S.S. Viswanethra Ravi ORDER
S.S. Viswanethra Ravi, Member (J)
1. This appeal by the assessee is directed against the confirmation of penalty of Rs. 3,36,910 imposed by the AO u/s. 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') in relation to the assessment year 2013-14.
2. Briefly stated, the facts of the case are that the assessee was subjected to Survey action u/s. 133A of the Act, wherein a sum of Rs. 10,86,800 was offered as additional income. The assessee filed return declaring total income of Rs. 38,03,430, including the declared income. The assessment was completed at the declared income only. Thereafter, the AO imposed penalty with reference to the amount offered during the course of Survey and included suo motu by the assessee in total income. The ld. CIT(A) sustained the penalty. Aggrieved thereby, the assessee has come up in appeal before the Tribunal.
3. We have heard the rival contentions through the Virtual Court and scanned through the relevant material on record. The ld. AR has placed on record a copy of notice issued u/s. 274 r.w.s. 271(1)(c) of the Act at page 1 of the paper book. As per this notice, penalty has been initiated with reference to both the limbs: concealment of income and furnishing of inaccurate particulars of income. In other words, there is no striking off of one of them, even though the item of income under challenge is only one. The question arises as to whether penalty u/s. 271(1)(c) of the Act in such circumstances is sustainable?
4. Recently, the full Bench of Hon'ble Bombay High Court in Mohd. Farhan A. Shaikh Vs. Dy. CIT MANU/MH/0808/2021 : (2021) 125 taxmann.com 253 (Bom) has considered this very issue. Answering the question in affirmative, the Full Bench held that a defect in notice of not striking out the irrelevant words vitiates the penalty even though the AO had properly recorded the satisfaction for imposition of penalty in the order u/s. 143(3) of the Act. In another judgment, the Hon'ble Bombay High Court in Pr. CIT Vs. Golden Peace Hotels and Resorts (P.) Ltd. (2021) 124 taxmann.com 248 (Bom) also took similar view that where inapplicable portions were not struck off in the penalty notice, the penalty was vitiated. The SLP of the Department against this judgment has recently been dismissed by the Hon'ble Supreme Court in Pr. CIT Vs. Golden Peace Hotels and Resorts (P.) Ltd. (2021) 124 taxmann.com 249 (SC).
5. In view of the overwhelming legal position, it is clear that where the charge is not properly set out in the notice u/s. 274, viz., both the limbs stand therein without striking off of the inapplicable limb, the penalty order gets vitiated. Turning to the facts of the extant case, we find from the notices u/s. 274 of the Act that the AO did not strike out the irrelevant limb. Respectfully following the above Full Bench judgment of the Hon'ble jurisdictional High Court, we overturn the impugned order on this legal issue and direct to delete the penalty.
6. In the result, the appeal is allowed.
Order pronounced in the Open Court on 10th January, 2022.
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