Narender Kumar Choudhry ORDER
Narender Kumar Choudhry, Member (J)
1. These appeals have been preferred by the Assessee against the independent orders all dated 29/05/2023 impugned herein passed by the National Faceless Appeal Centre (NFAC) Delhi / Ld. Commissioner of Income Tax (Appeals) [in short, Ld. Commissioner'] under section 250 of the Income-tax Act, 1961 (in short, the Act') for the A.Ys. 2009-10, 2011-12, 2013-14 & 2014-15 respectively.
2. Since the challenge in all the four appeals, relates to affirmation of levy of penalty under section 271(1)(c) of the Act, therefore the same were heard together and are being disposed off by this composite order and ITA no. 2528/Mum/2023 as a lead case.
3. Brief facts as involved in ITA no. 2528/Mum/2023 which are relevant for adjudication of the instant appeal are that the Assessee, a Private Limited Company, carries on the business of builder and developer. The Assessee e-filed its return of income for A.Y. 2009-10 on 29/09/2009 declaring Nil income which was recomputed at Rs. 10,13,170/- by passing Assessment order dated 27/12/2016 U/s 143(3) of the Act.
Subsequently the case of the Assessee was reopened u/s 147 of the Act notice under section 148 was issued. It was observed by the AO that the Assessee had purchased an immovable property (flat) admeasuring about 1342 sq.ft. on the building known as Venus Apartment situated at 87, Cuffe Parade, Mumbai-400 005, for a total consideration of Rs.3,53,24,387/- which was let out to its director Shri Vipin Kumar Jain at a fixed monthly rent of Rs.25,000/- p.m. in the year 1998 an had also taken security deposit of Rs.70,00,000/-. It was also noticed that the Assessee had offered the rental income as "business income". The Assessing Officer vide assessment order treated the rental income as "Income from house property" and by adopting the market rental value @ Rs.1,50,000/- p.m., also added the deemed interest on the security deposit of Rs.70,00,000/- in addition to making other disallowances.
4. The Assessee carried the matter before the CIT(A), who vide impugned order confirmed the order of the Assessing Officer. On further appeal before the Tribunal, the Tribunal vide order dated 02/06/2018 held that the rental income received by the Assessee is not a "business income" and the same is to be treated as "Income from house property". With regard to the estimation of rental income, directed the AO to re-compute annual rateable value. The assessed income after giving effect to the order of the Tribunal stood as below:-
A.Y. Income after appeal effect As against assessed income
A.Y. 2009-10 Rs. 2,06,083/- Rs.10,13,170/-
5. On confirmation of the assessment by the CIT(A), the Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Income-tax Act,1961 and vide penalty order dated 29-09-2019, finally levied the penalty of Rs. 3,13,069/- under section 271(1)(c) of the Act @ 100% of the tax sought to be evaded on the income of Rs.10,13,170/-.
6. On appeal, the Ld. Commissioner vide impugned order dated 29-05-2023, affirmed the levy of penalty under section 271(1)(c) of the Act, against which the Assessee being aggrieved preferred the instant appeal before the Tribunal.
7. Before the Tribunal, the grounds raised by the Assessee runs into two limbs; viz. the penalty cannot survive as the quantum appeal filed by the Assessee has been set aside / modified by the Tribunal; that the notice issued under section 274 read with section 271(1)(c) suffers from lacunae inasmuch as that the inapplicable portion in the notice was not struck off while issuing the notice and, therefore, the penalty order has no legs to stand.
8. At the outset, it was argued by the learned counsel for the Assessee that in the instant case the notice issued u/s 271(1)(c) dated 27/12/2016 is vague, having not specified any particular limb of the penalty and, therefore, the penalty is not leviable. In support of said contention, also relied on various judgments of the Hon'ble Apex Court and High Courts.
9. On the contrary the Ld. DR supported the orders passed by the authorities below and submitted that impugned order specifically under challenge does, not suffer from any perversity, impropriety and/or illegality and hence needs no interference.
10. Heard the parties and perused the material available on record. The Assessee has challenged the penalty order on various grounds. In the instant case, the AO initiated penalty under section 271(1)(c) of the Act for furnishing inaccurate particulars of Income leading to concealment of income and thereafter issued the notice u/s 274 read with 271(1)(c) of the Act without specifying any particular limb of the penalty and finally imposed the penalty for furnishing inaccurate particulars of income. The Assessee challenged the Imposition of penalty mainly on the basis of notice itself, therefore we deem it appropriate to decide the legal issue involved in the instant case, instead of going into other issue/merits of the case.
10.1. The Hon'ble Apex Court in case of M/s. SSA's Emerald Meadows, (2016) 73 taxmann.com 248(SC) also dealt with the identical issue and dismissed the Special Leave Petition filed by the Revenue against the judgment rendered by Hon'ble High Court of Karnataka whereby identical issue was decided in favour of the Assessee. Operative part of the judgment in case of M/s. SSA's Emerald Meadows (supra) decided by Hon'ble High Court of Karnataka is reproduced below:-
"2. This appeal has been filed raising the following substantial questions of law:
(1) Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case'
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in. holding that the penalty notice under Section 274 r.w.s. 271(1)(c) is bad in law and. invalid inspite the amendment of Section 271(1 B) with retrospective effect and by virtue of the amendment, the assessing officer has initiated the penalty by properly recording the satisfaction for the same'
(3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in deciding the appeals against the Revenue on the basis of notice issued, under Section 274 without taking into consideration the assessment order when the assessing officer has specified that the assessee has concealed particulars of income'
3. The Tribunal has allowed the appeal filed by the Assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (for short 'the Act') to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income .The Tribunal, while allowing the appeal of the Assessee, has relied upon the decision of the Division Bench of this Court rendered In the case of COMMISSIONER or INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY MANU/KA/2416/2012 : (2013) 359 ITR 565.
4. In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court, the appeal is accordingly dismissed."
10.2. The Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory, MANU/KA/2416/2012 : 359 ITR 565 (Kar) observed that the levy of penalty has to be clear as to the limb under which it is being levied. As per Hon'ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon'ble High Court also held that the standard proforma of notice under section 274 of the Act without striking off the irrelevant clause would lead to an inference of non-application of mind by the Assessing Officer and levy of penalty would suffers from non-application of mind.
10.3. Even the Hon'ble High Court of Delhi in the case of M/s. Sahara India Life Insurance Company Ltd. MANU/DE/4689/2019 : 432 ITR 84 (Del.) while following the judgments referred to above, held as under:
"21. The Respondent had challenged the upholding of the penalty imposed under Section 271(1)(c) of the Act, which was accepted by the ITAT. It followed the decision of the Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory MANU/KA/2416/2012 : 359 ITR 565 (Kar) and observed that the notice issued by the AO would be bad in law if it did not specify which limb of Section 271(l)(c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for [6] furnishing of inaccurate particulars of income. The Karnataka High Court had followed the above judgment in the subsequent order in Commissioner of Income Tax v. SSA's Emerald Meadows (2016) 73 Taxman.com 241(Kar), the appeal against which was dismissed by the Supreme Court of India in SLP No: 11485 of 2016 by order dated 5th August, 2016.
22. On this issue again this Court is unable to find any error having been committed by the ITAT. No substantial question of law arises. Thus, notice under Section 271(1)(c) r.w.s. 274 of the Act itself is bad in law. We, therefore, set-aside the order of the CIT(A) and direct the Assessing Officer to cancel the penalty so levied."
10.4. The penalty provisions of section 271(1)(c) of the Act are attracted, where the Assessee has concealed the particulars of income or furnished inaccurate particulars of such income. It is also a well-accepted proposition that the aforesaid two limbs of section 271(1)(c) of the Act carry different meanings. Therefore, it is imperative for the Assessing Officer to specify the relevant limb, so as to make the Assessee aware as to what is the charge made against him' so that he can respond accordingly.
10.5. In the background of the aforesaid legal position and, having regard to the manner in which the Assessing Officer has issued the notice dated 27/12/2016 under section 274 r.w.s. 271(1)(c) of the Act without specifying the limb under which the penalty proceedings have been initiated and proceeded with, apparently goes to prove that notice in this case has been issued in a stereotyped manner without applying mind which is bad in law, hence can not be considered a valid notice sufficient to impose penalty u/s 271(1)(c) of the Act and therefore we are of the considered view that under these circumstances, the penalty is not leviable as held by the various Courts, hence, we have no hesitation to delete the penalty levied by the AO and affirmed by the Ld. Commissioner. Consequently appeal i.e. ITA no. 2528/Mum/2023 filed by the Assessee is allowed.
11. In view of our decision in ITA no. 2528/Mum/2023, all the appeals filed by the Assessee which are under consideration before us are allowed
Order pronounced in the open court on 23/11/2023
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