Rakesh Kumar Pawa v. ACIT - Taxpublishers.in

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The Tax Publishers2022 TaxPub(DT) 1353 (Del-Trib)

INCOME TAX ACT, 1961

Section 271(1)(c)

Where AO had not specified under which limb of the provisions of section 271(1)(c), i.e., whether for concealment of income or for furnishing of inaccurate particulars of income and he had initiated the penalty proceedings, therefore, penalty levied by AO was, therefore, directed to be cancelled.

Penalty under section 271(1)(c) - Notice issued by AO without specifying grounds of penalty - Defective notice -

AO, during the course of assessment proceedings, noted that the assessee has taken a loan from an NBFC company on which interest was paid. Although the net disbursement of loan to M/s. P out of total borrowings, proportionate interest was claimed as expenses. AO, therefore, asked the assessee to explain as to why proportionate interest should not be disallowed and added back to the total income of the assessee. The assessee surrendered the above amount and offered the same for taxation. The AO accordingly made an addition of the same. Subsequently, AO had imposed penalty under section 271(1)(c) on the assessee. Held: AO, in the instant case, had not specified under which limb of the provisions of section 271(1)(c), i.e., whether for concealment of income or for furnishing of inaccurate particulars of income and he has initiated the penalty proceedings, therefore, such penalty proceedings not being in accordance with the law, cannot be sustained. Accordingly, penalty levied by AO was directed to be cancelled.

Followed:CIT v. Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158 (SC) : 2010 TaxPub(DT) 1683 (SC), CIT, Bangalore and The ITO, Ward-6 (3), Bangalore v. M/s. SSA'S Emerald Meadows 2018 TaxPub(DT) 0953 (Karn-HC), CIT and another v. Manjunatha Cotton and ginning factory, Manjunath Ginning and pressing, Veerabhadrappa Sangappa and Co., V.S. Lad and sons, G.M. Export (2014) 359 ITR 565 (Karn) : 2014 TaxPub(DT) 0202 (Karn-HC), New Sorathia Engineering Co. v. CIT. (2006) 282 ITR 642 (Guj) : 2006 TaxPub(DT) 1265 (Guj-HC)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

IN THE ITAT, DELHI BENCH

R.K. PANDA, A.M.

Rakesh Kumar Pawa v. ACIT

ITA No. 8059/Del/2018

10 February, 2022

In favour of assessee.

Appellant by: Abhishek Mathur, CA

Respondents by: Sanjiv Mahajan, Sr. Departmental Representative

ORDER

This appeal filed by the assessee is directed against the order of the Commissioner (Appeals)-16, New Delhi, dated 31-10-2018 relating to assessment year 2009-10.

2. Levy of penalty of Rs. 1,71,212 by the assessing officer under section 271(1)(c) of the Income Tax Act which has been confirmed by the Commissioner (Appeals) is the only issue raised by the assessee in the grounds of appeal.

3. Facts of the case, in brief, are that the assessee is an individual and had filed his return of income on 29-3-2012, declaring a loss of Rs. 5,01,092. A search and seizure and survey operation under section 132/133A of the Income Tax Act was conducted by the Investigation Wing in the case of the assessee along with other cases of the Jagat group. In response to the notice under section 153A, the assessee submitted that the return filed earlier under section 139(1) should be treated as return filed under section 153A. The assessing officer completed the assessment under section 143(3)/153A determining the total income of the assessee at Rs. 11,36,640 wherein he made addition of Rs. 2,40,000 being income from salary and Rs. 8,96,639 being the income surrendered by the assessee. So far as the surrender of above income is concerned, the assessing officer, during the course of assessment proceedings, noted that the assessee has taken a loan from Money Line Credit, an NBFC company, amounting to Rs. 1,53,00,000 on which interest of Rs. 10,76,689 has been paid. Although the net disbursement of loan to M/s. Pawa Associates out of total borrowings was only of Rs. 1,27,41,453, however, proportionate interest amounting to Rs. 8,96,639 was claimed as expenses. The assessing officer, therefore, asked the assessee to explain as to why proportionate interest should not be disallowed and added back to the total income of the assessee. The assessee surrendered the above amount and offered the same for taxation. The assessing officer accordingly made an addition of the same.