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M/s Singh Consultancy Pvt. Ltd. 1106 Indra Prakash Building, 21 Barakhamba Road, New Delhi Vs. Income Tax Officer, Ward-8(4), New Delhi
April, 12th 2021

IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH, ‘G’: NEW DELHI
(Through Video Conferencing)

BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND
SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER

ITA No.3061/Del/2017
Assessment Year : 2009-10

M/s Singh Consultancy Pvt. Vs. Income Tax Officer,
Ltd. Ward-8(4),
1106 Indra Prakash Building, New Delhi
21 Barakhamba Road,
New Delhi-110001 (Respondent)
PAN-AAKCS5550J

(Appellant)

Appellant by : Sh. S.K. Gupta, CA
Respondent by : Sh. H.K. Choudhary, CIT-DR

Date of hearing : 25.03.2021

Date of pronouncement : 09.04.2021

ORDER

PER R.K. PANDA, AM :

This appeal filed by the assessee is directed against the order dated
23.12.2016 of the learned CIT(A)-22, New Delhi, relating to Assessment Year
2009-10.

2. Facts of the case, in brief, are that the assessee is private limited
company, engaged in the business of share, commodity trading and
investment activities. It filed its return of income on 29.09.2009, declaring
loss of Rs.2,20,67431/-. The Assessing Officer completed the assessment
under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) on
30.12.2011 determining total income of the assessee at Rs.26,39,389/-,
wherein, he made addition of Rs.2,47,06,820/- treating unsecured loan of
2 ITA No.3061/Del/2017

Rs.2,47,06,820/- as bogus and ingenuine. The addition so made was
confirmed by the learned CIT(A). Thereafter, the Assessing Officer initiated
penalty proceedings u/s 271(1)(c) of the Act. Rejecting the various
explanations given by the assessee and observing that the assessee has
concealed its income to the extent of Rs.2,47,06,820/- willfully and
knowingly by furnishing inaccurate particulars of income, he levied penalty
of Rs.74,12,046/- being 100% of the tax sought to be evaded.

3. In appeal, the learned CIT(A) sustained the addition by observing as
under:-

“7.1. Non filing of complete details/information amounts to
suppression of material facts. Order of CIT(A) reflects facts
which are different from the statement of facts filed by the
appellant. Finding of facts by CIT(A) has not yet been reversed
by ITAT. The case laws relied upon by the appellant, do not
hold that penalty is not leviable even when there is suppression
of material facts. Therefore, the addition made falls under the
definition of deemed concealment under explanation 1 to
section 271(1)(c) of the I.T. Act. 1961. Therefore, the penalty
levied is confirmed.”

4. Aggrieved with such order of the learned CIT(A), the assessee is in

appeal before the Tribunal by raising following grounds of appeal:-

1. That the CIT(A) has erred in upholding the notice issued u/s
271(l)(c) and order passed under the said section imposing
penalty of Rs. 74,12,046/- since the notice issued U/s 271
r.w.s. 274 and penalty order passed is illegal, bad in law and
vague.

2. That no valid satisfaction was recorded before initiation of
penalty and as such the notice issued u/s 271(l)(c) and
penalty order dated 28.03.2014 imposing penalty of Rs
74,12,046/- passed under said section are illegal, bad in law
and without jurisdiction and liable to be quashed.
3 ITA No.3061/Del/2017

3. That the penalty order is illegal, bad in law and without
jurisdiction since the AO who has passed the order had no
jurisdiction to pass the order.

4. That in the absence of any specific charge against the
assessee, the initiation and levying of penalty U/s 271(l)(c) is
illegal, bad in law and is liable to be quashed.

5. That the CIT(A) has erred in law and on facts in not
appreciating that additions made by the A.O. in quantum
proceedings on account of unsecured loan being treated as
income do not attract penalty provisions.

6. That the CIT(A) has erred in law and on facts in not
appreciating that addition of unsecured loan received by the
appellant is a highly debatable and contentious issue and
hence no penalty u/s 271(l)(c) can be levied.

7. That the penalty order u/s 271(l)(c) is against the well
established norms and jurisprudence of penalty under the IT
Act and against various decisions of ITAT, High Court and
Supreme Court.

8. That the CIT(A) has grossly erred in holding that the appellant
had suppressed material facts and has further erred in holding
that the appellant is liable under Explanation 1 to Sec 271 .

9. That the explanations filed before the A.O and the material
available on record has not been properly considered and legally
interpreted. The penalty imposed cannot be justified by any
material on record.

5. The learned counsel for the assessee strongly challenged the order of
the CIT(A) in confirming the penalty so levied by the Assessing Officer.
Referring to the copy of the notice issued u/s 274 r.w.s. 271of the Act by
the Assessing Officer on 30.12.2011, which is placed at Sl. No.6 of soft
copy, he submitted that the inappropriate words in the said notice have not
been struck off and it is not clear as to under which limb of section 271(1)(c)
penalty has been initiated i.e. for concealment of income or for furnishing of
4 ITA No.3061/Del/2017

inaccurate particulars of income. Referring to the copy of the assessment
order, he submitted that the Assessing Officer is silent on particular limb of
default attributable to the assessee. The order doesn’t indicate any specific
default of sec 271(1)(c) attributed to the assessee although there is general
satisfaction of initiation of penalty proceedings in para 3.1 thereof.
Referring to the copy to penalty order, he submitted that the Assessing
Officer while levying penalty records satisfaction that the assessee
knowingly and willfully by furnishing inaccurate particulars of income
concealed its income. He submitted that from the satisfaction in penalty
order, there cannot be any dispute that the assessee is in default for
furnishing of inaccurate particulars of income and no default for concealing
the particulars of income is attributable to the assessee, although, the
Assessing Officer finds that this default has resulted into concealment of
income. He submitted that invoking of the Explanation of section 271(1)(c)
across the board further shows non-application of mind by the Assessing
Officer. Referring to the various decision including the decision of the
Hon’ble Supreme Court in the case of CIT vs SSA’s Emerald Meadows
reported in 73 taxmann.com 248 and CIT vs Manjunatha Cotton & Ginning
Factory reported in 359 ITR 565 (Kar) and the decision of the Delhi High
Court in the case of Pr. CIT vs M/s Sahara India Life Insurance Company in
ITA No.475, 426, 427 and 429/2019, order dated 02.08.2019 and various
other decision, he submitted that the penalty levied by the Assessing Officer
has been canceled on the ground of non-specification of the particular limb
of default covered by the penal provision of sec 271(1)(c) of the Act.
Referring to the following decisions, he submitted that where the particular
5 ITA No.3061/Del/2017

limb has not been mentioned by the Assessing Officer under which the
penalty has been levied, the penalty proceedings have been quashed:-

i. CIT v. Samson Perinchery 392 ITR 4 (Bombay);

ii. Manu Bali v. ACIT [ITA/790/DEL/2016; decision dated
05.10.2017];

iii. Vijay Agarwal v. DCIT [ITA/5432/DEL/2016; decision dated
05.11.2019];

iv. Sanjay Mittra vs. DCIT [ITA No.5206/Del/2016, order dated
01.10.2018];

v. DCIT vs. Gellette Diversified Operations Pvt. Ltd. [ITA
No.4585/Del/2015] and vice versa [ITA No.3238/Del/2015], order
dated 25th April, 2019 for A.Y. 2011-12.

6. He further submitted that a perusal of the assessment order shows
that while making addition of Rs.2,47,06,820/-, there is no satisfaction
whatsoever of the default committed within the meaning of section 271(1)(c)
and the relevant limb of default appears in the assessment order. He
submitted that recording of satisfaction is sine qua-non for valid initiation
of penalty proceedings which is evident from the wording of sec 271(1) of
the Act which places emphasis on the satisfaction by the AO while initiating
penalty proceedings. He submitted that in absence of any satisfaction of
recording nature of default by the AO in the assessment order qua this
addition, the penalty cannot be imposed on such addition. Referring to the
6 ITA No.3061/Del/2017

decision of the Hon’ble Delhi High Court in the case of Madhushree Gupta
vs Union of India reported in 317 ITR 143(Del), he submitted that Hon’ble
High Court in the said decision has held that the presence of prima facie
satisfaction for initiation of penalty proceedings was and remains a
jurisdictional fact which cannot be wished away as the provision stands
even today, i.e post amendment. Relying on various other decisions, he
submitted that where it is mentioned that penalty proceedings u/s 271(1)(c)
of the Act are intiated separately, it is held that the same doesn’t comply
with the word ‘direction’ as contemplated under section 271(1)(c) of the Act.

7. The learned counsel for the assessee submitted that penalty has been
levied for concealment of particulars of income of Rs.2,47,06,820/- for
which addition has been made u/s 68 of the Act. Referring to para-3 of the
assessment order, he submitted that the Assessing Officer simply relies on
the finding given in the assessment order for AY 2008-09. This shows that
the Assessing Officer has not conducted any enquiry to verify the evidences
furnished by the assessee in support of the cash credit of Rs.2,47,06,820/-
for this year. Thus, the addition is not based on the rejection of the
evidences furnished after due enquiry by the Assessing Officer. Therefore,
such addition is not tenable in law in view of the following decisions:-

i. CIT vs. Goel Sons Golden Estate Pvt Ltd. ITA 212/2012 (Del);

ii. Pr. CIT Vs Laxman Industrial Resources Ltd in 397 ITR 106 (Del);

iii. Pr. CIT vs. Green Valley Plywood Limited (ITA No. 358/2016 (Del);

iv. Pr. CIT vs Rakam Money Matters Pvt Ltd ITA 778/2015 (Del);
7 ITA No.3061/Del/2017

v. CIT vs M/s Russian technology Centre (P) Ltd 300 CTR 0501 (Del).

8. He submitted that the Assessing Officer in the penalty order, failed to
support the charge of furnishing of inaccurate particulars without
identifying which of the particulars filed by the assessee regarding the cash
credit were inaccurately furnished in the absence of enquiry conducted by
him. He submitted that the assessee during the assessment proceedings
had furnished the required evidences in support of the cash credit. The
details furnished by the assessee during the assessment proceedings was
not found to be unsubstantiated and there is no question of the same not
being bona-fide and all the details regarding the acceptance of credit were
furnished before the Assessing Officer and therefore, it cannot be said that
it is a case of furnishing of inaccurate particulars of income. Relying on
various decisions, he submitted that although the addition has attained
finality in quantum proceedings, the assessee can always make a new plea
during the penalty proceedings. He, accordingly, submitted that both
legally and factually penalty so levied by the Assessing Officer and
sustained by the learned CIT(A) is not justified.

9. Learned DR, on the other hand, strongly supported the order of the
Assessing Officer and the CIT(A). He submitted that the Assessing Officer
has initiated penalty proceedings after recording satisfaction. Referring to
the copy of the notice issued u/s 274 r.w.s 271 of the Act on 30.12.2011, he
submitted that there is tick mark against “have concealed the particulars of
income or furnished inaccurate particulars of such income in terms of
Explanation 1, 2, 3, 4 and 5”. This shows that Assessing Officer has put the
8 ITA No.3061/Del/2017

tick mark for concealment of particulars of income, therefore, the argument
of the learned counsel for the assessee that the Assessing Officer has not
mentioned under which limb of section 271(1)(c) of the Act, penalty has
been levied is not correct. He submitted that the addition has attained
finality and the Assessing Officer has validly initiated the penalty
proceeding, therefore, such order levying penalty by the Assessing Officer
and sustained by the CIT(A) should be upheld.

10. We have considered the rival arguments made by both the sides,
perused the orders of Assessing Officer and CIT(A) and the paper book filed
on behalf of the assessee. We find that the Assessing Officer in the instant
case levied penalty of Rs.74,12,046/- being 100% of tax sought to be
evaded on the ground that the assessee has concealed its income to the
tune of Rs. 2,47,06,820/- willingly and knowingly by furnishing inaccurate
particulars of income. We find that the learned CIT(A) upheld the penalty
so levied by the Assessing Officer, reasons of which have already been
reproduced in the preceding paragraphs. It is the submission of the learned
counsel for the assessee that since the inappropriate words in the said
notice has not been struck of, therefore, it is not clear as to under which
limb the penalty u/s 271(1)(c) has been initiated. A perusal of the notice
issued u/s 274 r.w.s. 271 issued by the Assessing Officer shows that the
Assessing Officer has simply put a tick mark against “have concealed the
particulars of income or furnished inaccurate particulars of such income in
terms of Explanation 1,2,3,4 and 5”. A perusal of the assessment order
shows that penalty has been initiated in general terms and the assessment
9 ITA No.3061/Del/2017

order is not clear as to under which limb of the penalty i.e. for concealment

of income or for furnishing inaccurate particulars of income has been

mentioned. Similarly, in the case of penalty order, where it is mentioned

that assessee has concealed its income to the tune of Rs.2,47,06,820/-

willingly and knowingly by furnishing inaccurate particulars of income. We,

therefore, find merit in the arguments of the learned counsel for the

assessee that in order to initiate penalty proceedings, the Assessing Officer

has to specify in the show-cause notice u/s 271(1(c) r.w.s 274 of the Act, if

the assessee has concealed the particulars of income or has furnished

inaccurate particulars of income which is in instant case, the Assessing

Officer has failed to do. The Hon’ble Apex Court in the case of CIT vs SSA’s

Emerald Meadows reported in 73 taxmann.com 248, while dismissing the

SLP filed by the Revenue quashing the penalty by the Tribunal as well as by

the Hon’ble Delhi High Court on the ground that the penalty notice does not

specify under which limb the penalty has been levied has held as under:-

“Section 274, read with section 271(1)(c), of the Income-tax Act,
1961 - Penalty - Procedure for imposition of (Conditions
precedent) - Assessment year 2009-10 - Tribunal, relying on
decision of Division Bench of Karnataka High Court rendered in
case of CIT v. Manjunatha Cotton & Ginning Factory [2013] 359
1TR 565/218 Taxman 423/35 taxmann.com 250, allowed
appeal of assessee holding that notice issued by Assessing
Officer under section 274 read with section 271 (1 )(c) was bad
in law, as it did not specify under which limb of section 271 (1
)(c) penalty proceedings had been initiated, i.e., whether for
concealment of particulars of income or furnishing of inaccurate
particulars of income - High Court held that matter was covered
by aforesaid decision of Division Bench and, therefore, there was
no substantial question of law arising for determination -
Whether since there was no merit in SLP filed by revenue, same
was liable to be dismissed - Held, yes [Para 2] [In favour of
assessee]”
10 ITA No.3061/Del/2017

11. Hon’ble Delhi High Court in case of Pr. CIT vs. Sahara India Life

Insurance Company Ltd. (supra) while deciding the identical issue 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 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(1) (c) the penalty
proceedings had been initiated under i.e. whether for concealment
of particulars of income or for 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 of2016 by order dated 5th August, 2016.”

12. Following the decisions rendered in the cases of CIT vs. Manjunatha

Cotton and Ginning Factory, CIT vs. SSA’s Emerald Meadows and Pr. CIT

vs. Sahara India Life Insurance Company Ltd. (supra), the Co-ordinate

Benches of the Tribunal are taking the consistent view that when the notice

issued by the AO is bad in law being vague and ambiguous having not

specified under which limb of section 271(1)(c) of the Act the penalty notice

has been issued, the penalty proceedings initiated u/s 271(1)(c) are not

sustainable.

13. Respectfully following the decisions cited above, we hold that since,

the particular limb under which the penalty has been levied is not coming

out from the notice as well as the assessment order and penalty order,
11 ITA No.3061/Del/2017

therefore, such levy of penalty under these facts and circumstances is not
justified. Accordingly, we set aside the order of the CIT(A) and direct the
Assessing Officer to delete the penalty so levied.

14. In the result, appeal filed by the assessee is allowed.

Order pronounced in the open court on 09.04.2021

Sd/- Sd/-
(R.K. PANDA)
(SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER
JUDICIAL MEMBER
By Order
Delhi/Dated-09.04.2021 Assistant Registrar,

f{x~{tÜ ITAT, Delhi

Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT

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