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TMI Blog2025 (3) TMI 800X X X X Extracts X X X X X X X X Extracts X X X X ..... r For the Assessee : Sh. Shantanu Jain, Adv. For the Department : Ms. Baljeet Kaur, CIT(DR) ORDER PER SATBEER SINGH GODARA, JM This assessee's appeal for assessment year 2018-19, arises against the Commissioner of Income Tax (Appeals)-27 [in short, the "CIT(A)"], Delhi's order dated 30.11.2022 passed in case nos. CIT(A), Delhi-27/10380/2017-18 involving proceedings under section 271AAB of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'). 2. Heard both the parties at length. Case file perused. 3. Learned counsel submits at the outset that both the lower authorities hereby have levied section 271AAB penalty of Rs. 11.40 lakhs qua pertaining to the seized cash of Rs. 38 lakhs; during the course of search conducted in his group of cases on 21.08.2017. He next invites our attention to the learned Assessing Officer's penalty show-cause notice dated 31st December, 2019 as not specifying the corresponding limb thereunder. His case in light thereof is that the learned Assessing Officer's failure in not pinpointing the relevant limb under section 271AAB (a) to (c) vitiates the entire penalty proceedings herein. He further quotes the tribunal's order in Sh. Ashok Bhatia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was held that since the penalty notice u/s. 271AAB was vague, penalty cannot be levied. Further, ld CIT(A) has referred to the judgment of Pr. CIT vs Sandeep Chandak 405 ITR 648 (All.). This judgment was discussed and distinguished in the case of Ravi Mathur vs DCIT (TS-8004-ITAT-2018(Jaipur)-O) (CL-131- 155). 5. Ld. Counsel for the assessee submitted that before levying the penalty u/s 271AAB of the Act Ld. A.O has to issue notice u/s 274 of the Act, as provided in Section 271AAB(3) of the Act. In the notice issued to the assessee there is no mention about the various conditions provided u/s 271 AAB of the Act relating to levy of penalty @ 10% or 20% or 30% (as the case may be). Nothing is specified in the notice about Clause-a, b & c of Section 271AAB of the Act as to at what percentage the penalty will be levied on the assessee for the undisclosed income not surrendered during the course of search. The assessee deserves an opportunity to plead before the Ld. A.O before being visited with the penalty u/s 271AAB of the Act. The alleged notice issued u/s 274 r.w.s 271AAB of the Act is liable to be quashed since there is a technical defect in issuing the notice. Reliance plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty where search has been initiated.-(1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of July, 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,- (a) a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year, if such assessee- (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) on or before the specified date- (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of twenty per cent of the undisclosed income of the specified previous year, if such assessee- (i) in the course of the search, in a statement under sub-section (4) of section 132, does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be so had the search not been conducted.'. Section 274 of the Act (1) No order imposing a penalty under this Chapter shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard. (2) No order imposing a penalty under this Chapter shall be made- (a) by the Income- tax Officer, where the penalty exceeds ten thousand rupees; (b) by the Assistant Commissioner, where the penalty exceeds twenty thousand rupees, except with the prior approval of the Deputy Commissioner.] (3) An income- tax authority on making an order under this Chapter imposing a penalty, unless he is himself the Assessing Officer, shall forthwith send a copy of such order to the Assessing Officer'] 8. From perusal of the above provision we observe that sub section 3 of Section 271AAB of the Act talks about issuing the notice u/s 274 of the Act. So for initiating the penalty proceedings u/s 271AAB of the Act the first step to be taken by Ld. A.O is to issue a valid notice u/s 274 of the Act. Subsection (1) to Section 274 of the Act provides a procedure that " No order imposing a penalty under this Chapter shall be made unless the assessee has been h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... You are hereby requested to appear before me on 21.04.2016 at 3.30 PM and show cause why an order imposing a penalty on you should not be made under section 271AAB of the Income Tax Act 1961 if you do not wish to avail yourself of this opportunity of bearing heard in person or through authorized representative you may show cause in writing on or before the side date which will be considered before any such order is made under section 271AAB. Sd/- (Amit Kumar Soni) Asstt. Commissioner of Income Tax (Central)-I Indore OFFICE OF THE Deputy Commissioner of Income Tax (Central)-I, Indore PAN. ACFPB4590H To Shri Ashok Kumar Bhatia 33-A Radha Nagar Neelkanth Colony Indore-452006 Sir, Sub: Penalty fixation u/s 271AAB of the Income Tax Act, 1961 for the A.Y. 2014-15-reg. Please refer to the penalty proceedings u/s 271AAB of the Income Tax Act 1961 for the A.Y. 2014-15 in the above mentioned case, you are hereby requested to appear before the undersigned on 10.06.2016 at 11.50AM in my office at Room No.101, Aayakar Bhawan, Main opp. White Church, Indore personally or through authorized representative to show cause as to why penalty u/s 271AAb of the I.T. Act 1961 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Supreme Court in the case of CIT V/s Manjunatha Cotton Ginning Factory and CIT v/s SSA'S Emerald Meadows (supra) held that such show cause notices would not satisfy the requirement of law as notice was not specific. Merely issuing notice in general proforma will negate the very purpose of natural justice. Hon'ble Apex Court in the case of Dilip N Shraf 161 Taxmann 218 held that "the quasi criminal proceedings u/s 271(1)(c) of the Act ought to comply with the principles of natural justice". 12. In the case of DCIT V/s R. Elangovan Ltd (supra), Coordinate Bench, Chennai while dealing with the legal ground challenging thevalidity of notice issued u/s 274 r.w.s. 271AAB of the Act had observed that ; "It is clear from the Sub Section (3) of Section 271 AAB that Sections 274 and Section 275 of the Act shall, so far as may be, apply. Sub Section (1) of Section 274 of the Act mandates that order imposing penalty has to be imposed only after hearing the assessee or giving a assessee opportunity of hearing. Opportunity that is to be given to the assessee should be a meaningful one and not a farce. Notice issued to the assessee reproduced (supra), does not show whether pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of law arises in this appeal for determination by this Court. The appeal is accordingly dismissed". In the earlier case of Manjunatha Cotton and Ginning Factory (supra) their lordship had observed as under:- "Notice under section 274 of the Act should specifically state the grounds mentioned in section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy the requirement of law; The assessee should know the grounds which he has to meet specifically. Otherwise, the principles of natural justice are offended. On the basis of such proceedings, no penalty could be imposed on the assessee) taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law; penalty proceedings are distinct from the assessment proceedings : though proceedings for imposition of penalty emanate from proceedings of assessment, they are independent and a separate aspect of the proceedings; The findings recorded in the assessment proceedings in so far as "concealment of income" and "furnishing of incorrec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the show cause notice issued by the AO though mentions section 271(1) in the caption of the said notice, however, the body of the show cause notice clearly mentions section 271AAB, which was fully comprehended by the assessee as reveals in the reply filed by the assessee against the said show cause notice. Hence the Hon'ble High Court has held as under: - "The ld A.Rs have also challenged that the caption of the notice mentioned only section 271 and not 271AAB. In this respect, the copy of notice has been produced by the ld. A.R. before me. It is seen that the ld A.R is correct in observing that the section of penalty has not been correctly mentioned by the AO in the caption. However, the AO will get the benefit of section 292BB of the Income Tax Act, 1961 because firstly, the assessee has raised no objection before the AO in this regard. Secondly, last line of the notice clearly mentions section 271AAB. Thirdly, the assessee has given reply to said notice which shows that the assessee fully comprehended the implication of the notice that it is for section 271AAB. The assessee has also challenged that the principles of natural justice has not followed by the AO. The detaile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned penalty is automatic in nature once the departmental authorities come across assessee's undisclosed income in light of Pr. CIT vs Sandeep Chandak (supra) and the Assessing Officer's failure in not specifying the limb is no more fatal as per Veena Estate (P.) Ltd. v. CIT (2024) 461 ITR 483. Ms. Baljeet Kaur accordingly prays for confirming the penalty. 6. We have given our thoughtful consideration to the assessee's and Revenue's foregoing vehement rival submissions. We find no reasons to hold the impugned penalty. This is for the precise reasons that learned coordinate bench has already distinguished Pr. CIT vs Sandeep Chandak (supra) and that the case law quoted by the Revenue i.e Veena Estate Pvt. Ltd (supra) is found not to have dealt with the specific issue of a search penalty under section 271AAB as is the case before us. We further reiterate that the main appeal before the hon'ble Bombay high court is still pending for final adjudication thereof. 7. Be that as it may, we conclude that given the fact that the learned Assessing Officer's not having satisfied the corresponding limb under section 271AAB hereinabove, the impugned penalty deserves to be deleted only. We or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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