Pradip Bardhan, V. ITO, WD-33(3), KOLKATA,

ITA 1308/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1747 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2006-2007
• Appeal Filed On: 10-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARINDAM BHATTACHARJEE
• Assessee Lawyers: B K SINGH
• Keywords: Opportunity of being heard; Principle of natural justice; Question of law; Reasonable cause
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA D BENCH, KOLKATA [BEFORE SRI J. SUDHAKAR REDDY, A CCOUNTANT M EMBER & SRI S. S. VISWANETHRA RAVI , JUDICIAL MEMBER ] I.T.A. NO. 1 307 /KOL/201 6 ASSESSMENT YEAR: 20 06 - 07 I.T.A. NO. 1308/KOL/2016 ASSESSMENT YEAR: 2006 - 07 PRADIP BARDHAN.. ........ . ... APPELLANT 40, RAJANI GUPTA ROW KOLKATA 700 009 [PAN : ADXPB 4496 K ] INCOME TAX OFFICER, WARD - 33(3) , KOLKATA .. ... RESPONDENT INCOME TAX OFFICE 10, MIDDLETON ROW KOLKATA APPEARANCES BY: SHRI B.K. SINGH , APPEAR ED ON BEHALF OF THE ASSESSEE. SHRI ARINDAM BHATTACHARJEE , ADDL. CIT , DR APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : DECEMBER 20 TH , 2017 DATE OF PRONOUNCING THE ORDER : JANUARY 19 TH , 201 8 O R D E R PER J. SUDHAKAR REDDY : - BOTH THESE APPEAL S ARE FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 9 , KOLKATA , (HEREINAFTER THE LD. CIT (A)), PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (THE ACT), DT. 2 7 / 11 /201 5 , FOR THE ASSESSMENT YEAR 20 06 - 07 . ITA NO. 1307/KOL/2016 2.1. THE ASSESSEE SUBMITS THAT, HE RUNS A PROPRIETARY CONCERN IN THE NAME OF M/S. BARDHAN ENTERPRISE, WHICH IS IN THE BUSINESS OF SUPPLIES OF FOOD TO GOVERNMENT HOSPITALS. HE OBTAINED A CONTRACT FOR SUPPLY OF FOOD TO SSKM HOSPITAL AND FOR EXECUTION OF THE SAME HE CONSTITUTED A PARTNERSHIP FIRM UNDER THE SAME NAME WITH 5 OTHER PERSONS. IT WAS S UBMITTED THAT THE ASSESSEE PARTNERSHIP FIRM SUPPLIED FOOD ITEMS FOR SSKM HOSPITAL BUT THE PAN NUMBER OF THE ASSESSEE WAS 2 I.T.A. NO. 1307/KOL/2016 ASSESSMENT YEAR: 2006 - 07 I.T.A. NO. 1308/KOL/2016 ASSESSMENT YEAR: 2006 - 07 PRADIP BARDHAN USED. THE PARTNERSHIP FIRM DID NOT FILE ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006 - 07. IT STARTED FILING RETURN FOR THE ASSESSME NT YEAR 2007 - 08. AS THE ASSESSEES PAN NUMBER WAS USED, THE ASSESSING OFFICER ADDED THE TURNOVER DECLARED BY THE ASSESSEE AND ESTIMATED A PERCENTAGE OF SUCH TURNOVER AS INCOME. ON CONSEQUENT APPEALS TO THE LD. CIT(A) AND THE ITAT, THE PROFIT WAS DETERMINED AT 10 PER CENT OF THE TURNOVER AS DETERMINED BY THE ASSESSING OFFICER. CONSEQUENTLY, PENALTY U/S 271B OF THE ACT, WAS LEVIED FOR VIOLATION OF SECTION 44B OF THE ACT, AS THE TURNOVER OF THE ASSESSEE EXCEEDED RS.40 LAKHS. 2.2. THE LD. COUNSEL FOR THE ASSE SSEE, RELIED ON THE DECISION OF THE ITAT DELHI BENCH IN THE CASE OF BRIJ LAL GOYAL V. ASSISTANT COMMISSIONER OF INCOME - TAX [2004] 88 ITD 413 (DELHI), AND SUBMITTED THAT HE WAS UNDER THE IMPRESSION THAT THE PARTNERSHIP FIRM WOULD HAVE DISCLOSED HIS TURNOVER AND HENCE HE DID NOT DISCLOSE THE SAME AND IT IS A REASONABLE CAUSE FOR NOT GETTING THE BOOKS OF ACCOUNT AUDITED. 3. WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE ASSESSEE. HE BEING A PARTNER OF THE PARTNERSHIP FIRMS, SHOULD BE AWARE OF THE FACT WHE THER THE PARTNERSHIP FIRM HAS DISCLOSED HIS TURNOVER OR NOT IN THE RETURN OF INCOME FILED. HAVING NOT DONE SO, HE CANNOT PLEAD IGNORANCE. THUS, WE CONFIRM THE ORDER OF THE LD. CIT(A) AND DISMISS THIS APPEAL OF THE ASSESSEE. ITA NO. 130 8 /KOL/2016 4. THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF THE LD. CIT(A), CANCELLING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 5. IN THIS CASE, THE IRRELEVANT PORTIONS OF THE NOTICE HAVE NOT BEEN STRUCK OFF. IN THE CASE OF CIT VS. KAUSHALYA 216 ITR 660(BOM ), THE HONBLE BOMBAY HIGH COURT HELD THAT SECTION 274 OR ANY OTHER PROVISION IN THE ACT OR THE RULES, DOES NOT EITHER MANDATE THE GIVING OF NOTICE OR ITS ISSUANCE IN A PARTICULAR FORM. PENALTY PROCEEDINGS ARE QUASI - CRIMINAL IN NATURE. SECTION 274 CONTAINS THE PRINCIPLE OF NATURAL JUSTICE OF THE ASSESSEE BEING HEARD BEFORE LEVYING PENALTY. RULES OF NATURAL JUSTICE CANNOT BE IMPRISONED IN ANY S TRAIGHT - JACKET FORMULA. FOR SUSTAINING A COMPLAINT OF FAILURE OF THE PRINCIPLES OF NATURAL JUSTICE ON THE GROUND OF ABSENCE OF 3 I.T.A. NO. 1307/KOL/2016 ASSESSMENT YEAR: 2006 - 07 I.T.A. NO. 1308/KOL/2016 ASSESSMENT YEAR: 2006 - 07 PRADIP BARDHAN OPPORTUNITY, IT HAS TO BE ESTABLISHED THAT PREJUDICE IS CAUSED TO THE CONCERNED PERSON BY THE PROCEDURE FOLLOWED. THE ISSUANCE OF NOTICE IS AN ADMINISTRATIVE DEVICE FOR INFORMING THE ASSESSEE ABOUT THE PROPOSAL TO LEVY PENALTY IN ORDER TO ENABLE HIM TO EXPLAIN AS TO WHY IT SHOULD NOT BE DONE. MERE MISTAKE IN THE LANGUAGE USED OR MERE NON - STRIKING OF THE INACCURATE PORTION CANNOT BY ITSELF INVALIDATE THE NOTICE. THE ITAT MUMBAI BENCH IN THE CASE OF DHANRAJ MILLS PVT. LTD. VS. ACIT ITA NO.3830 & 3833/MUM/2009 DATED 21.3.2017 , FOLLOWED THE DECISION RENDERED BY THE JURISDICTIONAL HONBLE BOMBAY HIGH COURT IN THE CASE OF KAUSHALYA (SUPRA) AND CHOSE NOT TO FOLLOW DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565 . RELIANCE WAS ALSO PLACED BY THE ITAT MUMBAI IN THIS DECISION ON THE DECISION OF HONBLE PATNA HIGH COURT IN TH E CASE OF CIT V. MITHILA MOTOR 'S (P.) LTD. [1984] 149 ITR 751 (PATNA) WHEREIN IT WAS HELD THAT UNDER SECTION 274 OF THE INCOME - TAX ACT, 1961, ALL T HAT IS REQUIRED IS THAT THE ASSESSEE SHOULD BE GIVEN AN OPPORTUNITY TO SHOW CAUSE. NO STATUTORY NOTICE HAS BEEN PRESCRIBED IN THIS BEHALF. HENCE, IT IS SUFFICIENT IF THE ASSESSEE WAS AWARE OF THE CHARGES HE HAD TO MEET AND WAS GIVEN AN OPPORTUNITY OF BEING HEARD. A MISTAKE IN THE NOTICE WOULD NOT INVALIDATE PENALTY PROCEEDINGS. 10. IN THE CASE OF EARTHMOVING EQUIPMENT SERVICE CORPORATION (SUPRA), THE ITAT MUMBAI DID NOT FOLLOW THE DECISION RENDERED IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY (SUPR A) FOR THE REASON THAT PENALTY IN THAT CASE WAS DELETED FOR SO MANY REASONS AND NOT SOLELY ON THE BASIS OF DEFECT IN SHOW CAUSE NOTICE U/S.274 OF THE ACT. THIS IS NOT FACTUALLY CORRECT. ONE OF THE PARTIES BEFORE THE GROUP OF ASSESSEES BEFORE THE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING (SUPRA) WAS AN ASSESSEE BY NAME M/S.VEERABHADRAPPA SANGAPPA & CO., IN ITA NO.5020 OF 2009 WHICH WAS AN APPEAL BY THE REVENUE. THE TRIBUNAL HELD THAT ON PERUSAL OF THE NOTICE ISSUED UNDER SECTION 271( 1)(C) OF THE ACT, IT IS CLEAR THAT IT IS A STANDARD PROFORMA USED BY THE ASSESSING AUTHORITY. BEFORE ISSUING THE NOTICE THE INAPPROPRIATE WORDS AND PARAGRAPHS WERE NEITHER STRUCK OFF NOR DELETED. THE ASSESSING AUTHORITY WAS NOT SURE AS TO WHETHER SHE HAD P ROCEEDED ON THE BASIS THAT THE ASSESSEE HAD EITHER CONCEALED ITS INCOME OR HAS FURNISHED INACCURATE DETAILS. THE NOTICE IS NOT IN COMPLIANCE WITH THE REQUIREMENT OF THE PARTICULAR 4 I.T.A. NO. 1307/KOL/2016 ASSESSMENT YEAR: 2006 - 07 I.T.A. NO. 1308/KOL/2016 ASSESSMENT YEAR: 2006 - 07 PRADIP BARDHAN SECTION AND THEREFORE IT IS A VAGUE NOTICE, WHICH IS ATTRIBUTABLE TO A PATEN T NON APPLICATION OF MIND ON THE PART OF THE ASSESSING AUTHORITY. FURTHER, IT HELD THAT THE ASSESSING OFFICER HAD MADE ADDITIONS UNDER SECTION 69 OF THE ACT BEING UNDISCLOSED INVESTMENT. IN THE APPEAL, THE SAID FINDING WAS SET - ASIDE. BUT ADDITION WAS SUSTA INED ON A NEW GROUND, THAT IS UNDER VALUATION OF CLOSING STOCK. SINCE THE ASSESSING AUTHORITY HAD INITIATED PENALTY PROCEEDINGS BASED ON THE ADDITIONS MADE UNDER SECTION 69 OF THE ACT, WHICH WAS STRUCK DOWN BY THE APPELLATE AUTHORITY, THE INITIATED PENAL P ROCEEDINGS, NO LONGER EXISTS. IF THE APPELLATE AUTHORITY HAD INITIATED PENAL PROCEEDINGS ON THE BASIS OF THE ADDITION SUSTAINED UNDER A NEW GROUND IT HAS A LEGAL SANCTUM. THIS WAS NOT SO IN THIS CASE AND THEREFORE, ON BOTH THE GROUNDS THE IMPUGNED ORDER PA SSED BY THE APPELLATE AUTHORITY AS WELL AS THE ASSESSING AUTHORITY WAS SET - ASIDE BY ITS ORDER DATED 9TH APRIL, 2009. AGGRIEVED BY THE SAID ORDER, THE REVENUE FILED APPEAL BEFORE HIGH COURT. THE HONBLE HIGH COURT FRAMED THE FOLLOWING QUESTION OF LAW IN TH E SAID APPEAL VIZ., 1. WHETHER THE NOTICE ISSUED UNDER SECTION 271(1)(C) IN THE PRINTED FORM WITHOUT SPECIFICALLY MENTIONING WHETHER THE PROCEEDINGS ARE INITIATED ON THE GROUND OF CONCEALMENT OF INCOME OR ON ACCOUNT OF FURNISHING OF INACCURATE PARTICULARS IS VALID AND LEGAL? 2. WHETHER THE PROCEEDINGS INITIATED BY THE ASSESSING AUTHORITY WAS LEGAL AND VALID? THE HONBLE KARNATAKA HIGH COURT HELD IN THE NEGATIVE AND AGAINST THE REVENUE ON BOTH THE QUESTIONS. THEREFORE THE DECISION RENDERED BY THE ITAT MUMB AI IN THE CASE OF EARTHMOVING EQUIPMENT SERVICE CORPORATION (SUPRA) IS OF NO ASSISTANCE TO THE PLEA OF THE REVENUE BEFORE US. 11. IN THE CASE OF M/S.MAHARAJ GARAGE & CO. VS. CIT , DATED 22.8.2017 REFERRED TO IN THE WRITTE N NOTE GIVEN BY THE LEARNED DR, WH ICH IS AN UNREPORTED DECISION AND A COPY OF THE SAME WAS NOT FURNISHED, THE SAME PROPOSITION AS WAS LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT.KAUSHALYA (SUPRA) APPEARS TO HAVE BEEN REITERATED, AS IS EVIDENT FROM THE EXTRACTS FURNISHED I N THE WRITTEN NOTE FURNISHED BY THE LEARNED DR BEFORE US. 12. IN THE CASE OF TRISHUL ENTERPRISES ITA NO.384 & 385/MUM/2014, THE MUMBAI BENCH OF ITAT FOLLOWED THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT.KAUSHALYA (SUPRA). 5 I.T.A. NO. 1307/KOL/2016 ASSESSMENT YEAR: 2006 - 07 I.T.A. NO. 1308/KOL/2016 ASSESSMENT YEAR: 2006 - 07 PRADIP BARDHAN 13. IN THE C ASE OF MAHESH M.GANDHI VS. ACIT VS. ACIT ITA NO.2976/MUM/2016 DATED 27.2.2017 , THE MUMBAI ITAT THE ITAT HELD THAT THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE MANJUNATHA COTTON & GINNING (SUPRA) WILL NOT BE APPLICABLE TO THE FACTS OF THAT CASE BECAUSE THE AO IN THE ASSESSMENT ORDER WHILE INITIATING PENALTY PROCEEDINGS HAS HELD THAT THE ASSESSEE HAD CONCEALED PARTICULARS OF INCOME AND MERELY BECAUSE IN THE SHOW CAUSE NOTICE U/S.274 OF THE ACT, THERE IS NO MENTION WHETHER THE PROCEEDINGS ARE FOR FURNISHING INACCURATE PARTICULARS OR CONCEALING PARTICULARS OF INCOME, THAT WILL NOT VITIATE THE PENALTY PROCEEDINGS. IN THE PRESENT CASE THERE IS NO WHISP ER IN THE ORDER OF ASSESSMENT ON THI S ASPECT. WE HAVE POINTED OUT THIS ASPECT IN THE EARLIER PART OF THIS ORDER. HENCE, THIS DECISION WILL NOT BE OF ANY ASSISTANCE TO THE PLEA OF THE REVENUE BEFORE US. EVEN OTHERWISE THIS DECISION DOES NOT FOLLOW THE RATIO LAID DOWN BY THE HONBLE KARNATAK A HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING (SUPRA) IN AS MUCH AS THE RATIO LAID DOWN IN THE SAID CASE WAS ONLY WITH REFERENCE TO SHOW CAUSE NOTICE U/S.274 OF THE ACT. THE HONBLE COURT DID NOT LAY DOWN A PROPOSITION THAT THE DEFECT IN THE SHO W CAUSE NOTICE WILL STAND CURED IF THE INTENTION OF THE CHARGE U/S.271(1) (C ) IS DISCERNIBLE FROM A READING OF THE ASSESSMENT ORDER IN WHICH THE PENALTY WAS INITIATED. 14. FROM THE AFORESAID DISCUSSION IT CAN BE SEEN THAT THE LINE OF REASONING OF THE HONBLE BOMBAY HIGH COURT AND THE HONBLE PATNA HIGH COURT IS THAT ISSUANCE OF NOTICE IS AN ADMINISTRATIVE DEVICE FOR INFORMING THE ASSESSEE ABOUT THE PROPOSAL TO LEVY PENALTY IN ORDER TO ENABLE HIM TO EXPLAIN AS TO WHY IT SHOULD NOT BE DONE. MERE MISTAKE IN THE LANGUAGE USED OR MERE NON - STRIKING OF THE INACCURATE PORTION CANNOT BY ITSELF INVALIDATE THE NOTICE. THE TRIBUNAL BENCHES AT MUMBAI AND PATNA BEING SUBORDINATE TO THE HONBLE BOMBAY HIGH COURT AND PATNA HIGH COURT ARE BOUND TO FOLLOW THE AFORESAID VIEW. THE TRIBUNAL BENCH ES AT BANGALORE HAVE TO FOLLOW THE DECISION OF THE HONBLE KARNATAKA HIGH COURT. AS FAR AS BENCHES OF TRIBUNAL IN OTHER JURISDICTIONS ARE CONCERNED, THERE ARE TWO VIEWS ON THE ISSUE, ONE IN FAVOUR OF THE ASSESSEE RENDERED BY THE H ONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING (SUPRA) AND OTHER OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT.KAUSHALYA. IT IS SETTLED LEGAL POSITION THAT WHERE TWO VIEWS ARE AVAILABLE ON AN ISSUE, THE VIEW FAVOURABLE TO TH E ASSESSEE HAS TO BE 6 I.T.A. NO. 1307/KOL/2016 ASSESSMENT YEAR: 2006 - 07 I.T.A. NO. 1308/KOL/2016 ASSESSMENT YEAR: 2006 - 07 PRADIP BARDHAN FOLLOWED. WE THEREFORE PREFER TO FOLLOW THE VIEW EXPRESSED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING (SUPRA). 15. WE HAVE ALREADY OBSERVED THAT THE SHOW CAUSE NOTICE ISSUED IN THE PRESENT CASE U /S 274 OF THE ACT DOES NOT SPECIFY THE CHARGE AGAINST THE ASSESSEE AS TO WHETHER IT IS FOR CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE SHOW CAUSE NOTICE U/S 274 OF THE ACT DOES NOT STRIKE OUT THE INAPPROPRIATE WORDS . IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT IMPOSITION OF PENALTY CANNOT BE SUSTAINED. ACCORDINGLY, WE ALLOW THIS APPEAL OF THE ASSESSEE. 6. IN THE RESULT, ITA NO. 1307/KOL/2016, DISMISSED & ITA NO. 1308/KOL/2016 IS ALLOWED. KOLKATA, THE 19 TH DAY OF JANUARY , 201 8 . SD/ - SD/ - [ S.S. VISWANETHRA RAVI ] [ J. SUDHAKAR REDDY ] J UDICIAL MEMBER ACCOUNTANT MEMBER DATED : 19 . 01 .201 8 {SC SPS} COPY OF THE ORDER FORWARDED TO: 1. PRADIP BARDHAN 40, RAJANI GUPTA ROW KOLKATA 700 009 2. INCOME TAX OFFICER, WARD - 33(3), KOLKATA INCOME TAX OFFICE 10, MIDDLETON ROW KOLKATA 3. CIT(A) - 4. CIT - , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/ D.D.O. ITAT, KOLKATA BENCHES 7 I.T.A. NO. 1307/KOL/2016 ASSESSMENT YEAR: 2006 - 07 I.T.A. NO. 1308/KOL/2016 ASSESSMENT YEAR: 2006 - 07 PRADIP BARDHAN