Case Number: ITA 5960/DEL/2019
Appellant: Kailash Chander Malhotra HUF, New Delhi
Respondent: ACIT, Circle-45(1), New Delhi
Assessment Year: 2014-15
Order Type: Final Tribunal Order
Date of Order: 2020-09-29
Pronounced On: 2020-09-29
Introduction:
The case at hand involves Kailash Chander Malhotra HUF, who filed an appeal against the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2014-15. The penalty was levied by the ACIT, Circle-45(1), New Delhi, for alleged concealment of income and furnishing inaccurate particulars. The primary contention in the appeal is the legality of the penalty initiation process, particularly the failure to specify the exact charge in the show cause notice.
Background and Grounds of Appeal:
The appellant, Kailash Chander Malhotra HUF, filed their income tax return on 19th July 2014, declaring a total income of Rs.2,46,67,670/-. During the assessment, the Assessing Officer (AO) determined the total income at Rs.2,70,67,670/-, which included an addition of Rs.24,00,000/-. This amount was credited to the appellant’s bank account and treated by the AO as unexplained income under Section 69A of the Income Tax Act, against which the appellant had declared the amount as agricultural income.
The appellant did not contest the addition in appeal but accepted it and paid the taxes. However, the AO initiated penalty proceedings under Section 271(1)(c), alleging that the income was only disclosed after detection during the assessment, thereby constituting concealment and furnishing of inaccurate particulars.
The appellant’s primary arguments in the appeal were:
Tribunal’s Analysis and Findings:
The Tribunal examined the legality of the penalty proceedings, focusing on whether the notice issued under Section 274 read with Section 271 was valid. The Tribunal found that the notice was indeed defective, as it did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars, which is a mandatory requirement as per judicial precedents.
The Tribunal referred to various judicial rulings, including the decisions of the Hon’ble Delhi High Court and the Hon’ble Supreme Court, which have consistently held that such notices are invalid if they do not clearly specify the charge. The Tribunal concluded that the penalty notice was defective and thus, the initiation of penalty proceedings was not in accordance with the law.
On the merits, the Tribunal observed that the appellant had declared the income as agricultural and the amount was received through cheque as rent for agricultural land. The Tribunal noted that the appellant’s claim of agricultural income was bona fide, even though the addition was accepted by the appellant to avoid protracted litigation.
Conclusion:
The Tribunal allowed the appeal, setting aside the penalty order and holding that the penalty proceedings initiated by the AO were legally unsustainable due to the defective notice. The penalty levied under Section 271(1)(c) of the Income Tax Act was quashed.
Final Judgment:
The appeal filed by Kailash Chander Malhotra HUF is allowed, and the penalty imposed by the ACIT, Circle-45(1), New Delhi, is hereby quashed.
Order Pronounced: 29th September 2020
Judges: Shri R.K. Panda, Accountant Member, and Shri Sudhanshu Srivastava, Judicial Member
Reference: IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D: NEW DELHI
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