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TMI Blog2023 (4) TMI 1404X X X X Extracts X X X X X X X X Extracts X X X X ..... ars of such income. This issue has been decided in case of Md. Farhan A Sheikh [2021 (3) TMI 608 - BOMBAY HIGH COURT (LB)] and held that penalty u/s 271(1)(c) is not leviable when invalid notice as in the instant case has been issued to the assessee. Undisputedly entire addition in this case was made/confirmed by the AO as well as the CIT (A) on the basis of estimation and guess work on the alleged bogus entry provided by the assessee during the year under consideration initially @ 100% by the AO, which was reduced by the Ld. CIT (A) to 2% of the turnover, which was further reduced by the Tribunal to 0.15% of total bogus entries provided. Thus, we are of the considered view that when the entire addition has been made on the basis of esti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplying with the principles of natural justice. 3. The learned Commissioner of Income Tax (Appeals) has erred in law and in facts in confirming penalty u/s 271(1)(C) of the Act at Rs. 2,50,000/- 4. The appellant craves leave to add to, alter, amend and / or delete in all the foregoing grounds of appeal." 2. Briefly stated facts necessary for consideration and adjudication of the issues at hand are : on the basis of completed assessment framed under section 143(3) read with 153C of the Income Tax Act, 1961 (for short 'the Act') determining the total income at Rs. 4,63,769/- by making addition of the commission income @ 0.15% in case of assessee being an entry provider, penalty proceedings were initiated by way of issuance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and arguments addressed by the Ld. Authorized Representatives of the parties to the appeal, the sole question arises for determination in this case is:- "As to whether the assessee has concealed particulars of income or has furnished inaccurate particulars of such income during assessment proceedings?" 8. Ld. AR for the assessee challenging the impugned order contended that the AO in order to initiate the penalty proceedings has prima-facie failed to issue a valid show cause notice under section 271(1)(c) read with section 274 of the Act by invoking specific limb of section 271(1)(c) of the Act as to if the assessee has concealed the particulars of income or has furnished inaccurate particulars of such income during the assessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21 prevention takes just a tick mark. Prudence demands prevention is better than cure. Answers: Question No. 1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Sec. 271(1)(c), docs a mere defect in the notice - not striking off the irrelevant matter vitiate the penalty proceedings? 181. It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penal ty proceedings against the assessee. But that translates into action only through the statutory notice under Sec. 271(1)(c), r.w.s. 274 of the Act. True, the assessment proceedings form the basis for the penal ty proceedings, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reduced by the Tribunal to 0.15% of total bogus entries provided. 14. In the backdrop of the aforesaid facts and circumstances of the case, we are of the considered view that when the entire addition has been made on the basis of estimation, penalty levied by the AO and sustained by the Ld. CIT (A) is not sustainable. So when the basis for initiation of penalty proceedings have been altered or modified by the appellate authority the AO cannot proceed with the penalty proceedings as has been held by the Hon'ble Delhi High Court in case of Pr. CIT vs. Fortune Technocomps (P) Ltd. (ITA No. 313/2016) (Delhi HC) by following the decision rendered by the Hon'ble Kolkata High Court in case of CIT vs. Ananda Bazar Patrika Pvt. Ltd. (1979) 116 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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