The Tax Publishers2019 TaxPub(DT) 2671 (Jp-Trib)

INCOME TAX ACT, 1961

Section 271AAB Section 132(4) Sections 153 & 274

Since both the show cause notices issued by the AO for initiation of penalty proceedings under section 271AAB were very vague and silent about the default of the assessee and further the amount of undisclosed income on which the penalty was proposed to be levied issue was therefore, decided in favour of the assessee by holding that the initiation of penalty was not valid and consequently order passed under section 271AAB was liable to be quashed.

Penalty under section 271AAB - Validity - Non-specification of charge in notice issued under section 274 -

In the course of search and seizure action, certain documents were found and seized marked as Annexure-2 of Exhibit-2 containing the entries of advances for land. In the statement recorded under section 132(4) the assessee offered an additional income of Rs. 7,02,00,000 as recorded in the seized document. Assessment was completed under section 143(3) read with section 153B(1)(b) on 14-12-2016 accepting the returned income. The AO initiated the penalty proceedings under section 271AAB by issuing show cause notices. The assessee filed his reply to the show cause notice but the same was not accepted by the AO and consequently penalty was imposed under section 271AAB while passing the Order, dated 14-6-2017. CIt(A) had confirmed penalty by holding that the penalty under section 271AAB is mandatory in nature. Assessee had submitted that the AO while issuing the show cause notice under section 274 read with section 271AAB had not specified the default of the assessee in terms of clauses (a) to (c) of section 271AAB. Therefore, the initiation of penalty proceedings was illegal due to show cause notice was defective.Held: In the present case, the AO in the show cause notice had neither specified the grounds and default on the part of the assessee nor even specified the undisclosed income on which the penalty was proposed to be levied. Both the show cause notices issued by the AO for initiation of penalty proceedings under section 271AAB were very vague and silent about the default of the assessee and further the amount of undisclosed income on which the penalty was proposed to be levied. Accordingly, following the decision of the Coordinate Bench as well as Jurisdictional High Court, this issue was, therefore, decided in favour of the assessee by holding that the initiation of penalty was not valid and conseqmently the order passed under section 271AAB was not sustainable and liable to be quashed.

Followed:CIT v. Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565 (Karnataka) : 2014 TaxPub(DT) 0202 (Karn-HC), CIT v. SSA's Emerald Meadows (2016) 73 Taxmann.com 248 (SC) : 2016 TaxPub(DT) 4242 (SC) and Shevata Construction Co. Pvt. Ltd. in DBIT Appeal No. 534/2008, dt. 6-12-2016.

REFERRED : Muninaga Reddy v. ACIT (2017) 396 ITR 398 (Karn) : 2016 TaxPub(DT) 4490 (Karn-HC), Ravi Mathur v. Dy. CIT [ITA No. 969/JP/2017, dt. 13-6-2018], Pr. CIT v. Sandeep Chandak and others, dt. 27-11-2017 in I.T. Appeal No. 122, 128 and 129 of 2017, Dy. CIT v. Amit Agarwal, (2017) 88 Taxmann.com 288 (Kol-Trib) : 2017 TaxPub(DT) 4952 (Kol-Trib).

FAVOUR : In assessee's favour.

A.Y. : 2015-16


INCOME TAX ACT, 1961

Section 271AAB(2), Expln.

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