack of jurisdiction and was therefore required to be quashed.
4. Without prejudice to the grounds already raised, the Ld. CIT(A) has erred in confirming the penalty u/s 271(1)(c ) of the Act on an issue which was not only debatable, but in respect of which complete details had been furnished at the assessment stage.”
6. On behalf of the Assessee the ld counsel submitted that the notice dated 31.12.2017 u/s 274 read with section 271 of the Act is defective as the same does not disclose as to why penalty proceedings were initiated i.e. for furnishing of inaccurate particulars or concealment of income. The ld counsel relied upon the judgment of Bombay High Court in Ganga Iron and Steel Trading Co. Vs. CIT (2022) 135 com 244 (Bombay) to contend that it is settled that where the show cause notice does not indicate whether there was concealment of particulars of income or furnishing inaccurate particulars of such income, same would vitiate penalty proceedings.
7. The ld DR however relied on para No. 7 of the penalty order to contend that the ld AO has brought on record as to what he found was furnishing inaccurate particulars. It was submitted that the orders passed by the ld Tax Authorities below specifically clarified that penalty proceedings were conducted for furnishing inaccurate particulars.
8. Giving a thoughtful consideration to the submission and to the matter on record it can be observed that the copy of penalty notice available at page NO. 5 of the paper book makes it apparent that the ld AO had failed to distinguish and inform the Assessee as to it the notice was issued for concealment of income or furnishing inaccurate particulars and a proforma in a mechanical manner the notice was issued. The judgment relied by the ld counsel for the Assessee in the case of Ganga Iron & Steel Trading Co. Vs. CIT (supra) reiterates the settled provision of law that if notice is vague then the penalty proceedings initiated on that basis were vitiate and for that purpose Hon’ble High court relied its full bench judgment in Mohd. Farhan A Shaikh Vs. CIT (2021) 424 ITR 1.
9. In the light of the aforesaid, the penalty proceedings are void ab initio. Accordingly, grounds raised by the Assessee are sustained.
10. The appeal is allowed. The impugned penalty order dated 28.06.2018 is set aside.
Order pronounced in the open court on 21/02/2023.
