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2023 (6) TMI 380 - AT - Income TaxPenalty u/s 271(1)(c) - period of limitation - CIT(A) has passed rectification order on 28.10.2011, second notice u/s 271(1)(c) was issued on 04.03.2013. - HELD THAT - AO after issuing the initial notice u/s 271(1)(c) of the Act on 17.12.2009, keeping the proceedings in abeyance, has assumed jurisdiction to pass the order dated 30.03.2013 on the basis of subsequent notice u/s 271(1)(c) dated 04.02.2013 which was issued after the receipt of CIT(A) s rectified order. There was no justification to issue a fresh notice u/s 271(1)(c) of the Act on 04.02.2013, as already Ld. AO at the instance of the assessee had kept the penalty proceeding in abeyance. The disposal of appeal by Ld. CIT(A) on 28.02.2011, itself gave Ld. AO an opportunity to revive the penalty proceedings or to have waited further for the order from Tribunal. Thus, for the purpose of exercising jurisdiction to pass the penalty order the Ld. AO was supposed to proceed on receiving the order of ld. CIT(A) dated 28.02.2011 and when that is taken into account, the order dated 30.03.2013 stands barred by limitation, as for the purpose of Section 275(1)(a) of the Act, the period of 6 months for disposal of appeal had to be reckoned from receipt of order of Ld. CIT(A). Non-striking of the limb in the notice - DR could not dispute the fact that these notices were issued on cyclostyle formats. In this regard, there is a consistent view of the Tribunal following the Delhi High Court judgment in PCIT v. Sahara India Life Insurance Co. Ltd. 2019 (8) TMI 409 - DELHI HIGH COURT that non-striking of the limb in the notice vitiates the penalty order. In the case in hand on behalf of the Ld. DR an attempt was made to defend the notices submitting that there are allegations of both concealment and of furnishing inaccurate particulars, then in that case it was all the more necessary to identify and convey to the assessee under the notice as to which particular set of allegations he needs to defend. The Bench is inclined to sustain the grounds raised in the cross objections, consequently, the same are allowed
Issues Involved:
1. Deletion of penalty under Section 271(1)(c) on disallowance of speculation loss. 2. Initiation of penalty proceedings by CIT(A). 3. Deletion of penalty on addition made under Section 68 for share capital. 4. Limitation period for imposing penalty under Section 271(1)(c). 5. Validity of penalty notice under Section 274 read with Section 271(1)(c). Summary: Issue 1: Deletion of Penalty on Speculation Loss The Revenue challenged the deletion of penalty under Section 271(1)(c) on disallowance of a loss of Rs. 1,94,82,909/- treated as speculation loss. The Tribunal upheld the deletion of the penalty, finding that the penalty order was not justified. Issue 2: Initiation of Penalty Proceedings by CIT(A) The Revenue argued that the CIT(A) did not initiate penalty proceedings for certain disallowances. The Tribunal found that the CIT(A) had indeed initiated penalty proceedings and thus, the deletion of the penalty by CIT(A) was upheld. Issue 3: Deletion of Penalty on Addition under Section 68 The Revenue contended that the CIT(A) erred in deleting the penalty on an addition of Rs. 2,05,00,000/- made under Section 68 for share capital. The Tribunal upheld the deletion of the penalty, noting that the assessee had failed to prove the identity, creditworthiness, and genuineness of the transactions. Issue 4: Limitation Period for Imposing Penalty The assessee's cross objection claimed that the penalty order dated 30.03.2013 was barred by limitation under Section 275(1)(a). The Tribunal observed that the penalty proceedings were initiated on 17.12.2009, and the penalty order was passed on 30.03.2013, beyond the permissible period. The Tribunal held that the penalty order was barred by limitation and thus void ab initio. Issue 5: Validity of Penalty Notice The assessee argued that the penalty notice under Section 274 read with Section 271(1)(c) was invalid as it did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars. The Tribunal noted that the notices were issued on cyclostyle formats without specifying the charge. Following the Delhi High Court judgment in PCIT v. Sahara India Life Insurance Co. Ltd., the Tribunal held that non-striking of the limb in the notice vitiates the penalty order. Conclusion: The Tribunal allowed the cross objections raised by the assessee, holding that the penalty order was barred by limitation and the penalty notices were invalid. Consequently, the Revenue's appeal was dismissed as infructuous.
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