Case Number: ITA 5659/DEL/2019
Appellant: Sanjeev Garg, Panipat
Respondent: ITO, Ward-4, Panipat
Assessment Year: 2014-15
Case Filed On: 2019-06-28
Order Type: Final Tribunal Order
Date of Order: 2020-09-28
Pronounced On: 2020-09-28
This case involves an appeal filed by Mr. Sanjeev Garg, Panipat, against the order of the Commissioner of Income Tax (Appeals), Karnal, dated 24.04.2019. The appeal pertains to the assessment year 2014-15 and challenges the penalty of Rs. 7,16,880/- levied under Section 271(1)(c) of the Income Tax Act, 1961.
Sanjeev Garg, the appellant, is an individual who filed his return of income for AY 2014-15 on 30.07.2014, declaring an income of Rs. 12,85,950/-. Later, information was received regarding a bogus entry of profit/gain obtained by the assessee. During the investigation, Sanjeev Garg admitted to receiving a bogus long-term capital gain of Rs. 23,20,000/-. Consequently, proceedings under Section 147 of the Act were initiated, and a notice under Section 148 was issued on 27.01.2017. In response, the assessee filed his return of income on 16.02.2017, including the above income and paying the tax due thereon.
The grounds of appeal raised by the appellant are as follows:
The assessee filed his return of income for AY 2014-15, including the income from bogus long-term capital gains and paid the due tax. However, the Assessing Officer (AO) initiated penalty proceedings under Section 271(1)(c) of the Act, asserting that the assessee had declared the income only after the investigation and issuance of notice under Section 148. The AO levied a penalty of Rs. 7,16,880/- for concealment of income.
The assessee challenged the penalty order before the CIT(A), relying on several judicial precedents and arguing that the penalty notice issued by the AO was not sustainable on merit, as the assessee had already disclosed the escaped income in response to the notice under Section 148. The CIT(A), however, confirmed the penalty, leading to the present appeal.
The Ld. Authorized Representative (AR) for the assessee argued that the penalty notice issued under Section 274 read with Section 271(1)(c) was invalid, as the AO did not strike off any of the twin charges (concealment of particulars of income or furnishing inaccurate particulars of income). The AR cited the decision of the Hon’ble Karnataka High Court in Pr. CIT Vs. SSA’s Emerald Meadows (2016) 73 Taxman.com 241 (Kar.) and other judicial precedents to support her case.
The Ld. Departmental Representative (DR) argued that the AO had clearly mentioned in the assessment order that the assessee had concealed particulars of income, and therefore, the initiation of the penalty was valid even if one of the charges was not struck off in the notice under Section 274.
The Tribunal, comprising Judicial Member Shri Amit Shukla and Accountant Member Shri Prashant Maharishi, carefully considered the rival contentions and perused the orders of the lower authorities. The Tribunal observed that the penalty notice issued under Section 274 read with Section 271(1)(c) did not strike off any of the twin charges. The Hon’ble Delhi High Court in Pr. CIT Vs. Sahara India Life Insurance Co. Ltd. in ITA No. 475/2019 had categorically held that penalty is not sustainable if none of the twin charges in the notice under Section 274 are cancelled or struck off.
Respectfully following the decision of the Hon’ble Delhi High Court and the Hon’ble Karnataka High Court in 73 Taxman.com 241 (supra), the Tribunal held that the penalty levied by the AO was not sustainable in law. The Tribunal reversed the orders of the lower authorities and cancelled the penalty of Rs. 7,16,880/- levied under Section 271(1)(c) of the Act. Accordingly, Ground No. 5 of the appeal was allowed.
In view of this finding, all other grounds of appeal contested on the merits of the case were deemed academic and were not adjudicated.
The appeal filed by Sanjeev Garg was allowed, with the Tribunal cancelling the penalty levied under Section 271(1)(c) of the Act. The Tribunal’s decision was based on the invalidity of the penalty notice, which did not strike off any of the twin charges, as required by law.
Order pronounced in the open court on 28th September 2020.
Signed by:
(AMIT SHUKLA) JUDICIAL MEMBER
(PRASHANT MAHARISHI) ACCOUNTANT MEMBER
Date: 28th September 2020
Copy forwarded to:
// BY Order //
Assistant Registrar, ITAT New Delhi Benches, New Delhi
Sanjeev Garg vs ITO – Validity of Penalty Levy under Section 271(1)(c) for AY 2014-15
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