Shri Yashvardhan Mohta, Kolkata V. ACIT, Circle - 44, Kolkata , Kolkata

ITA 1676/KOL/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5359 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 18-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice; Question of law; Initiation of penalty proceedings
• Section: 69; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SHRI ABY.T.VARKEY, JM & SHRI M.BA LAGANESH, AM] I.T.A NO. 1676/KOL/20 17 ASSESSMENT YEAR : 2006-0 7 SHRI YASHVARDHAN MOHTA -VS- ACIT, CIRCLE-44 , KOLKATA. [PAN: AFAPM 0724 J] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI M. D. SHAH, A R FOR THE RESPONDENT : SHRI ROBIN CHOUDHURY, A DDL. CIT SR. DR DATE OF HEARING : 08.10.2018 DATE OF PRONOUNCEMENT : 12.10.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 13, KOLKATA [ IN SHORT THE LD CITA] IN A PPEAL NO. 448/CIT(A)-13/CIR- 44/KOL/2014-15 DATED 10.04.2017 AGAINST THE PENALT Y ORDER PASSED BY THE LEARNED ACIT, CIRCLE-41, KOLKATA [IN SHORT THE LD AO] U/S 271(1)( C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) DATED 11.04. 2014 FOR THE ASSESSMENT YEAR 2006-07. 2. THE LD. AR SUBMITS THAT THE NOTICE DATED 29.12 .2011 ISSUED BY THE AO U/S 274 R.W.S 271(1) ( C) OF THE ACT IS DEFECTIVE FOR NOT M ENTIONING THE SPECIFIC CHARGE AND PLACED RELIANCE ON THE DECISION OF THE HONBLE SUP REME COURT IN THE CASE OF SSAS EMERALD MEADOWS. 2 ITA NO.1676/KOL/2017 SHRI YASHVARDHAN MOHTA A.YR. 2006-07 2 3. THE LD.AR FURTHER SUBMITS THAT THE ISSUE RAISED IN THE APPEAL IS COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F SSAS EMERALD MEADOWS . HE ALSO SUBMITS THAT THE AO IMPOSED PENALTY ON DEFECTI VE NOTICE ISSUED U/S. 274 OF THE ACT ON 29.12.2011 AND THE IMPOSITION/CONFIRMATION OF PENALTY ON DEFECTIVE NOTICE IS NOT MAINTAINABLE IN THE EYE OF LAW. 4. ON THE OTHER HAND, THE LD. DR STATED THAT THE WRITTEN SUBMISSION FILED BY THE DEPARTMENT ON EARLIER OCCASIONS WITH REGARD TO THIS ISSUE MAY KINDLY BE TAKEN ON RECORD WHICH IS REPRODUCED HEREUNDER:- 1. THE HONBLE ITAT, 'D' BENCH, KOLKATA, IN THE CO URSE OF HEARING OF APPEAL OF M/S. DADHEECH FURNITURE PVT. LIMITED VS.ITO, WARD 7(3), KOLKATA FOR THE A.Y 2012-13 , AT THE REQUEST OF THE DR, ALLOWED THE DEPARTMENT TO MA KE A WRITTEN SUBMISSION, ON THE ISSUE OF WHETHER NON MARKING UPON CONCERNED DETAIL IN THE NOTICE U/S.274, OUTLINING THE TYPE OF DEFAULT WOULD CONSTITUTE GROUNDS FOR REJECT ION OF SATISFACTION AND LEVY OF PENALTY U/S.271(1)(C) OF THE IT. ACT. 2. THE JUDGEMENT OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE DR.SYAMAL BARAN MONDAL VS. CIT (2011) 244 CTR631 STATES THAT 'SECTI ON 271 NOWHERE MANDATES THAT RECORDING OF SATISFACTION ABOUT CONCEALMENT OF ASSE SSEE'S INCOME MUST BE IN SPECIFIC TERMS AND WORDS, SATISFACTION OF AO MUST REFLECT FR OM THE ORDER EITHER WITH EXPRESSED WORDS RECORDED BY THE ASSESSING OFFICER HIMSELF OR BY HIS OVERT ACT AND ACTION.' 3. THE LD. ITAT MUMBAI IN ITS ORDER THE CASE OF TRI SHUL ENTERPRISES VS. DCIT (ITA NOS.384 & 385/MUM/2014 FOR A.YRS.2006-07 & 2007-08) , DT.10-02-2017 DISMISSED THE CONTENTION OF THE ASSESSEE REGARDING FAILURE OF THE AO TO STRIKE OFF THE RELEVANT PART OF THE NOTICE U/S.274 FOR INITIATING PROCEEDINGS U/ S.271(1)(C). THE ITAT RELIED UPON THE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE C ASE OF CIT VS. SMT.KAUSHALYA (1992) WHEREIN IT WAS HELD THAT 'MERE NOT STRIKING OFF SPECIFIC LIMB CANNOT BY ITSELF INVALIDATE NOTICE ISSUED U/ S.274 OF THE ACT. THE L ANGUAGE OF THE SECTION DOES NOT SPEAK ABOUT THE ISSUANCE OF NOTICE. ALL THAT IS REQUIRED THAT THE ASSESSEE BE GIVEN AN OPPORTUNITY OF SHOW CAUSE.. ' 4. THE HON'BLE BOMBAY HIGH COURT (NAGPUR BENCH) IN THE CASE OF M/S.MAHARAJ GARAGE & COMPANY VS. CIT IN ITS JUDGEMENT DT.22-08- 2017, HAS ALSO HELD THAT '15. THE REQUIREMENT OF SECTION 274 OF THE INCOME TAX AC T FOR GRANTING REASONABLE OPPORTUNITY OF BEING HEARD IN THE MATTER CANNOT BE STRETCHED TO THE EXTENT OF FRAMING A SPECIFIC CHARGE OR ASKING THE ASSESSEE AN EXPLANATI ON IN RESPECT OF THE QUANTUM OF PENALTY PROPOSED TO BE IMPOSED, AS HAS BEEN URGED . .... ' IT FURTHER OBSERVED THAT: '16. IT IS NOT IN DISPUTE THAT A REASONABLE OPPORTUNITY OF BEING HEARD IN THE MATTER, AS 3 ITA NO.1676/KOL/2017 SHRI YASHVARDHAN MOHTA A.YR. 2006-07 3 REQUIRED BY SECTION 274 OF THE SAID ACT WAS GIVEN T O THE ASSESSEE BEFORE IMPOSING THE PENALTY BY THE INCOME TAX OFFICER.' 5. HONBLE MUMBAI E BENCH IN THE CASE OF EARTHMOVING EQUIPMENT SERVICE CORPORATION VS DCIT 22(2), MUMBAI (2017) 84 TAXMANN .COM 51 LOOKED INTO THE ISSUE VERY CLOSELY AND OPINED THAT AFTER PERUSING THE RAT IO OF THE JUDGEMENT RENDERED IN MANJUNATHA COTON AND GINNING FACTORY WE FIND THAT T HE ASSESSEES APPEAL WAS ALLOWED BY THE HONBLE HIGH COURT AFTER CONSIDERING THE MULT IPLE FACTORS AND NOT SOLELY ON THE BASIS OF DEFECT IN NOTICE U/S 274. THEREFORE WE ARE OF THE OPINION THAT THE PENALTY COULD NOT BE DELETED MERELY ON THE BASIS OF DEFECT POINTE D BY THE LD AR IN THE NOTICE AND THEREFORE THE LEGAL GROUNDS RAISED ARE REJECTED. 6. THE MUMBAI BENCH OF !TAT IN A RECENT DECISION IN THE CASE OF MAHESH M GANDHI VS ACIT [TS-5465-ITAT-2017(MUMBAI)-O] ALSO DEALT WITH THIS ASPECT. THE TAXPAYER HAD NOT OFFERED DIRECTOR'S FEES AND INCOME FROM SHO RT TERM CAPITAL GAINS TO TAX IN THE RETURN OF INCOME. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS WHEN THESE INCOMES WERE PICKED UP BY THE TAX OFFICER, THE TAXPAYER ADM ITTED EARNING OF THE INCOMES AND FILED A REVISED COMPUTATION OF INCOME. BASED ON THI S FINDING, THE TAX OFFICER MENTIONED IN THE ASSESSMENT ORDER THAT PENALTY PROCEEDINGS UN DER SECTION 271(1)(C) OF THE ACT WILL BE INITIATED FOR FURNISHING OF INACCURATE PART ICULARS OF INCOME. SUBSEQUENTLY THE TAX OFFICER ISSUED A NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(C) OF THE ACT WHEREIN THE REASON FOR PENALTY WAS NOT MENTIONED. T HE TAXPAYER FILED AN APPEAL BEFORE THE CIT(A) WHICH RULED IN FAVOUR OF THE REVENUE. TH E CIT(A) PLACED RELIANCE ON THE DECISION OF THE KHC IN THE CASE OF CIT VS MANJUNATH A COTTON AND GINNING FACTORY (SUPRA), THE CIT(A) RULED IN FAVOUR OF THE REVENUE. AGGRIEVED THE TAXPAYER PREFERRED AN APPEAL BEFORE THE ITAT. THE ITAT AFTER OBSERVING THE FACTS OF THE CASE HELD THAT THE TAX OFFICER HAD RECORDED SATISFACTION IN THE ASSESS MENT ORDER IN RELATION TO INVOKING PENALTY PROVISIONS. THE TAX OFFICER HAD APPLIED HIS MIND WHILE DETAILING THE REASONS FOR INITIATION OF PENALTY PROCEEDINGS IN THE ASSESSMENT ORDER. ACCORDINGLY, NOT MENTIONING THE REASONS IN THE PENALTY NOTICE CANNOT INVALIDATE THE PENALTY PROCEEDINGS. 7. HON'BLE MUMBAI ITAT IN THE CASE OF DHANRAJ MILLS (P) LTD VS ACIT(OSD) CENTRAL RANGE-S, MUMBAI ON 21 MARCH 2017 HAS STATED AS THER E IS NO DECLARATION OF LAW WHICH MAY BE GOVERNED BY ARTICLE 141 OF THE CONSTITUTION OF INDIA IN THE CASE OF CITVERSUS SSA'S EMERALD MEADOWS DISMISSED BY HON'BLE APEX COU RT, VIDE SLP (CC NO. 11485/2016) ON 05/08/2016. THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS KAUSHALYA (SUPRA) IS STILL HAVING A BINDING FORCE ON US. THUS, WITH UTMOST REGARDS TO THE JUDGMENT OF KARNATAKA HIGH COURT IN CIT VS MANJUNATHA COTTON & GINNING FACTORY (SUPRA) WE ARE BOUND TO FOLLOW THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN CIT VS KAUSHALYA (SUPRA). OUR VIEW ALSO FI ND SUPPORT FROM A DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DHAWAL K. JAIN VS INCOME TAX OFFICER (ITA NO.996/MUM/2014) ORDER DATED 30/09/2016. WITH THESE OBSERVATIONS, THE ARGUMENT OF ID. COUNSEL OF THE ASSESSEE ON THE LEGA L/TECHNICAL GROUND IS REJECTED. THUS, ALL THESE FOUR APPEALS ARE, THEREFORE, DISMISSED AN D THE STAND OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IS AFFIRMED. 4 ITA NO.1676/KOL/2017 SHRI YASHVARDHAN MOHTA A.YR. 2006-07 4 8. THEREFORE, IT IS SUBMITTED THAT SERVICE OF NOTIC E U/S.274 FOR INITIATING PENALTY PROCEEDINGS U/S.271(1)(C) OF THE IT. ACT, WOULD CON STITUTE VALID INITIATION OF PENALTY PROCEEDINGS AND THE CASE MAY BE HEARD ON MERITS. 5. IN VIEW OF ABOVE, THE LD. DR PRAYED TO DISMISS T HE GROUNDS RAISED IN APPEAL AND TO CONFIRM THE PENALTY IMPOSED BY THE AO AND C ONFIRMED BY THE CIT-A RESPECTIVELY. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDER ED THE WRITTEN SUBMISSIONS AND THE CASE LAWS RELIED UPON BY THE LD. DR. WE FIN D THE SAME SET OF WRITTEN SUBMISSIONS WERE FILED BEFORE THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF JEETMAL CHORARIA IN ITA 956/KOL/16 FOR AY 2010-11, WHEREIN THE COORDINATE BENCH ELABORATELY DISCUSSED THE FACTS IN THE DECISIONS AS RELIED UPON BY THE LD.DR AND THE PRINCIPLE LAID DOWN BY THE RESPECTIVE HONBLE HIGH COURTS AT BOMBAY AND PATNA AND PREFERRED TO FOLLOW THE RATIO LAID DOWN BY THE HON BLE HIGH COURT OF KARNATAKA IN THE CASE OF MANJUNATHA COTTON AND GINNING SUPRA BY TAKI NG SUPPORT OF THE ESTABLISHED PRINCIPLE FOR A PROPOSITION WHEN THERE ARE TWO VIEW S ON THE ISSUE, ONE IN THE FAVOURING OF ASSESSEE SHOULD BE ADOPTED, WHICH ENUNCIATED BY THE HONBLE SUPREME COURT IN THE CASE OF VEGETABLE PRODUCTS LTD REPORTED IN 88 ITR 192 (SC). WE ARE IN AGREEMENT WITH THE REASONING OF THE CO-ORDINATE BEN CH IN ITS ORDER DT: 01- 12-2017 IN THE CASE OF JEETMAL CHORARIA AND THE SA ME IS REPRODUCED HEREIN BELOW FOR READY REFERENCE: 7. THE LEARNED DR SUBMITTED THAT THE HONBLE CA LCUTTA HIGH COURT IN THE CASE OF DR.SYAMAL BARAN MONDAL VS. CIT (2011) 244 CTR 63 1 (CAL) HAS TAKEN A VIEW THAT SEC.271 DOES NOT MANDATE THAT THE RECORDING OF SATISFACTION ABOUT CONCEALMENT OF INCOME MUST BE IN SPECIFIC TERMS AND WORDS AND THAT SATISFACTION OF AO MUST REFLECT FROM THE ORDER EITHER WITH EXPRESSE D WORDS RECORDED BY THE AO OR BY HIS OVERT ACT AND ACTION. IN OUR VIEW THIS DECI SION IS ON THE QUESTION OF RECORDING SATISFACTION AND NOT IN THE CONTEXT OF SP ECIFIC CHARGE IN THE MANDATORY SHOW CAUSE NOTICE U/S.274 OF THE ACT. THEREFORE RE FERENCE TO THIS DECISION, IN OUR VIEW IS NOT OF ANY HELP TO THE PLEA OF THE REVENUE BEFORE US. 5 ITA NO.1676/KOL/2017 SHRI YASHVARDHAN MOHTA A.YR. 2006-07 5 8. THE LEARNED DR RELIED ON THREE DECISIONS OF MU MBAI ITAT VIZ., (I) DHANRAJ MILLS PVT. LTD. VS. ACIT ITA NO.3830 & 3833/MUM/200 9 DATED 21.3.2017; (II) EARTHMOVING EQUIPMENT SERVICE CORPORATION VS. DCIT 22(2), MUMBAI, (2017) 84 TAXMANN.COM 51 (III) MAHESH M.GANDHI VS. ACIT VS. A CIT ITA NO.2976/MUM/2016 DATED 27.2.2017. RELIANCE WAS PLA CED ON TWO DECISIONS OF THE HONBLE BOMBAY HIGH COURT VIZ., (I) CIT VS. KAUSHAL YA 216 ITR 660(BOM) AND (II) M/S.MAHARAJ GARAGE & CO. VS. CIT DATED 22.8.20 17. THIS DECISION WAS REFERRED TO IN THE WRITTEN NOTE GIVEN BY THE LEARNE D DR. THIS IS AN UNREPORTED DECISION AND A COPY OF THE SAME WAS NOT FURNISHED. HOWEVER A GIST OF THE RATIO LAID DOWN IN THE DECISION HAS BEEN GIVEN IN THE WRI TTEN NOTE FILED BEFORE US. 9. IN THE CASE OF CIT VS. KAUSHALYA (SUPRA), THE H ONBLE BOMBAY HIGH COURT HELD THAT SECTION 274 OR ANY OTHER PROVISION IN THE ACT OR THE RULES, DO ES NOT EITHER MANDATE THE GIVING OF NOTICE OR ITS ISSUANCE IN A P ARTICULAR 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 STRAIGHT-JACKET FORMULA. FOR SUSTAINING A COMPLAINT OF FAILURE OF THE PRINCIPLES OF NATURAL J USTICE ON THE GROUND OF ABSENCE OF OPPORTUNITY, IT HAS TO BE ESTABLISHED THAT PREJUDIC E IS CAUSED TO THE CONCERNED PERSON BY THE PROCEDURE FOLLOWED. THE ISSUANCE OF N OTICE IS AN ADMINISTRATIVE DEVICE FOR INFORMING THE ASSESSEE ABOUT THE PROPOSA L TO LEVY PENALTY IN ORDER TO ENABLE HIM TO EXPLAIN AS TO WHY IT SHOULD NOT BE DO NE. MERE MISTAKE IN THE LANGUAGE USED OR MERE NON-STRIKING OF THE INACCURAT E PORTION CANNOT BY ITSELF INVALIDATE THE NOTICE. THE ITAT MUMBAI BENCH IN THE CASE OF DHANRAJ MILLS PVT.LTD. (SUPRA) 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 CAS E OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA). RELIANCE WAS ALSO PLACED BY THE ITAT MUMBAI IN THIS DECISION ON THE DECISION OF HONBLE PATNA HIGH COUR T IN THE 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 THAT IS REQUIRED IS THAT THE ASSESSEE SHOULD BE GIVEN AN OPPORTUNITY TO SHOW CAU SE. NO STATUTORY NOTICE HAS BEEN PRESCRIBED IN THIS BEHALF. HENCE, IT IS SUFFIC IENT IF THE ASSESSEE WAS AWARE OF THE CHARGES HE HAD TO MEET AND WAS GIVEN AN OPPORTU NITY OF BEING HEARD. A MISTAKE IN THE NOTICE WOULD NOT INVALIDATE PENALTY PROCEEDINGS. 10. IN THE CASE OF EARTHMOVING EQUIPMENT SERVICE C ORPORATION (SUPRA), THE ITAT MUMBAI DID NOT FOLLOW THE DECISION RENDERED IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA) 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 CA SE OF MANJUNATHA COTTON & GINNING (SUPRA) WAS AN ASSESSEE BY NAME M/S.VEERABH ADRAPPA 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 ASSESSIN G AUTHORITY. BEFORE ISSUING THE 6 ITA NO.1676/KOL/2017 SHRI YASHVARDHAN MOHTA A.YR. 2006-07 6 NOTICE THE INAPPROPRIATE WORDS AND PARAGRAPHS WERE NEITHER STRUCK OFF NOR DELETED. THE ASSESSING AUTHORITY WAS NOT SURE AS TO WHETHER SHE HAD PROCEEDED ON THE BASIS THAT THE ASSESSEE HAD EITHER CONCEALED IT S INCOME OR HAS FURNISHED INACCURATE DETAILS. THE NOTICE IS NOT IN COMPLIANCE WITH THE REQUIREMENT OF THE PARTICULAR SECTION AND THEREFORE IT IS A VAGUE NOTI CE, WHICH IS ATTRIBUTABLE TO A PATENT NON APPLICATION OF MIND ON THE PART OF THE A SSESSING AUTHORITY. FURTHER, IT HELD THAT THE ASSESSING OFFICER HAD MADE ADDITIONS UNDER SECTION 69 OF THE ACT BEING UNDISCLOSED INVESTMENT. IN THE APPEAL, THE SA ID FINDING WAS SET-ASIDE. BUT ADDITION WAS SUSTAINED ON A NEW GROUND, THAT IS UND ER VALUATION OF CLOSING STOCK. SINCE THE ASSESSING AUTHORITY HAD INITIATED PENALTY PROCEEDINGS BASED ON THE ADDITIONS MADE UNDER SECTION 69 OF THE ACT, WHICH W AS STRUCK DOWN BY THE APPELLATE AUTHORITY, THE INITIATED PENAL PROCEEDING S, NOLONGER 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 ORD ER PASSED BY THE APPELLATE AUTHORITY AS WELL AS THE ASSESSING AUTHORITY WAS SE T-ASIDE BY ITS ORDER DATED 9TH APRIL, 2009. AGGRIEVED BY THE SAID ORDER, THE REVEN UE FILED APPEAL BEFORE HIGH COURT. THE HONBLE HIGH COURT FRAMED THE FOLLOWING QUESTION OF LAW IN THE SAID APPEAL VIZ., 1. WHETHER THE NOTICE ISSUED UNDER SEC TION 271(1)(C) IN THE PRINTED FORM WITHOUT SPECIFICALLY MENTIONING WHETHER THE PR OCEEDINGS ARE INITIATED ON THE GROUND OF CONCEALMENT OF INCOME OR ON ACCOUNT OF FU RNISHING OF INACCURATE PARTICULARS IS VALID AND LEGAL? 2. WHETHER THE PROC EEDINGS INITIATED BY THE ASSESSING AUTHORITY WAS LEGAL AND VALID? THE HONB LE KARNATAKA HIGH COURT HELD IN THE NEGATIVE AND AGAINST THE REVENUE ON BOT H THE QUESTIONS. THEREFORE THE DECISION RENDERED BY THE ITAT MUMBAI 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. CI T DATED 22.8.2017 REFERRED TO IN THE WRITTEN 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 EXT RACTS FURNISHED IN 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). 13. IN THE CASE OF MAHESH M.GANDHI (SUPRA) THE MUM BAI 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 FAC TS OF THAT CASE BECAUSE THE AO IN THE ASSESSMENT ORDER WHILE INITIATING PENALTY PR OCEEDINGS HAS HELD THAT THE ASSESSEE HAD CONCEALED PARTICULARS OF INCOME AND ME RELY BECAUSE IN THE SHOW CAUSE NOTICE U/S.274 OF THE ACT, THERE IS NO MENTIO N WHETHER THE PROCEEDINGS ARE 7 ITA NO.1676/KOL/2017 SHRI YASHVARDHAN MOHTA A.YR. 2006-07 7 FOR FURNISHING INACCURATE PARTICULARS OR CONCEALING PARTICULARS OF INCOME, THAT WILL NOT VITIATE THE PENALTY PROCEEDINGS. IN THE PRESENT CASE THERE IS NO WHISPHER IN THE ORDER OF ASSESSMENT ON THIS ASPECT. WE HAVE POINTE D 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 KARNATAKA HIGH COURT IN THE CAS E OF MANJUNATHA COTTON & GINNING (SUPRA) IN AS MUCH AS THE RATIO LAID DOWN I N 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 SHOW CAUS E NOTICE WILL STAND CURED IF THE INTENTION OF THE CHARGE U/S.271(1) (C ) IS DISCERNI BLE FROM A READING OF THE ASSESSMENT ORDER IN WHICH THE PENALTY WAS INITIATED . 14. FROM THE AFORESAID DISCUSSION IT CAN BE SEEN T HAT THE LINE OF REASONING OF THE HONBLE BOMBAY HIGH COURT AND THE HONBLE PATNA HIG H 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 A S TO WHY IT SHOULD NOT BE DONE. MERE MISTAKE IN THE LANGUAGE USED OR MERE NON-STRIK ING OF THE INACCURATE PORTION CANNOT BY ITSELF INVALIDATE THE NOTICE. THE TRIBUN AL 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 B ENCHS AT BANGALORE HAVE TO FOLLOW THE DECISION OF THE HONBLE KARNATAKA HIGH C OURT. AS FAR AS BENCHES OF TRIBUNAL IN OTHER JURISDICTIONS ARE CONCERNED, THER E ARE TWO VIEWS ON THE ISSUE, ONE IN FAVOUR OF THE ASSESSEE RENDERED BY THE HONB LE 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. I T IS SETTLED LEGAL POSITION THAT WHERE TWO VIEWS ARE AVAILABLE ON AN ISSUE, THE VIEW FAVOURABLE TO THE ASSESSEE HAS TO BE FOLLOWED. WE THEREFORE PREFER TO FOLLOW THE VIEW EXPRESSED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTT ON & GINNING (SUPRA). 15. WE HAVE ALREADY OBSERVED THAT THE SHOW CAUSE N OTICE 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 27 4 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. THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE WHICH IS BASED ON THE DECISIONS REFERRED T O IN THE EARLIER PART OF THIS ORDER HAS TO BE ACCEPTED. WE THEREFORE HOLD THAT IM POSITION OF PENALTY IN THE PRESENT CASE CANNOT BE SUSTAINED AND THE SAME IS DI RECTED TO BE CANCELLED. 7. WE FIND THE NOTICE DATED 26.06.2014 ISSUED U/ S. 274 R.W.S 271 OF THE ACT, PLACED ON RECORD, DOES NOT SPECIFY THE CHARGE OF OFFENCE C OMMITTED BY THE ASSESSEE VIZ. WHETHER HAD CONCEALED THE PARTICULARS OF INCOME OR HAD FURNISHED INACCURATE PARTICULARS OF INCOME. HENCE THE SAID NOTICE IS TO BE HELD AS DEFECTIVE. 8 ITA NO.1676/KOL/2017 SHRI YASHVARDHAN MOHTA A.YR. 2006-07 8 8. FURTHER, WE FIND THAT REVENUE HAD PREFERRED A SL P BEFORE THE HONBLE SUPREME COURT AGAINST THIS JUDGMENT WHICH WAS DISMISSED IN CC NO. 11485/2016 DATED 5.8.2016 BY OBSERVING AS UNDER:- UPON HEARING THE COUNSEL, THE COURT MADE THE FOLLO WING ORDER DELAY CONDONED. WE DO NOT FIND ANY MERIT IN THIS PETITION. THE SPE CIAL LEAVE PETITION IS , ACCORDINGLY DISMISSED. PENDING APPLICATION, IF ANY, STANDS DISPOSED OF. WE ALSO FIND THAT THE HONBLE JURISDICTIONAL HIGH C OURT IN ITS RECENT DECISION IN THE CASE OF PCIT VS. DR. MURARI MOHAN KOLEY IN ITAT NO. 306 OF 2017, G.A. NO. 2968 OF 2017 DATED 18.07.2018 HAD ENDORSED THE AFORESAID V IEW. 9. RESPECTFULLY FOLLOWING THE ABOVE, WE SET ASIDE THE ORDER OF CIT-A AND CANCEL THE PENALTY OF RS. 6,81,615/- LEVIED BY THE AO U/S 271( 1)(C) OF THE ACT FOR A.Y 2006-07. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE IN THE APPEAL FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ARE ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 12 .10.2018 SD/- SD/- [A.T.VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 12.10.2018 SB, SR. PS 9 ITA NO.1676/KOL/2017 SHRI YASHVARDHAN MOHTA A.YR. 2006-07 9 COPY OF THE ORDER FORWARDED TO: 1. SHRI YASHVARDHAN MOHTA, 5/2, RAM KRISHNA LANE, K OLKATA-700003. 2. ACIT, CIRCLE-44, KOLKATA, 3, GOVERNMENT PLACE, K OLKATA-700001. 3..C.I.T.(A)- 4. C.I.T .- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT , KOLKATA BENCHES