M/s BMG Enterprises Ltd., New Delhi V. DCIT, New Delhi

ITA 134/DEL/2016

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 7773 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 11-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R K KAPOOR
• Keywords: Gift; Principle of natural justice; Question of law; Initiation of penalty proceedings
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER I.T.A. NO. 134/DEL/2016 A.Y. : 2008-09 BMG ENTERPRISES LTD., 1 ST FLOOR, DCM BUILDING, 16, BARAKHAMBA ROAD, NEW DELHI 11 001 (PAN: AAACB4657R) VS. DCIT, CIRCLE 3(1), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. PRADIP DINODIA, CA & SH. R.K. KAPOOR, CA DEPARTMENT BY : MS. RASHMITA JHA, SR. DR. DATE OF HEARING : 25.09.2018 DATE OF ORDER : 27.09.2018 ORDER PER K. NARASIMHA CHARY, J.M. THIS IS AN APPEAL BY THE ASSESSEE CHALLENGING THE ORDER DATED 09.10.2015 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-2, NEW DELHI (IN SHORT LD. CIT(A)) WHEREIN THE LD. CIT(A) HAS UPHELD THE PENALTY OF RS. 5,81,021/- MA DE BY THE AO U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT). 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILE D RETURN OF INCOME ON 29.9.2009 DECLARING INCOME OF RS . 33,12,300/-. THE ASSESSMENT IN THIS CASE WAS COMPLETED ON 15.10.2010 AT AN INCOME OF RS. 81,20,252/- AS AGAINST THE RETURNED INCOME OF RS. 3312330/- BY MAKING VARIOUS ADDITIONS I.E. (I) RS. 7,28,066/- ON ACCOUNT OF ADDITIONS UNDER RULE 8D; (I I) RS. 20,56,607/- ON ACCOUNT OF ADDITIONS U/S. 41(1)(A ); (III) RS. 18,47,138/- ON ACCOUNT OF ADDITIONS ON ACCO UNT OF EXPENDITURE INCURRED ON GIFT ITEMS AND RS. 1,76,11 2/- ON ACCOUNT OF ADDITIONS ON ACCOUNT OF VEHICLE RUNNING / MAINTENANCE CHARGES. 3. AO SIMULTANEOUSLY INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT AND LEVIED THE PENALTY VID E HIS ORDER DATED 31.3.2014 ON THE GROUND OF CONCEALMENT OF INCOME AND FOR FURNISHING OF INACCURATE PARTICULARS. AGAINST THE PENALTY ORDER, ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 09.10.2015 HAS DISMISSED THE APPEAL OF THE ASSESSEE. HENCE, THE ASSESSEE IS IN APPEAL BEFORE US . 4. AT THE OUTSET, IT IS THE ARGUMENT OF THE LD. AR TH AT MERE DISALLOWANCE U/S. 14A OR THE DISALLOWANCE OF EXPENDITURE ON ACCOUNT OF GIFT DOES NOT IPSO FACTO AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, BUT IT IS ONLY A MA TTER OF APPLICATION OF LAW AND A DEBATABLE ISSUE. HE FURTHER 3 SUBMITTED THAT EVEN THE NOTICE U/S. 274 OF THE ACT DOE S NOT SPECIFY THAT UNDER WHICH LIMB OF SECTION 271(1)(C ) OF THE ACT THE PENALTY WAS PROPOSED AND LEVIED. IN S UPPORT OF HIS CONTENTION, HE PLACED THE RELIANCE ON THE DECI SION OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE O F CIT VS. VEERBHADRAPPA SANGAPPA & CO. (TS-381-SC-2016); II) CIT & ANR. VS. M/S SSAS EMERALD MEADOWS HON BLE SUPREME COURT OF INDIA REPORTED IN 2016 (8) TMI 1 145 AND THE DECISION OF THE HONBLE KARNATAKA HIGH COURT I N THE CASE OF CIT & ANR. VS. M/S SSAS EMERALD MEADOWS 2015 (11) TMI 1620. 5. LD. DR HEAVILY RELIED UPON THE ORDER OF THE AUTH ORITIES BELOW. 6. AFTER HEARING BOTH THE PARTIES AND AFTER PERUSIN G THE RECORDS, WE FIND THAT THE NOTICE DATED 15.10.2010 I SSUED BY THE AO U/S. 274 READ WITH SECTION 271 OF THE ACT DO ES NOT SPECIFY WHICH LIMB OF SECTION 271 OF THE ACT, THE P ENALTY PROCEEDINGS HAD BEEN PROPOSED AND LEVIED I.E. WHETH ER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS, AND THE DECISIONS OF KARNAT AKA HIGH COURT IN CIT VS MANJUNATHA COTTON & GINNING FACTORY, 359 ITR 565 (KAR) AND CIT & ANR. VS. M/S SSAS EMERALD MEADOWS 2015 (11) TMI 1620 ARE APPLICABLE. 7. IN THE CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY, 359 ITR 565 (KAR) . VIDE PARAGRAPH 60, THE HONBLE KARNATAKA HIGH COURT HAS HELD AS FOLLOWS:- 4 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, T HAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. NO DOUBT, THE FAC TS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOM E CASES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE PENALTY PROCEEDING S ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENAL TY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSE E GUILTY OF ANOTHER OFFENCE OR FINDING HIM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLES S TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROUNDS ME NTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE C ONFINED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO ANSWER. IT IS NOT OPE N TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOS E PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIAT ED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON T HE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF P ENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHI CH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS N OT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERM INED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS I N THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUB SEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE OR DER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. 8. IN CIT & ANR. VS. M/S SSAS EMERALD MEADOWS 2 015 (11) TMI 1620 THE HONBLE KARNATAKA HIGH COURT CONS IDERED THE QUESTION OF LAW AS TO,- 5 WHETHER, OMISSION IF ASSESSING OFFICER TO EXPLICITL Y MENTION THAT PENALTY PROCEEDINGS ARE BEING INITIATED FOR FU RNISHING OF INACCURATE PARTICULARS OR THAT FOR CONCEALMENT OF I NCOME MAKES THE PENALTY ORDER LIABLE FOR CANCELLATION EVE N WHEN IT HAS BEEN PROVED BEYOND REASONABLE DOUBT THAT THE AS SESSEE HAD CONCEALED INCOME IN THE FACTS AND CIRCUMSTANCES OF THE CASE? AND THE HONBE HIGH COURT RULED ANSWERED THE SAME I N FAVOUR OF THE ASSESSEE OBSERVING THAT: THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY THE AS SESSEE HOLDING THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTIO N 274 READ WITH SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) TO BE BAD IN LAW AS IT DID NOT SPECIFY WHICH LIMB OF SECT ION 271(1)(C) OF THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED I.E ., WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE TRIBUNAL, WHILE ALLOWING THE APPEAL OF THE ASSESSEE, HAS RELIED ON THE DECISION OF THE DIVISIO N BENCH OF THIS COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 IT R 565. IN OUR VIEW, SINCE THE MATTER IS COVERED BY JUDGMEN T OF THE DIVISION BENCH OF THIS COURT, WE ARE OF THE OPINION, NO SUBS TANTIAL QUESTION OF LAW ARISES IN THIS APPEAL FOR DETERMINATION BY THIS COURT. THE APPEAL IS ACCORDINGLY DISMISSED. 9. THE SPECIAL LEAVE PETITION FILED BY THE REVENUE CHALLENGING THE AFORESAID JUDGEMENT OF THE HIGH COU RT WAS DISMISSED BY THE HONBLE SUPREME COURT IN CIT & ANR . VS. M/S SSAS EMERALD MEADOWS 2016 (8) TMI 1145 WITH THE OBSERVATION THAT, - WE DO NOT FIND ANY MERIT IN THIS PETITION. THE SPEC IAL LEAVE PETITION IS, ACCORDINGLY, DISMISSED. 10. FURTHER, IN CIT VS. VEERBHADRAPPA SANGAPPA & CO. (TS-381-SC-2016) HONBLE SUPREME COURT OF INDIA HAS DISMISSED THE REVENUES SLP AGAINST KARNATAKA HIGH COURT JUDGMENT LAYING DOWN LAW ON PENALTY LEVY FOR AY 6 2003-04. HONBLE KARNATAKA HIGH COURT HAD HELD THAT NOTICE U/S. 274 MUST SPECIFICALLY STATE GROUND FOR INITIATION OF PROCEEDINGS (WHETHER CONCEALMENT OR FI LING INACCURATE PARTICULARS); THAT MERE SENDING OF PRINTE D FORM WITH AL GROUNDS MENTIONED NOT SUFFICIENT COMPLIA NCE OF LAW. DISMISSING SLP, HONBLE APEX COURT HELD TH AT WE DO NOT FIND ANY MERIT IN THESE PETITIONS. 11. KEEPING IN VIEW OF THE AFORESAID DISCUSSIONS AN D RESPECTFULLY FOLLOWING THE AFORESAID PRECEDENTS, WE FIND IT DIFFICULT TO SUSTAIN THE PENALTY LEVIED AND SUSTAIN ED BY THE AUTHORITIES BELOW. THEREFORE, THE PENALTY IN DISPUT E IS NOT SUSTAINABLE IN THE EYES OF LAW. WE ACCORDINGLY QUA SH THE PENALTY PROCEEDINGS. SINCE THE PENALTY HAS BEEN QU ASHED ON THE LEGAL GROUND, THERE IS NO NEED TO ADJUDICATE T HE MERITS OF THE CASE. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/09/20 18. SD/- SD/- [ [[ [G.D. G.D. G.D. G.D. AGRAWAL] AGRAWAL] AGRAWAL] AGRAWAL] [ [[ [K. K.K. K. NARASIMHA CHARY] CHARY] CHARY] CHARY] PRESIDENT PRESIDENT PRESIDENT PRESIDENT JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER DATE 27/09/2018 7 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES