The Delhi bench of Income Tax Appellate Tribunal (ITAT) deleted the penalty imposed under Section 271AAB of the Income Tax Act, 1961 due to the defective penalty notice issued by the assessing officer.
The assessee Landcraft Developers (Pvt.) Ltd. is engaged in the business of development of land. A search and seizure operation under Section 132 of the Income Tax Act was carried out in M/s Landcraft Group of cases. During the course of search, statement under Section 132(4) of the Income Tax Act was recorded from the Director of the assessee, wherein sum of Rs.6,42,57,474/- and Rs.40,00,000/- was surrendered as undisclosed income by the assessee.
Thereafter the assessment was completed under Section 143(3) of the Income Tax Act for AY 2013-14 determining total income at Rs.80,05,205/- after making addition on account of unexplained cash credit Rs.10,00,000/- and addition of Rs.3,98,235/- made u/s 69A of the Act in respect of transactions with M/s Pandav Developers Pvt. Ltd.
Accordingly, The penalty proceedings under Section 271AAB of the Income Tax Act were initiated on completion of assessment proceedings. A show cause was issued under Section 274 r.w.s 271AAB of the Act. The said show cause only mentioned the offense committed by the assessee by mentioning that assessee has concealed the particulars of income or furnished inaccurate particulars of income. This show cause notice is meant for initiating penalty proceedings under Section 271(1)(c) of the Income Tax Act.
Thereafter the AO has used the same show cause notice in the same format for initiating penalty proceedings under Section 271AAB of the Income Tax Act.
Aggrieved with the penalty order the assessee filed an appeal before the CIT(A). The CIT(A) upheld the order of assessing officers. Subsequently the assessee filed a second appeal before the tribunal.
It was observed by the tribunal that the penalty notice dated 31/03/2015 issued by the LAO was actually meant for initiating the penalty proceedings under Section 271(1)(c) of the Act. The said notice mentions the offense committed by the assessee i.e., to say whether the assessee has concealed the particulars of income or had furnished inaccurate particulars of income. Both these conditions are absolutely not relevant for initiating penalty proceedings under Section 271AAB of the Income Tax Act.
Hence the bench determined that the format for issuing show cause notice for penalty u/s 271(1)(c) of the Act cannot be used for initiating penalty proceedings under Section 271AAB of the Income Tax Act.
Therefore the two-member bench Of Challa Nagendra Prasad, (Judicial Member) and N.K. Billaiya, (Accountant Member) held that the penalty notice issued on 31/03/2015 is defective and, accordingly, entire penalty proceedings gets vitiated. Hence, the penalty levied under Section 271AAB of the Income Tax Act in the facts and circumstances of the instant case would have no legs to stand in the eyes of law.
Accordingly the bench allowed the appeal filed by the assessee. Rajkumar counsel appeared for the assessee and Jeetendra Kumar Kale counsel appeared for revenue.
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