RAMESH H GADA, MUMBAI V. ITO 21(1)(4), MUMBAI

ITA 1100/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9357 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 16-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Unexplained investment; Principle of natural justice; Wrong claim
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E, MU MBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 1100/MUM/2017 (ASSESSMENT YEAR- 2009-10) SHRI RAMESH H GADA, 9/A NARSHINA PRASAD BUILDING, MALVIYA ROAD, OPP GALA EYE HOSPITAL, VILLE PARLE (EAST), MUMBAI-400057 PAN: AABPG2968C VS. THE ITO 25(3) (3) C-10, ROOM NO. 606, 6 TH FLOOR, PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400051. (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. NISHIT GANDHI ADVOCATE REVENUE BY : SH. V. JUSTIN - DR DATE OF HEARING : 23.08.2017 DATE OF PRONOUNCEMENT : 27.09.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF THE IN COME-TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER O F INCOME TAX (APPEALS)- 34 [THE CIT(A)], MUMBAI DATED 30.11.2016 FOR THE AS SESSMENT YEAR 20091-10. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEALS; (1) THE LEARNED COMMISSIONER (APPEALS) ERRED IN LAW AS WELL AS IN FACTS BY NOT ADJUDICATING AND NOT DEALING WITH ADDITIONAL GROUND OF APPEAL RAISED BEFORE HIM IN THE FOLLOWING TERMS THE LEARNED ASSESSING O FFICER INITIATED PENALTY IN RESPECT OF EXPLANATION 1 TO SECTION 271(1) WHEREA S NOTICE UNDER SECTION 274 DID NOT SPECIFY ANY LIMB OR CHARGE ULTIMATELY L EVIED PENALTY ON YOUR APPELLANT FOR FILING INACCURATE PARTICULARS OF ITS INCOME AND CONCEALED PARTICULAR OF INCOME. SINCE, THE ORDER LEVIED PENAL TIES DIFFERED FROM INITIATION 2 ITA NO. 1100/MUM/2017- SHRI RAMESH H GADA OF PENALTY AND NOTICE ISSUED WITHOUT SPECIFYING CHA RGE OR LIMB THEREFORE, ILLEGAL, INVALID AND WITHOUT JURISDICTION TO BE QUA SHED. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE QUASHED THE PENALTY ORDER BEING INVALID, ILLEGAL AND WITHOUT JURISDICTI ON. (2) THE LEARNED COMMISSIONER (APPEALS) HAS ERRED IN FA CTS AND IN LAW WHILE CONFIRMING THE ORDER OF PENALTY UNDER SECTION 271(1 )(C) OF THE ITO BY DISMISSING THE APPEAL OF YOUR APPELLANT IN RESPECT OF PENALTY LEVIED OF RS.1,41,377/- THE LEARNED COMMISSIONER (APPEALS) FA ILED TO CONSIDER AND APPRECIATE THE FACTS AND CONTENTION OF YOUR APPELLA NT IN ITS TRUE PERSPECTIVE. YOUR APPELLANT SUBSTANTIATED THE CLAIM AND THERE IS NO FINDING THAT EXPLANATION OFFERED BY HIM IS FOUND TO BE FALSE OR NOT BONAFIDE. IT IS MERELY A CASE THAT EXPLANATIONS AND CLAIM MADE BY YOUR APPEL LANT IS NOT ACCEPTABLE TO THE DEPARTMENT. HE FAILED TO CONSIDER AND APPRECIAT E THAT THE PENALTY PROCEEDING AND ASSESSMENT PROCEEDINGS ARE SEPARATE AND DISTINCT, FINDING OF ASSESSMENT PROCEEDINGS MAY NOT BE SUFFICIENT TO LAB EL PENALTY. UNDER THE FACT AND CIRCUMSTANCES THE LEARNED COMM ISSIONER (APPEALS) OUGHT TO HAVE DELETED AND CANCELLED THE PENALTY. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR RELEVANT AY ON 30.07.2009 DECLARING TOTAL INCOME OF RS. 6,36,654/-. THE ASSESSMENT WAS COMPLETED ON 10.12.2011 UNDER SECTIO N 143(3) OF THE ACT. THE ASSESSING OFFICER (AO) WHILE PASSING THE ASSESS MENT ORDER MADE ADDITION OF RS. 1,00,000/- UNDER SECTION 69B ON ACC OUNT OF UNEXPLAINED INVESTMENT, DISALLOWANCE OF INTEREST OF RS. 2,08,0 00/- UNDER SECTION 24(B) AND AN ADDITION OF RS. 2,97,054/- ON ACCOUNT OF REN TAL INCOME. SIMULTANEOUSLY, THE AO INITIATED PENALTY UNDER SECT ION 271(1) (C) VIDE NOTICE DATED 10.12.2011. ON APPEAL BEFORE THE LD. CIT(A), THE ADDITION 3 ITA NO. 1100/MUM/2017- SHRI RAMESH H GADA UNDER SECTION 69B WAS DELETED. HOWEVER, THE DISALLO WANCE OF INTEREST OF RS. 2,08,000/- AND ADDITION OF RS.2,97,054/- ON AC COUNT OF INCOME FROM HOUSE PROPERTY WAS CONFIRMED. THEREAFTER, THE AO AG AIN ISSUED SHOW CAUSED NOTICE DATED 16.01.201 FOR LEVYING PENALTY. THE ASSESSEE CONTESTED THE NOTICE AND FILED REPLY DATED 23.01.2014. IN REP LY FOR DISALLOWANCE OF INTEREST UNDER 24(B) THE ASSESSEE CONTENDED THAT M ERELY NO NEXUS WAS ESTABLISHED FOR INTEREST PAID FOR PROPERTY INVESTME NT, IT DOES NOT MEAN THAT IT WAS A FALSE CLAIM. FOR RENTAL INCOME THE ASSESSE E CONTENDED THAT THE ADDITION WAS MADE ON ESTIMATE BASIS. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY AO. THE AO LEVIED PENALTY @ 100% OF AMOUNT OF TAX SOUGHT TO BE EVADED. THE AO WORKED OUT THE PENALTY OF RS.1,41,377/-. ON APPEAL BEFORE THE LD. CIT(A), THE PENALTY WAS CONFI RMED. THUS, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE PRESENT A PPEAL IS FILED BEFORE US. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENT REPRESENTATIVE (DR) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASS ESSEE ARGUED THAT WHILE ISSUING NOTICE U/S 274 R.W.S. 271 OF THE ACT. THE A O HAS NOT STRIKE OUT THE IRRELEVANT PORTION OF THE NOTICE. THE LD. AR OF THE ASSESSEE PLACED ON RECORD THE COPY OF NOTICE DATED 10.12.2011. IT WAS ARGUED THAT THE QUANTUM ASSESSMENT PROCEEDING HAS BECOME FINAL AFTER THE DI SMISSAL OF APPEAL OF ASSESSEE BY THE LD. CIT(A). IT WAS FURTHER ARGUED THAT THE PENALTY NOTICE DATED 10.12.2011 ISSUED UNDER SECTION 274 R.W.S. 27 1 OF THE ACT, COPY OF 4 ITA NO. 1100/MUM/2017- SHRI RAMESH H GADA WHICH IS PLACED ON RECORD REVEALS NON APPLICATION O F MIND BY THE AO AS AS THE IRRELEVANT PORTION OF THE NOTICE HAS NOT BEEN S TUCK OFF. THE LD. AR OF THE ASSESSEE, THEREFORE, CONTENDED THAT THE LEVY OF PENALTY IS ILLEGAL AND DESERVE TO BE SET-ASIDE/DELETED. ON MERIT, IT WAS A RGUED THAT THE ADDITION ON ACCOUNT OF RENTAL INCOME IS BASED ON ESTIMATION, IT IS SETTLED LAW THAT NO PENALTY IS LEVIABLE ON ADDITION MADE IN THE ASSESSM ENT ORDER ON ESTIMATION BASIS. FOR ADDITION ON ACCOUNT OF BORROWED FUND, IT WAS ARGUED THAT THE ASSESSEE HAS FURNISHED ALL DETAILED PARTICULARS AND MERE DISALLOWANCE OF BONAFIDE CLAIM WOULD NOT ATTRACT THE PENALTY. THE A O HAS NOT SPECIFIED THAT THE PARTICULARS FURNISHED BY ASSESSEE WERE FALSE. I N SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE FOLLOWING DECISIONS: SR NO. PARTICULARS 1 CIT VS. M/S SSA'S EMERALD MEADOWS. [SLP NO. 11485 /2016 (ARISING OUT OF DECISION OF HIGH COURT KARNATAKA [ITA 380/2015) SUPREME COURT OF INDIA)] 2 CIT VS. M/S SSA'S EMERALD MEADOWS. [ITA 380/2015 (H IGH COURT KARNATAKA.) 3 MEHERJEE CASSINATH HOLDINGS PRIVATE LIMITE LIMITE D VS. ACIT [ITA 2555/MUM/2012] 4. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDER OF AUTHORITIES BELOW. IT WAS ARGUED THAT VARIOUS COURT S HAVE HELD THAT PENALTY CAN BE LEVIED ON THE ADDITIONS ON ESTIMATE BASIS. T HE LD. DR FOR THE REVENUE RELIED ON THE DECISION OF HONBLE BOMBAY HI GH COURT IN KAUSHALYA & ORS. (216 ITR 660). 5 ITA NO. 1100/MUM/2017- SHRI RAMESH H GADA 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDER OF AUTHORITIES BELOW. WE HAVE PER USED THE COPY OF NOTICE DATED 10.12.2011 ISSUED BY AO UNDER SECTION 274 R.W .S. 271(1)(C). THE PERUSAL OF THE NOTICE REVEALS THAT THE AO HAS NOT S TRIKE OUT THE IRRELEVANT PORTION OF THE NOTICE. FURTHER, WE HAVE ALSO PERUSE D THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) DATED 10.12.2011. THE P ERUSAL OF ASSESSMENT ORDER REVEALS THAT THE AO HAS NOT SPECIFIED UNDER W HICH LIMB OF SECTION 271(1((C), THE PENALTY IS INITIATED. THE AO SIMPLY NOTED THE ISSUE ATTRACT PROVISION OF PENALTY UNDER SECTION 271(1)(C) WITH E XPLANATION-1 OF IT ACT, 1961. THE PENALTY PROCEEDING INITIATED . WE HAVE SEEN THAT THIS BENCH WHILE CONSIDERING WITH ALMOST SIMILAR CONTENTION IN CASE OF MEHERJEE CASSINATH HOLDING PVT. LTD.(SUPRA) HELD AS UNDER: 8 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S. SEC. 271(1)(C) OF THE ACT EMPOWERS THE ASSESSING OFFICER TO IMPOSE PENALTY TO THE EXTENT SPECIFIED IF, IN THE COURSE OF ANY PROCEEDINGS UNDER THE ACT, HE IS SATI SFIED THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF SUCH INCOME. IN OTHER WORDS, WHAT SEC. 271(1)(C) OF THE ACT POSTULATES IS THAT THE PENALTY CAN BE LEVIED ON THE EXISTENCE OF ANY OF TH E TWO SITUATIONS, NAMELY, FOR CONCEALING THE PARTICULARS OF INCOME OR FOR FURNISH ING INACCURATE PARTICULARS OF INCOME. THEREFORE, IT IS OBVIOUS FROM THE PHRASEOLO GY OF SEC. 271(1)(C) OF THE ACT THAT THE IMPOSITION OF PENALTY IS INVITED ONLY WHEN THE CONDITIONS PRESCRIBED U/S 271(1)(C) OF THE ACT EXIST. IT IS ALSO A WELL ACCEP TED PROPOSITION THAT 'CONCEALMENT OF THE PARTICULARS OF INCOME' AND 'FURNISHING OF IN ACCURATE PARTICULARS OF INCOME' REFERRED TO IN SEC. 271(1)(C) OF THE ACT DENOTE DIF FERENT CONNOTATIONS. IN FACT, THIS DISTINCTION HAS BEEN APPRECIATED EVEN AT THE LEVEL OF HON'BLE SUPREME COURT NOT ONLY IN THE CASE OF DILIP N. SHROFF (SUPRA) BUT ALS O IN THE CASE OF T. ASHOK PAI, 292 ITR 11 (SC). THEREFORE, IF THE TWO EXPRESSIONS, NAM ELY 'CONCEALMENT OF THE PARTICULARS OF INCOME' AND 'FURNISHING OF INACCURAT E PARTICULARS OF INCOME' HAVE DIFFERENT CONNOTATIONS, IT IS IMPERATIVE FOR THE AS SESSEE TO BE MADE AWARE AS TO WHICH OF THE TWO IS BEING PUT AGAINST HIM FOR THE P URPOSE OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT, SO THAT THE ASSESSEE CAN DEFE ND ACCORDINGLY. IT IS IN THIS 6 ITA NO. 1100/MUM/2017- SHRI RAMESH H GADA BACKGROUND THAT ONE HAS TO APPRECIATE THE PRELIMINA RY PLEA OF ASSESSEE, WHICH IS BASED ON THE MANNER IN WHICH THE NOTICE U/S 274 R.W .S. 271(1)(C) OF THE ACT DATED 10.12.2010 HAS BEEN ISSUED TO THE ASSESSEE- COMPANY . A COPY OF THE SAID NOTICE HAS BEEN PLACED ON RECORD AND THE LEARNED REPRESENTATIV E CANVASSED THAT THE SAME HAS BEEN ISSUED BY THE ASSESSING OFFICER IN A STANDARD PROFORMA, WITHOUT STRIKING OUT THE IRRELEVANT CLAUSE. IN OTHER WORDS, THE NOTICE R EFERS TO BOTH THE LIMBS OF SEC. 271(1)(C) OF THE ACT, NAMELY CONCEALMENT OF THE PAR TICULARS OF INCOME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. QUI TE CLEARLY, NON-STRIKING-OFF OF THE IRRELEVANT LIMB IN THE SAID NOTICE DOES NOT CON VEY TO THE ASSESSEE AS TO WHICH OF THE TWO CHARGES IT HAS TO RESPOND. THE AFORESAID IN FIRMITY IN THE NOTICE HAS BEEN SOUGHT TO BE DEMONSTRATED AS A REFLECTION OF NON-AP PLICATION OF MIND BY THE ASSESSING OFFICER, AND IN SUPPORT, REFERENCE HAS BE EN MADE TO THE FOLLOWING SPECIFIC DISCUSSION IN THE ORDER OF HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA):- '83. IT IS OF SOME SIGNIFICANCE THAT IN THE STANDAR D PROFORMA USED BY THE ASSESSING OFFICER IN ISSUING A NOTICE DESPITE THE F ACT THAT THE SAME POSTULATES THAT INAPPROPRIATE WORDS AND PARAGRAPHS WERE TO BE DELETED, BUT THE SAME HAD NOT BEEN DONE. THUS, THE ASSESSING OFFICER HIMSELF WAS NOT SURE AS TO WHETHER HE HAD PROCEEDED ON THE BASIS THAT THE ASSESSEE HAD CONCEALED HIS INCOME OR HE HAD FURNISHED INACCURATE PARTICULARS. EVEN BEFOR E US, THE LEARNED ADDITIONAL SOLICITOR GENERAL WHILE PLACING THE ORDE R OF ASSESSMENT LAID EMPHASIS THAT HE HAD DEALT WITH BOTH THE SITUATIONS . 84. THE IMPUGNED ORDER, THEREFORE, SUFFERS FROM NON -APPLICATION OF MIND. IT WAS ALSO BOUND TO COMPLY WITH THE PRINCIPLES OF NAT URAL JUSTICE. ( SEE MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 2 SCC 718]' 9. FACTUALLY SPEAKING, THE AFORESAID PLEA OF ASSESS EE IS BORNE OUT OF RECORD AND HAVING REGARD TO THE PARITY OF REASONING LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA), THE NOTICE IN THE INSTANT CASE DOES SUFFER FROM THE VICE OF NON-APPLICATION OF MIND BY THE ASSESSIN G OFFICER. IN FACT, A SIMILAR PROPOSITION WAS ALSO ENUNCIATED BY THE HON'BLE KARN ATAKA HIGH COURT IN THE CASE OF M/S. SSA'S EMERALD MEADOWS (SUPRA) AND AGAINST S UCH A JUDGMENT, THE SPECIAL LEAVE PETITION FILED BY THE REVENUE HAS SINCE BEEN DISMISSED BY THE HON'BLE SUPREME COURT VIDE ORDER DATED 5.8.2016, A COPY OF WHICH IS ALSO PLACED ON RECORD. 10. IN FACT, AT THE TIME OF HEARING, THE LD. CIT-DR HAS NOT DISPUTED THE FACTUAL MATRIX, BUT SOUGHT TO POINT OUT THAT THERE IS DUE A PPLICATION OF MIND BY THE ASSESSING OFFICER WHICH CAN BE DEMONSTRATED FROM TH E DISCUSSION IN THE ASSESSMENT ORDER, WHEREIN AFTER DISCUSSING THE REAS ONS FOR THE DISALLOWANCE, HE HAS RECORDED A SATISFACTION THAT PENALTY PROCEEDINGS AR E INITIATED U/S 271(1)(C) OF THE ACT FOR FURNISHING OF INACCURATE PARTICULARS OF INC OME. IN OUR CONSIDERED OPINION, THE ATTEMPT OF THE LD. CIT-DR TO DEMONSTRATE APPLIC ATION OF MIND BY THE ASSESSING 7 ITA NO. 1100/MUM/2017- SHRI RAMESH H GADA OFFICER IS NO DEFENCE INASMUCH AS THE HON'BLE SUPRE ME COURT HAS APPROVED THE FACTUM OF NON-STRIKING OFF OF THE IRRELEVANT CLAUSE IN THE NOTICE AS REFLECTIVE OF NON- APPLICATION OF MIND BY THE ASSESSING OFFICER. SINCE THE FACTUAL MATRIX IN THE PRESENT CASE CONFORMS TO THE PROPOSITION LAID DOWN BY THE HON'BLE SUPREME COURT, WE PROCEED TO REJECT THE ARGUMENTS ADVANCED BY THE LD. CIT-DR BASED ON THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESS MENT ORDER. FURTHER, IT IS ALSO NOTICEABLE THAT SUCH PROPOSITION HAS BEEN CONSIDERE D BY (SUPRA) AND THE DECISION OF THE TRIBUNAL HOLDING LEVY OF PENALTY IN SUCH CIR CUMSTANCES BEING BAD, HAS BEEN APPROVED. 11. APART FROM THE AFORESAID, THE LD. CIT-DR MADE A N ARGUMENT BASED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF SMT. KAUSHALYA & OTHERS, 216 ITR 660 (BOM.) TO CANVASS SUPPORT FOR H IS PLEA THAT NON-STRIKING OFF OF THE IRRELEVANT PORTION OF NOTICE WOULD NOT INVALIDA TE THE IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT. WE HAVE CAREFULLY CONSIDERED THE SAID ARGUMENT SET-UP BY THE LD. CIT-DR AND FIND THAT A SIMILAR ISSUE HAD COME U P BEFORE OUR COORDINATE BENCH IN THE CASE OF DR. SARITA MILIND DAVARE (SUPRA). OU R COORDINATE BENCH, AFTER CONSIDERING THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SMT. KAUSHALYA & ORS., (SUPRA) AS ALSO THE JUDGMENTS OF THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA) AND DHARMENDRA TEXTILE PROCESSORS, 306 ITR 277 (SC) DEDUCED AS UNDER :- '12. A COMBINED READING OF THE DECISION RENDERED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF SMT. B KAUSHALYA AND OTHERS (S UPRA) AND THE DECISION RENDERED BY HON'BLE SUPREME COURT IN THE CASE OF DI LIP N SHROFF (SUPRA) WOULD MAKE IT CLEAR THAT THERE SHOULD BE APPLICATIO N OF MIND ON THE PART OF THE AO AT THE TIME OF ISSUING NOTICE. IN THE CASE OF LA KHDIR LALJI (SUPRA), THE AO ISSUED NOTICE U/S 274 FOR CONCEALMENT OF PARTICULAR S OF INCOME BUT LEVIED PENALTY FOR FURNISHING INACCURATE PARTICULARS OF IN COME. THE HON'BLE GUJARAT HIGH COURT QUASHED THE PENALTY SINCE THE BASIS FOR THE PENALTY PROCEEDINGS DISAPPEARED WHEN IT WAS HELD THAT THERE WAS NO SUPP RESSION OF INCOME. THE HON'BLE KERALA HIGH COURT HAS STRUCK DOWN THE PENAL TY IMPOSED IN THE CASE OF N.N.SUBRAMANIA IYER VS. UNION OF INDIA (SUPRA), WHE N THERE IS NO INDICATION IN THE NOTICE FOR WHAT CONTRAVENTION THE PETITIONER WAS CALLED UPON TO SHOW CAUSE WHY A PENALTY SHOULD NOT BE IMPOSED. IN THE I NSTANT CASE, THE AO DID NOT SPECIFY THE CHARGE FOR WHICH PENALTY PROCEEDINGS WE RE INITIATED AND FURTHER HE HAS ISSUED A NOTICE MEANT FOR CALLING THE ASSESSEE TO FURNISH THE RETURN OF INCOME. HENCE, IN THE INSTANT CASE, THE ASSESSING O FFICER DID NOT SPECIFY THE CHARGE FOR WHICH THE PENALTY PROCEEDINGS WERE INITI ATED AND ALSO ISSUED AN INCORRECT NOTICE. BOTH THE ACTS OF THE AO, IN OUR V IEW, CLEARLY SHOW THAT THE AO DID NOT APPLY HIS MIND WHEN HE ISSUED NOTICE TO THE ASSESSEE AND HE WAS NOT SURE AS TO WHAT PURPOSE THE NOTICE WAS ISSUED. THE HON'BLE BOMBAY HIGH COURT HAS DISCUSSED ABOUT NON-APPLICATION OF MIND I N THE CASE OF KAUSHALYA (SUPRA) AND OBSERVED AS UNDER:- 8 ITA NO. 1100/MUM/2017- SHRI RAMESH H GADA '....THE NOTICE CLEARLY DEMONSTRATED NON-APPLICATIO N OF MIND ON THE PART OF THE INSPECTING ASSISTANT COMMISSIONER. THE VAGUENESS AN D AMBIGUITY IN THE NOTICE HAD ALSO PREJUDICED THE RIGHT OF REASONABLE OPPORTU NITY OF THE ASSESSEE SINCE HE DID NOT KNOW WHAT EXACT CHARGE HE HAD TO FACE. I N THIS BACK GROUND, QUASHING OF THE PENALTY PROCEEDINGS FOR THE ASSESSM ENT YEAR 1967-68 SEEMS TO BE FULLY JUSTIFIED.' IN THE INSTANT CASE ALSO, WE ARE OF THE VIEW THAT T HE AO HAS ISSUED A NOTICE, THAT TOO INCORRECT ONE, IN A ROUTINE MANNER. FURTHER THE NOT ICE DID NOT SPECIFY THE CHARGE FOR WHICH THE PENALTY NOTICE WAS ISSUED. HENCE, IN OUR VIEW, THE AO HAS FAILED TO APPLY HIS MIND AT THE TIME OF ISSUING PENALTY NOTIC E TO THE ASSESSEE.' 12. THE AFORESAID DISCUSSION CLEARLY BRINGS OUT AS TO THE REASONS WHY THE PARITY OF REASONING LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA) IS TO PREVAIL. FOLLOWING THE DECISION OF OU R COORDINATE BENCH IN THE CASE OF DR. SARITA MILIND DAVARE (SUPRA), WE HEREBY REJECT THE AFORESAID ARGUMENT OF THE LD. CIT-DR. 13. APART FROM THE AFORESAID DISCUSSION, WE MAY ALS O REFER TO THE ONE MORE SEMINAL FEATURE OF THIS CASE WHICH WOULD DEMONSTRATE THE IM PORTANCE OF NON-STRIKING OFF OF IRRELEVANT CLAUSE IN THE NOTICE BY THE ASSESSING OF FICER. AS NOTED EARLIER, IN THE ASSESSMENT ORDER DATED 10.12.2010 THE ASSESSING OFF ICER RECORDS THAT THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ARE TO BE INIT IATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. HOWEVER, IN THE NOTICE ISSUE D U/S 274 R.W.S. 271(1)(C) OF THE ACT OF EVEN DATE, BOTH THE LIMBS OF SEC. 271(1)(C) OF THE ACT ARE REPRODUCED IN THE PROFORMA NOTICE AND THE IRRELEVANT CLAUSE HAS NOT B EEN STRUCK-OFF. QUITE CLEARLY, THE OBSERVATION OF THE ASSESSING OFFICER IN THE ASSESSM ENT ORDER AND NON-STRIKING OFF OF THE IRRELEVANT CLAUSE IN THE NOTICE CLEARLY BRIN GS OUT THE DIFFIDENCE ON THE PART OF ASSESSING OFFICER AND THERE IS NO CLEAR AND CRYSTAL LISED CHARGE BEING CONVEYED TO THE ASSESSEE U/S 271(1)(C), WHICH HAS TO BE MET BY HIM. AS NOTED BY THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA ), THE QUASI-CRIMINAL PROCEEDINGS U/S 271(1)(C) OF THE ACT OUGHT TO COMPL Y WITH THE PRINCIPLES OF NATURAL JUSTICE, AND IN THE PRESENT CASE, CONSIDERING THE O BSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER ALONGSIDE HIS ACTIO N OF NON-STRIKING OFF OF THE IRRELEVANT CLAUSE IN THE NOTICE SHOWS THAT THE CHAR GE BEING MADE AGAINST THE ASSESSEE QUA SEC. 271(1)(C) OF THE ACT IS NOT FIRM AND, THEREFORE, THE PROCEEDINGS SUFFER FROM NON-COMPLIANCE WITH PRINCIPLES OF NATUR AL JUSTICE INASMUCH AS THE ASSESSING OFFICER IS HIMSELF UNSURE AND ASSESSEE IS NOT MADE AWARE AS TO WHICH OF THE TWO LIMBS OF SEC. 271(1)(C) OF THE ACT HE HAS T O RESPOND. 14. THEREFORE, IN VIEW OF THE AFORESAID DISCUSSION, IN OUR VIEW, THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S 274 R.W.S. 271(1)(C) OF T HE ACT DATED 10.12.2010 IS UNTENABLE AS IT SUFFERS FROM THE VICE OF NON- APPLI CATION OF MIND HAVING REGARD TO THE RATIO OF THE JUDGMENT OF THE HON'BLE SUPREME CO URT IN THE CASE OF DILIP N. SHROFF (SUPRA) AS WELL AS THE JUDGMENT OF THE HON'B LE BOMBAY HIGH COURT IN THE CASE OF SHRI SAMSON PERINCHERY (SUPRA). THUS, ON TH IS COUNT ITSELF THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT IS LIABLE TO BE DE LETED. 9 ITA NO. 1100/MUM/2017- SHRI RAMESH H GADA 6. CONSIDERING THE DECISION OF THIS BENCH REFERRED ABO VE, IN OUR VIEW, THE NOTICE DATED 10.12.2011 ISSUED BY AO U/S 274 R.W.S. 271 OF THE ACT SUFFERED FROM NON-APPLICATION OF MIND HAVING REGARD TO THE RATIO OF HONBLE APEX COURT IN CASE OF DILIP N. SHROFF VS. J CIT [(161 TAXMAN 218 (SC)] AS WELL AS THE DECISION OF HONBLE BOMBAY HIG H COURT IN CASE OF SHRI SAMSON PERINCHERY VS. ACIT [ITA 1154, 953, 109 7 AND 1226/MUM/2014] DATED 05.01.2017. THUS, THE GROUND N O.1 OF THE APPEAL IS ALLOWED AND THE PENALTY ORDER PASSED BY AO UNDER SECTION 271(1)(C) DATED 21.03.2014 IS SET-ASIDE. SINCE WE HAVE ALLOWE D THE LEGAL GROUND RAISED BY THE ASSESSEE. HENCE, THE DISCUSSION ON GR OUND NO.2/MERIT OF THE APPEAL HAS BECOME ACADEMIC. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH DAY OF SEPTEMBER 2017. SD/- SD/- (G.S. PANNU) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 27/09/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //E COPY/