Sri. G.S. Suhas, Bangalore V. ITO, Bangalore

ITA 1003/BANG/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8667 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 28-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Keywords: Question of law
• Section: 143(3); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.1003/BANG/2014 ASSESSMENT YEAR : 2007-08 SHRI G.S. SUHAS, NO.284, NARAYANA PILLAI STREET, BANGALORE 560 001. PAN: APMPS 7222P VS. THE INCOME TAX OFFICER, WARD 1(2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SMT. SHEETAL BORKAR, ADVOCATE RESPONDENT BY : DR. P.K. SRIHARI, ADDL. CIT(DR) DATE OF HEARING : 10.12.2015 DATE OF PRONOUNCEMENT : 05.02.2016 O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LD. CIT(APPEALS)-I, BANGALORE DATED 16.04.2014 FOR THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL:- ITA NO.1003/BANG/2014 PAGE 2 OF 6 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT (APPEALS) ERRED IN PASSING THE ORDER IN THE MANNER HE DID. 2. THE LEARNED CIT (APPEALS) ERRED IN AFFIRMING TH E LEVY OF PENALTY UNDER SECTION 271(1)(C) AS MADE BY THE ASSE SSING OFFICER. 3. THE LEARNED CIT (APPEALS) OUGHT TO HAVE APPRECI ATED THE EXPLANATION OF THE APPELLANT AND OUGHT TO HAVE REFR AINED FROM CONFIRMING THE LEVY OF PENALTY. 4. THE LEARNED CIT (APPEALS) OUGHT TO HAVE APPRECI ATED THAT THE EXPLANATION OFFERED BY THE APPELLANT IN RESPECT OF THE FACTS MATERIAL TO THE COMPUTATION OF HIS INCOME WAS NEITH ER FOUND TO BE FALSE NOR DID THE APPELLANT FAIL TO PROVE HIS BONA FIDES BECAUSE, DIFFERENCE BETWEEN THE ASSESSED INCOME AND INCOME R ETURNED WAS VOLUNTARILY OFFERED FOR PEACE AND NO TAX WAS SOUGHT TO BE EVADED. 5. WITHOUT PREJUDICE, THE LEVY OF PENALTY UNDER SE CTION 271(1)(C) OF THE ACT AS CONFIRMED BY THE LEARNED CI T (APPEALS) IS ARBITRARY, UNJUST AND UNCALLED FOR AND THEREFORE TH E PENALTY IS LIABLE TO BE DELETED IN FULL. 6. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING OF THE APPEAL THE APPELLANT PRAYS THAT T HE APPEAL MAY BE ALLOWED. 3. THE HAS ALSO FILED THE FOLLOWING ADDITIONAL GROU NDS OF APPEAL:- 1. THE ASSESSING OFFICER HAVING ISSUED THE NOTIC E UNDER SECTION 274 READ WITH SECTION 27 1(1)(C) OF THE ACT IN A MECHANICAL MANNER, THE PENALTY ORDER PASSED UNDER S ECTION 271 (1)(C) OF THE ACT IS NOT SUSTAINABLE IN THE EYE OF LAW. 2. THE APPELLANT BEGS TO SUBMIT THAT THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MA NJUNATHA COTTON & GINNING FACTORY (2013) 359 ITR 565 (KARN) IS SQUARELY APPLICABLE AND THEREFORE THE IMPUGNED ORDER OF THE AUTHORITIES BELOW IS REQUIRED TO BE SET ASIDE. ITA NO.1003/BANG/2014 PAGE 3 OF 6 4. BRIEFLY THE FACTS ARE THAT THE APPELLANT IS AN I NDIVIDUAL. HE FILED RETURN OF INCOME FOR THE AY 2007-08 ON 4.1.2008 DEC LARING AN INCOME OF RS.90,820. AGAINST SUCH RETURN OF INCOME, ASSESSME NT WAS COMPLETED U/S. 143(3) OF THE ACT VIDE ORDER DATED 24.12.2009 AT A TOTAL INCOME OF RS.30,09,060. THE DISPARITY BETWEEN THE RETURNED I NCOME AND ASSESSED INCOME IS ON ACCOUNT OF MAKING ADDITION OF RS.27,50 ,000 ON ACCOUNT OF UNEXPLAINED DEPOSITS IN THE BANK ACCOUNT OF THE APP ELLANT. THE ASSESSEE HAD NOT CONTESTED THE ADDITION IN APPEAL PROCEEDING S, THUS THE ASSESSMENT ATTAINED FINALITY. 5. WHILE THE MATTER STOOD THUS, THE AO HAD INITIATE D PENALTY PROCEEDINGS BY ISSUING SHOW CAUSE NOTICE U/S. 274 R .W.S. 271(1)(C) OF THE ACT DATED 24.12.2009. IN RESPONSE TO THE SHOW CAUS E NOTICE, THE EXPLANATION OFFERED BY THE APPELLANT IS THAT THE AD DITION WAS AGREED ONLY TO BUY PEACE WITH THE DEPARTMENT AND AVOID PROTRACTED LITIGATION AND THEREFORE HIS ONLY CONTENTION WAS THAT IN SUCH CIRCUMSTANCES, THE PENAL PROVISIONS U/S. 271(1)(C) CANNOT BE APPLIED TO HIM. THE AO BR USHED ASIDE THE EXPLANATION OFFERED BY THE ASSESSEE HOLDING THE ASS ESSEE GUILTY OF FURNISHING INACCURATE PARTICULARS OF INCOME & CONCE ALING PARTICULARS OF INCOME AND LEVIED A PENALTY OF RS.9,28,478 VIDE ORD ER DATED 25.6.2010. 6. BEING AGGRIEVED, AN APPEAL WAS FILED BY THE ASSE SSEE BEFORE THE CIT(APPEALS)-I, BANGALORE, WHO VIDE IMPUGNED ORDER HAD DISMISSED THE APPEAL BY HOLDING THAT THE VERY FACT THAT ASSESSEE AGREED FOR ADDITION AND ITA NO.1003/BANG/2014 PAGE 4 OF 6 PAID TAX THEREON, CANNOT BE A VALID EXCUSE FOR NON- LEVY OF PENALTY. HENCE, THE APPELLANT IS BEFORE IS WITH THE PRESENT APPEAL. 7. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE APPELLANT HAD ONLY ARGUED THE ADDITIONAL GROUNDS OF APPEAL FILED AND SUBMITTED THAT THE SHOW CAUSE NOTICE WAS ISSUED BY THE ASSESSING OFFIC ER IN A MECHANICAL MANNER AND THEREFORE APPLYING THE RATIO OF THE DECI SION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. MANJUNATHA COTTON & GINNING FACTORY (2013) 359 ITR 565 (KARN) , THE PENALTY ORDER CANNOT BE SUSTAINED. 8. ON THE OTHER HAND, THE LD. SR. DR RELIED ON THE ORDERS OF LOWER AUTHORITIES. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE SHALL NOW TAKE UP THE ADDITIONAL GROUN D OF APPEAL FILED BY THE ASSESSEE WHICH CHALLENGES THE VERY VALIDITY OF PENA LTY PROCEEDINGS INITIATED U/S. 271(1)(C) OF THE ACT. SINCE THIS GROUND GOES TO THE VERY ROOT OF THE MATTER, WE SHALL DWELL ON THE SAME AT THE FIRST INS TANCE. THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSING OFFICER HAD NOT APPLIED HIS MIND AND HAD INITIATED PENALTY PROCEEDINGS. TO DEMONSTRATE THIS ISSUE, THE ASSESSEE HAD FILED BEFORE US COPY OF THE SHOW CAUSE NOTICE I SSUED, WHEREIN THE AO HAD NOT STRUCK OFF EITHER OF THE TWO I.E., CONCEALM ENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. ACCORDING TO THE ASSESSEE, THIS GOES TO SHOW THAT THE AO HAD NOT APP LIED HIS MIND AND REACH A SATISFACTION FOR INITIATING PENALTY PROCEED INGS. ITA NO.1003/BANG/2014 PAGE 5 OF 6 10. IDENTICAL ISSUE HAD COME UP BEFORE THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. MANJUNATHA COTTON & GINNING FACTORY (2013) 359 ITR 565 (KARN) , WHEREIN THE FOLLOWING QUESTION OF LAW WAS CONSIDE RED:- '1. WHETHER THE NOTICE ISSUED UNDER SECTION 271(1 )(C) IN THE PRINTED FORM WITHOUT SPECIFICALLY MENTIONING WHETHE R THE PROCEEDINGS ARE INITIATED ON THE GROUND OF CONCEALM ENT OF INCOME OR ON ACCOUNT OF FURNISHING OF INACCURATE PARTICULA RS IS VALID AND LEGAL? 11. THE HONBLE HIGH COURT HAS HELD THAT WHEN THE A O HAD NOT MARKED THE RELEVANT COLUMN OF THE SHOW CAUSE NOTICE, AN IN FERENCE CAN BE DRAWN THAT THE AO HAD NOT APPLIED HIS MIND. THEREFORE TH E PENALTY PROCEEDINGS SHOULD BE ANNULLED. THE RELEVANT PARA IS REPRODUCE D BELOW:- 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE ACT TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED I N THE COURSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOM E UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF INCOME ARE DIFFERENT. THUS, THE ASSESSING OFFICER WHILE ISSUIN G NOTICE HAS TO COME TO THE CONCLUSION THAT WHETHER IS IT A CASE OF CONCEALMENT OF INCOME OR IS IT A CASE OF FURNISHING OF INACCURATE PARTICULARS. THE APEX COURT IN THE CASE OF ASHOK PAI REPORTED IN [20 07] 292 ITR 11 (SC) AT PAGE 19 HAS HELD THAT CONCEALMENT OF INC OME AND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY D IFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF MANU ENGINEERING WORKS REPORTED IN [1980] 122 ITR 306 (G UJ) AND THE DELHI HIGH COURT IN THE CASE OF CIT V. VIRGO MARKET ING P. LTD. REPORTED IN [2008] 171 TAXMAN 156, HAS HELD THAT LE VY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVI ED AND THE POSITION BEING UNCLEAR PENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATEL Y MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTI CULARS OF ITA NO.1003/BANG/2014 PAGE 6 OF 6 INCOME. THE STANDARD PROFORMA WITHOUT STRIKING OF T HE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON-APPLICA TION OF MIND. 12. APPLYING THE ABOVE LEGAL POSITION TO THE FACTS OF THE PRESENT CASE, FROM THE SHOW CAUSE NOTICE IT IS CLEAR THAT THE AO HAD NOT MARKED THE RELEVANT COLUMN AND IT IS NOT CLEAR WHETHER THE AO HAD INITIATED PENALTY PROCEEDINGS FOR CONCEALMENT OR FURNISHING OF INACCU RATE PARTICULARS OF INCOME. THEREFORE, RESPECTFULLY FOLLOWING THE RATI O LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA) , WE CANNOT SUSTAIN THE PENALTY LEVIED IN THE PRESE NT CASE. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 05 TH DAY OF FEBRUARY, 2016. SD/- SD/- (VIJAY PAL RAO ) ( INTURI RAM A RAO ) JUDICIAL MEMBER ACCOUN TANT MEMBER BANGALORE, DATED, THE 05 TH FEBRUARY, 2016. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3 . CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.