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TMI Blog2023 (2) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act (hereinafter referred to as the 'Act'). 2. The assessee, in this appeal, has taken the following grounds of appeal: "1. That the Learned CIT(A)-20 was not justified in confirming penalty u/s 271AAB of the IT Act, 1961 at Rs.20,06,030/- by ignoring the fact that the appellant had made disclosure during the search to buy metal peace and avoid litigation and hence no penalty is to be levied u/s 271AAB. 2. That the Ld. A.O had not specified the clause at which penalty was intended to be levied. Thus, specific charge is not mentioned for which assessee was required to be show caused. In absence of mentioning of the specific charge issuance of penalty proceedings cannot be sustained. 3. That the appellant craves leave to add or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the word 'may' give discretion. That the word 'may' suggests that the levy of penalty is not mandatory. He has further invited our attention to the impugned assessment order to submit that the Assessing Officer, in this case, did not initiate penalty u/s 271AAB of the Act, rather, he had initiated penalty u/s 271(1)(c) of the Act. The ld. counsel, in this respect, has referred to the concluding sentence of the Assessing Officer in the assessment order i.e. "penalty proceeding as per section 271(1)(c) of the I. T. Act is also initiated separately in this ground". The ld. counsel has further invited our attention to the impugned penalty notice issued u/s 271AAB of the Act to submit that the said penalty notice was defective and that no p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluding the notice issued u/s 271AAB r.w.s. 274 of the Act dt. 31/03/2016, we find that the notice has been issue in a mechanical manner without specifying one of the three clauses uses under which the penalty was proposed to be levied. The ld. A/R before us challenged the very initiation of penalty proceedings u/s 271AAB as invalid and void ab initio on the ground that the initiation is itself by an invalid notice issued by the Assessing Officer. The ld. A/R submitted that the issuing a mechanical notice without application of mind is a substantive and patent error of law which goes to the root of the matter and is not curable at a later stage. The ld. A/R, therefore, prayed that the order of the ld. CIT(A) confirming the penalty deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own the procedure to be followed and adhered to while imposing the penalty. The proposal for such penalty proceedings was separately initiated upon completion of assessment and there may be cases where the assessee would not even contest the order of assessment. But, that would not preclude the assessee from challenging the penalty proceedings, as penalty proceedings are independent and the procedure required to be followed cannot be dispensed with. 15. As rightly pointed out by the learned counsel appearing for the assessee, Section 271AAB of the Act, which deals with penalty consists of three contingencies. Therefore, the Assessing Officer should point out to the assessee as to under which of the three clauses, he chooses to proceed ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s defective. 17. The decisions of the Karnataka High Court in the cases of Manjunatha Cotton and Ginning Factory and SSA's Emerald Emerald Meadows and the decision of this Court in the case of Babuji Jacob clearly support our above conclusion. For all the above reasons, we find no grounds to interfere with the common order passed by the Tribunal. 9. As the facts of the case before us are materially the same, we, therefore respectfully following the judgment of the Hon'ble Madras High Court in the case of PCIT vs. Shri R. Elangovan (supra) hold that the penalty order passed by the Assessing Officer is invalid and is accordingly quashed. The appeals of the assessee are allowed on legal issue. 10. The other issues raised on me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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