2023 (7) TMI 894 - AT - Income Tax

Penalty u/s 271AAB - argument of defective notice - HELD THAT - Solitary domain of section 271AAB over undisclosed income where the proceedings u/s 132 of the Act is initiated and at the same time it drags out the authorisation of imposition of penalty u/s 270A and 271(1)(c) of the Act as extra-territorial. Keeping aforesaid in mind, we find that, the appellant s contention that, the aforestated SCN represents the non-application of mind in communicating the exact charge for rebuttal falls like a house of cards on two counts; i) Firstly, the impugned SCN calling upon the appellant to showcase the reasons as to why a penalty u/s 271AAB should not be imposed clearly concluded intimating the consideration of representation before concluding proceedings imposing penalty u/s 271AAB of the Act, as it ostensible from the reproduced text of SCN laid at para 8 hereinbefore. ii) Secondly, the sub-section (2) of section 271AAB intractably expunges the levy of penalty u/s 270A and 271(1)(c), consequently, it communicates the exact charge left i.e. levy of penalty u/s 271AAB(1) for undisclosed income where the proceedings u/s 132 of the Act is carried out. In this context, we heedful to quote that, our aforesaid view finds fortified by the decision of Sandeep Chandak Vs PCIT 2018 (6) TMI 106 - SC ORDER where in similar facts and circumstance their lordship have dismissed the appeal of the assessee and upheld the order of Hon ble High Court sustaining the penalty imposed u/s 271AAB. Also the order imposing penalty was passed after the receipt of due approval from the Ld. JCIT. However the appellant during the course of physical hearing failed adduce any evidential material showcasing the mechanical approval and further failed to demonstrate the deficiency in the proceedings, for the reason this ground of appeal finds no legs to stand, ergo ordered accordingly. Decided against assessee.

Summary

Issues:
Challenge against imposition of penalty under section 271AAB of the Income-tax Act, 1961.

Analysis:
1. The appeal contested the penalty imposed by the Commissioner of Income Tax (Appeals-12), Pune for the assessment year 2015-16 under section 271AAB of the Act. The primary grievance revolved around the correctness of the penalty imposed by the tax authorities.

2. The appellant, engaged in the trading business of Gold & Silver Ornaments, challenged the penalty imposed based on additional income declared during a search and seizure operation. The appellant argued against the legality of the show cause notice issued under section 274 of the Act, citing errors in the notice and lack of specific charges. The appellant contended that the penalty should be deleted due to the illegal jurisdictional notice.

3. The appellant raised multiple grounds through a memorandum of appeal, questioning the validity of the notice, the legality of the penalty based on prior approval, and the mechanical approval process. The appellant sought deletion of the penalty based on these grounds.

4. During the penal proceedings, the appellant's contentions regarding the discretionary nature of section 271AAB and deficiencies in the show cause notice were dismissed by the Assessing Officer, resulting in the imposition of a penalty. The first appellate authority partially relieved the penalty but retained a portion, leading to the current appeal.

5. In the appellate tribunal hearing, the appellant's representative argued for the deletion of the penalty, highlighting issues with the show cause notice and the mechanical approval process. The departmental representative supported the orders of the tax authorities on these grounds.

6. After considering the arguments of both parties and reviewing the case materials, the tribunal addressed the delay in filing the appeal, condoning it based on sufficient reasons provided. The tribunal then proceeded to analyze each ground of appeal in detail.

7. Grounds 1 and 2 challenged the deficiency in the show cause notice issued under section 274, alleging non-application of mind. The tribunal found that the notice adequately communicated the charge for rebuttal under section 271AAB, dismissing the appellant's contentions based on legal precedents.

8. Ground 3 questioned the approval process for imposing the penalty, which was found to have been granted before the penalty order. The appellant failed to provide evidence of mechanical approval, leading to the dismissal of this ground as well.

9. Consequently, the tribunal dismissed the appeal, upholding the penalty imposed under section 271AAB. The order was pronounced on December 1, 2022, in open court.