International Seaport (Haldia) Private Limited , Kolkata V. DCIT, Circle - 12(1), Kolkata

ITA 170/KOL/2023

AI Insights

The case involves International Seaport (Haldia) Private Limited appealing against a penalty of Rs. 96,381 imposed by the AO under section 271(1)(c) for alleged furnishing of inaccurate particulars of income related to a disallowance claim under section 80IA for liquidated damages. The primary contention was the validity of the penalty notice, which was argued to be vague and non-specific, leading to a miscarriage of justice. The Tribunal referenced a decision by the jurisdictional High Court, which supported the assessee's position that a penalty notice must clearly specify the grounds for the penalty to ensure the assessee can adequately respond.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 122988 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 31-05-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 02-03-2023
• Other Referred Cases: PCIT vs Bijendra Kumar Poddar, CIT vs Manjunatha Cotton and Ginning Factory
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Invalid notice; Principle of natural justice; Set aside
• Section: 271(1)(c); 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH “C”, KOLKATA BEFORE SHRI RAJESH KUMAR, HON’BLE ACCOUNTANT MEMBER AND SHRI SONJOY SARMA, HON’BLE JUDICIAL MEMBER ITA No. 170/Kol/2023 Assessment Year: 2014-15 International Seaport (Haldia) Private Limited C/o. S.N. Ghosh & Associates, Advocates 2, Garstin Place, 2 nd Floor, Suite No. 203, Off Hare Street, Kolkata-700001. PAN: AAACI 9468 D Vs. DCIT, Circle-12(1), Kolkata. (Appellant) (Respondent) Present for: Appellant by : Shri Somnath Ghosh, Advocate Respondent by : Shri Vijay Kumar, Addl. CIT, Dr. DR Date of Hearing : 01.06.2023 Date of Pronouncement : 12.06.2023 O R D E R PER RAJESH KUMAR, AM: This appeal of the assessee for the assessment year 2014-15 is directed against the order dated 06.02.2023 passed by the ld. Commissioner of Income-tax Appeals, NFAC, Delhi [hereinafter referred to as ‘the ld. CIT(A)’]. 2. The issue raised in grounds of appeals is against the imposition of penalty of Rs. 96,381/- by ld. CIT(A) as levied by AO u/s 271(1)(c) of the Act. 3. The facts in brief are that the assessment was framed u/s 143(3) of the Act vide order dated 07.12.2016 in which the disallowance of Rs. 2,97,060/- was made by rejecting the claim u/s 80IA in respect of liquidated damages received by the assessee. Accordingly, the proceedings were initiated u/s 271(1)(c) of the Act by issuing a notice dated 07.12.2016. A penalty was levied on the ITA No.170/Kol/2023 International Seaport (Haldia) Private Limited A.Y. 2014-15 2 assessee by the AO vide order dated 30.06.2017 passed u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income. In the appellate proceedings, the ld. CIT(A) dismissed the appeal of the assessee by affirming the order. 4. At the outset, ld. counsel of the assessee drew our attention to the notice issued u/s 271(1)(c) of the Act a copy of which is filed at page 16 of the PB and submitted that the said notice is invalid as the AO has failed to strike off the redundant limb or has failed to mention one of the two limbs on which the penalty was proposed to levy. The ld. AR stated that while issuing show cause notice, there was complete non-application of mind by the AO as he did not mention the charge on which penalty was proposed to be levied thereby depriving the assesse from replying to the specific charge on which the penalty was to be imposed thereby causing the miscarriage of natural justice and fairplay. Thus the said notice is invalid and nullity in the eyes of law and the penalty imposed based on the said notice cannot be sustained. The ld. AR relied on the decision of jurisdictional High Court in the case of PCIT vs Bijendra Kumar Poddar IA No.GA/2/2018(Old No. GA/1832/2018) in ITAT No. 215/2018 and others wherein similar issue has been decided in favour of the assesse. The ld. AR therefore prayed the issue may be decided in favour of assessee on technical and legal ground. 5. The ld. DR, on the other hand, relied on the order of authorities below. 6. After hearing rival arguments of the parties and examining notice issued u/s 271(1)9c) of the Act , we find that undisputedly the notice has been issued without striking of one of the two limbs as ITA No.170/Kol/2023 International Seaport (Haldia) Private Limited A.Y. 2014-15 3 envisaged u/s 271(1)(c) of the Act by the AO. Therefore, the AO was casual issuing the notice as the said notice was issued in mechanical manner and in standard format. In our opinion, the invalid notice has deprived the assessee of his right to respond to the particular and specific charge on which the penalty was proposed to be levied. In our opinion, the said notice is invalid and nullity in the eyes of law and any order passed u/s 271(1)(c) of the Act also meet the same fate. The case of the assessee also find support from the decision of Hon’ble Jurisdictional High Court in the case of PCIT vs Brijendra Kumar Poddar(Supra) wherein the issue has been decided after considering the decision of Karnatka High court in the case of CIT vs Manjunatha Cotton and Ginning Factory reported in 359 ITR 565. The operative part of the decision is extracted below: “Penalty under section 271(1)(c) is a civil liability. Therefore, mens rea is not an essential element for imposing penalty for breach of such civil obligations or liabilities. Wilful concealment is not an essential ingredient for attracting civil liability. [Para 63] ■ Existence of conditions stipulated in section 271(1)(c) is a sine qua non for initiation of penalty proceedings under section 271. The existence of such conditions should be discernible from the assessment order or order of the Appellate Authority or Revisional Authority. Even if there is no specific finding regarding the existence of the conditions mentioned in section 271(1)(c), at least the facts set out in Explanation 1(A) and (B) should be discernible from the said order, which would, by a legal fiction, constitute concealment because of deeming provision. Even if these conditions do not exist in the assessment order passed, at least, a direction to initiate proceedings under section 271(1)(c) is a sine qua non for the Assessing Officer to initiate the proceedings because of the deeming provision contained in section 1(B). The said deeming provisions are not applicable to the orders passed by the Commissioner (Appeals) and the Commissioner. [Para 63] ■ The imposition of penalty is not automatic, i.e., imposition of penalty even if the tax liability is admitted, is not automatic. Even if the assessee has not challenged the order of assessment levying tax and interest and has paid the same, that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities which has resulted in payment of such tax or such tax liability came to be admitted, and if not, it would have escaped from tax net as opined by the Assessing Officer in the assessment order. Only when no explanation is offered ITA No.170/Kol/2023 International Seaport (Haldia) Private Limited A.Y. 2014-15 4 or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bona fide, an order imposing penalty can be passed. If the explanation offered, even though not substantiated by the assessee, is found to be bona fide and all facts relating to the same and material for the computation of his total income have been disclosed by him, no penalty can be imposed. [Para 63] ■ The direction referred to in Explanation 1B to section 271 should be clear and without any ambiguity. If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings in appeal, but the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. ■ Notice under section 274 should specifically state the grounds mentioned in section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form, where all the grounds mentioned in section 271 are mentioned, would not satisfy requirement of law. The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. [Para 63] ■ The penalty proceedings are distinct from the assessment proceedings. The proceedings for imposition of penalty, though emanate from proceedings of assessment, are independent and separate aspect of the proceedings. The findings recorded in the assessment proceedings in so far as 'concealment of income' and 'furnishing of incorrect particulars' would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings. [Para 63]” 7. Considering the facts of the case in the light of above decision, we are inclined to set aside the order of ld. CIT(A) and direct the AO to delete the penalty. 8. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 12.06.2023 Sd/- Sd/- [Sd/- (SONJOY SARMA) (RAJESH KUMAR) JUDICIALMEMBER ACCOUNTANT MEMBER Kolkata, Dated:12.06.2023 Biswajit, Sr. P.S. ITA No.170/Kol/2023 International Seaport (Haldia) Private Limited A.Y. 2014-15 5 Copy to: 1. The Appellant: International Seaport (Haldia) Private Limited. 2. The Respondent: DCIT, Circle-12(1), Kolkata. 3. The CIT, 4. The CIT (A) 5. The DR //True Copy// [ By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata