M/s Atmaram & Co, Kolkata V. DCIT, Circle-34, Kolkata, Kolkata

ITA 129/KOL/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1943 (ITAT-KOLKATA)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 25-01-2017
• Court: TRIBUNAL
• Department Lawyers: RAJAT KUMAR KUREEL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & DR.ARJUN LAL SAINI, AM] I.T.A NOS. 129 TO 135/KOL/2017 ASSESSMENT YEAR : 2 008-09 TO 2014-15 M/S. ATMARAM & CO., . -VS.- D.C.I.T., CIRC LE-34, KOLKATA- KOLKATA [PAN : AAEFA 5370 R] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI SUBASH AGARWA L, ADVOCATE FOR THE RESPONDENT : SHRI RAJAT KUMAR KUREEL, JCIT. SR.DR DATE OF HEARING : 03.04.2017. DATE OF PRONOUNCEMENT : 05.04.2017. ORDER PER BENCH THESE ARE APPEALS BY THE ASSESSEE AGAINST DIFFERE NT ORDERS ALL DATED 12.12.2016 OF CIT(A)-10, KOLKATA RELATING TO A.Y.2008-09 TO 20 14-15. 2. IN ALL THESE APPEALS, THE ASSESSEE HAS CHALLENG ED THE VALIDITY OF THE ORDER OF THE CIT(A) WHEREBY THE CIT(A) CONFIRMED THE ORDER OF TH E AO IMPOSING PENALTY ON THE ASSESSEE U/S.271(1) ( C) OF THE INCOME TAX ACT, 196 1 (ACT). 3. THE FACTS AND CIRCUMSTANCES UNDER WHICH PENALTY U/S.271(1) ( C) OF THE ACT WAS IMPOSED ON THE ASSESSEE BY THE AO, ARE AS FOLLOWS: THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE B USINESS OF GROWING AND MANUFACTURING OF TEA. IN TERMS OF RULE 8(1) OF INCO ME TAX RULES, 1962 (RULES) INCOME FROM GROWING AND MANUFACTURING OF TEA HAS TO BE COM PUTED AS IF IT WAS DERIVED FROM BUSINESS AND 40% OF SUCH INCOME ALONE IS LIABLE TO TAX UNDER THE INCOME TAX ACT, 1961 (ACT.). IF THE TEA IS MANUFACTURED WITH TEA LEAVES NOT GROWN BY THE ASSESSEE THEN THAT INCOME WILL NOT BE THE SUBJECT MATTER OF RULE 8(1) OF THE RULES AS TEA IS NOT GROWN AND MANUFACTURED BY THE ASSESSEE BUT MANUFACTURED FROM TEA LEAVES PURCHASED FROM THE 2 ITA NOS.129 TO 135/KOL/2017 M/S. ATMARAM & CO. A.YR..2008-09 TO 2014-15 2 THIRD PARTIES. THE ASSESSEE IN THE PREVIOUS YEARS R ELEVANT TO AY 2008-09 TO 2014-15 HAD PURCHASED GREEN LEAVES AS RAW MATERIAL FROM THE MAR KET FOR THE PURPOSE OF MANUFACTURING AND THEREFORE IN RESPECT OF RECEIPTS FROM MANUFACTURE AND SALE OF TEA FROM GREEN LEAVES PURCHASED FROM THE MARKET, THE AS SESSEE OUGHT NOT TO HAVE INCLUDED THE SAME IN THE RECEIPTS ON WHICH RULE 8(1) OF THE RULES WERE TO BE APPLIED. 4. IN ALL THESE ASSESSMENT YEARS, THE ASSESSEE INC LUDED WITHIN THE AMBIT OF RULE 8(1) OF THE RULES EVEN PROFITS DERIVED FROM GREEN LEAVES PU RCHASED FROM THE MARKET WHICH WERE MANUFACTURED AND SOLD BY THE ASSESSEE. IN THE ASSESSMENTS COMPLETED BY THE AO, INCOME FROM MANUFACTURE AND SALE OF GREEN LEAVES PU RCHASED FROM THE MARKET WAS CONSIDERED AS BUSINESS INCOME ON WHICH RULE 8(1) OF THE RULES DOES NOT APPLY. CONSEQUENTLY THE TOTAL INCOME WAS DETERMINED BY THE AO WAS AT A MUCH HIGHER SUM THAN WHAT WAS DECLARED BY THE ASSESSEE. IN RESPECT OF THE ADDITION MADE BY THE AO AS ABOVE THE AO INITIATED PROCEEDINGS AGAINST THE ASSE SSEE U/S 271(1)(C) OF THE ACT AND IMPOSED PENALTY ON THE ASSESSEE. THE CIT(A) CONFIRM ED THE ORDERS OF AO. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS PREFER RED THE PRESENT APPEALS BEFORE THE TRIBUNAL. 5. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEF ORE US THAT THE SHOW CAUSE NOTICES ISSUED U/S 274 OF THE ACT BEFORE IMPOSING PENALTY D OES NOT CONTAIN THE SPECIFIC CHARGES AGAINST THE ASSESSEE NAMELY AS TO WHETHER THE ASSES SEE WAS GUILTY OF HAVING CONCEALED PARTICULARS OF INCOME OR HAVING FURNISHED INACCURAT E PARTICULARS OF INCOME. COPIES OF THE SHOW CAUSE NOTICES U/S 274 OF THE ACT ARE PLACE D AT PAGE-1 TO 7 OF THE ASSESSEES PAPER BOOK AND PERUSAL OF THE SAME REVEAL THAT AO H AS NOT STRUCK OUT THE IRRELEVANT PORTION IN THE SHOW CAUSE NOTICES AND THEREFORE THE SHOW CAUSE NOTICES DO NOT SPECIFY THE CHARGE AGAINST THE ASSESSEE AS TO WHETHER THE C HARGE IS OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 3 ITA NOS.129 TO 135/KOL/2017 M/S. ATMARAM & CO. A.YR..2008-09 TO 2014-15 3 6. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTEN TION TO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SSAS E MERALD MEADOWS IN ITA NO.380 OF 2015 DATED 23.11.2015 WHEREIN THE HONBLE KARNAT AKA HIGH COURT FOLLOWING ITS OWN DECISION IN THE CASE OF CIT VS MANJUNATHA COTTON AN D GINNING FACTORY (2013) 359 ITR 565 TOOK A VIEW THAT IMPOSING OF PENALTY U/S 271(1) (C) OF THE ACT IS BAD IN LAW AND INVALID FOR THE REASON THAT THE SHOW CAUSE NOTICES U/S 274 OF THE ACT DO NOT SPECIFY THE CHARGE AGAINST THE ASSESSEE AS TO WHETHER IT IS FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE LD. COUNSEL FURTHER BROUGHT TO OUR NOTICE THAT AS AGAINST THE DECISION OF THE HON BLE KARNATAKA HIGH COURT THE REVENUE PREFERRED AN APPEAL IN SLP IN CC NO.11485 OF 2016 A ND THE HONBLE SUPREME COURT BY ITS ORDER DATED 05.08.2016 DISMISSED THE SLP PREFER RED BY THE DEPARTMENT. THE LD. COUNSEL ALSO BROUGHT TO OUR NOTICE THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS SHRI SAMSON PERINCHERY IN ITA NO .1154 OF 2014 DATED 05.01.2017 WHEREIN THE HONBLE BOMBAY HIGH COURT FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS MANJUNAT HA COTTON AND GINNING FACTORY (SUPRA) CAME TO THE CONCLUSION THAT IMPOSITION OF P ENALTY ON DEFECTIVE SHOW CAUSE NOTICE WITHOUT SPECIFYING THE CHARGE AGAINST THE AS SESSEE CANNOT BE SUSTAINED. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF ITAT IN THE CASE OF SUVAPRASANNA BHATTACHARYA VS ACIT IN ITA NO.1303/KOL/2010 DATED 06.11.2015 WHEREIN IDENTICAL PROPOSITION HAS BEEN FOLLOWED BY THE TRIBUNAL. 7. WE HAVE ALREADY OBSERVED THAT THE SHOW CAUSE NOTICES ISSUED IN THE PRESENT CASES U/S 274 OF THE ACT DO NOT SPECIFY THE CHARGE AGAINS T THE ASSESSEE AS TO WHETHER IT IS FOR CONCEALING PARTICULARS OF INCOME OR FURNISHING INAC CURATE PARTICULARS OF INCOME. THE SHOW CAUSE NOTICES U/S 274 OF THE ACT DO NOT STRIKE OUT THE INAPPROPRIATE WORDS. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT IMPOSI TION OF PENALTY CANNOT BE SUSTAINED. THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE WHICH IS BASED ON THE DECISIONS REFERRED TO IN THE EARLIER PART OF THIS ORDER HAS TO BE ACCEPT ED. WE THEREFORE HOLD THAT IMPOSITION OF 4 ITA NOS.129 TO 135/KOL/2017 M/S. ATMARAM & CO. A.YR..2008-09 TO 2014-15 4 PENALTY IN THE PRESENT CASES CANNOT BE SUSTAINED AN D THE SAME ARE DIRECTED TO BE CANCELLED. 8. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE ACCORDINGLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 05.04.2017. SD/- SD/- [DR.ARJUN LAL SAINI] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :05.04.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. M/. ATMARAM & CO., 4, INDIA EXCHANGE PLACE, 3 RD FLOOR, KOLKATA-700001. 2. D.C.I.T., CIRCLE-34, KOLKATA. 3. CIT(A)-10, KOLKATA. 4. CIT-X, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES 5 ITA NOS.129 TO 135/KOL/2017 M/S. ATMARAM & CO. A.YR..2008-09 TO 2014-15 5