M/s. Collabrant Incubators Private Limited, Bangalore V. The Income Tax Officer, Ward- 2(1)(2), Bangalore

ITA 1709/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2833 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 31-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISRA
• Assessee Lawyers: PRATHIBHA
• Keywords: Principle of natural justice; Tax effect; Set aside
• Section: 271(1)(c); 143(3); 274; 13; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI. B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA 1709 & 1710/BANG/2019 ASSESSMENT YEARS : 2012 13 & 2013-14 M/S COLLABRANT INCUBATORS PVT. LTD., OLD ADDRESS : NO.29, 1 ST FLOOR, 17 TH MAIN, 33 RD CROSS, 4 TH BLOCK, JAYANAGAR, BANGALORE-560 041. PRESENTLY AT : NO.729, 38 TH CROSS, 16 TH A MAIN, 4 TH T BLOCK, JAYANAGAR, BANGALORE. PAN AACCC 5116 G VS. THE INCOME TAX OFFICER, WARD 2(1) (2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SMT. PRATHIBHA, ADVOCATE RESPONDENT BY : SHRI PRIYADARSHI MISRA, JCIT - DR DATE OF HEARING : 05-03-2020 DATE OF PRONOUNCEMENT : 13-03-2020 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT PENALTY APPEALS IS HAS BEEN FILED BY ASSESS EE AGAINST SEPARATE ORDER DATED 23/05/2019 PASSED BY L D.CIT(A)-2, BANGALORE FOR ASSESSMENT YEARS 2012-13 AND 2013-14. GROUNDS RAISED BY ASSESSEE IN BOTH THE APPEALS ARE IDENTICA L TO EACH OTHER PAGE 2 OF 7 ITA 1709 & 1710/BANG/2019 A. YS : 2012 13 & 2013-14 WITH ONLY DIFFERENCE IN AMOUNTS. FOR SAKE OF CONVEN IENCE, WE ARE REPRODUCING GROUNDS FOR ASSESSMENT YEAR 2012-13 AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT FOR THE RELEVANT ASSESSMENT YEAR CONFIRMED BY THE CIT(A) IS OPPOSED TO LAW AND TO THE PRINCIPLES OF NATURAL JUSTICE AND ACCORD INGLY THE IMPUGNED ORDER OF PENALTY IS LIABLE TO BE CANCELLED . TAX EFFECT : RS.3,13,796/- THE LEARNED CIT (A) HAVING FAILED TO CONSIDERED THE PROCEEDINGS HAD BEEN INITIATED EITHER FOR CONCEALME NT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS IN T HE SHOW CAUSE NOTICE, THE PENALTY PROCEEDINGS INITIATED WER E BAD IN LAW AND CONSEQUENTLY THE PENALTY CONFIRMED IS ALSO BAD IN LAW AND LIABLE TO BE DELETED AS HELD BY THE JURISDI CTIONAL HIGH COURT, AND ACCORDINGLY THE PENALTY IS LIABLE TO BE CANCELLED. R THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED - 3,13 ,796/- THAT THE APPELLANT HAD DISCLOSED ALL THE MATERIAL A ND GIVEN EXPLANATION TOWARDS JUSTIFICATION OF THE CLAIM AND ACCORDINGLY THERE WAS NO REASON TO HOLD THAT THE APPELLANT HAD CONCEALED INCOME OR FURNISHED INACCURATE I PARTICULARS TO JUS TIFY THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THAT MERE FACT THAT THE DISALLOWANCE AS MADE IN THE ASSESSMENT HAV E NOT BEEN PURSUED FURTHER IN APPEAL WAS NOT A SUFFICIENT REASON TO JUSTIFY THE LEVY OF PENALTY. - THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT FURNISHED THE DETAIL S AND ALSO GIVEN EXPLANATION TO JUSTIFY THE CLAIM OF THE APPEL LANT AND THE ASSESSING AUTHORITY HAVING NOT FOUND THAT THE CLAIM OF DEDUCTION WAS FALSE, HE OUGHT TO HAVE ACCEPTED THE EXPLANATION AND REFRAINED FROM MAKING THE IMPUGNED PENALTY. THE CIT (A) OUGHT TO HAVE APPRECIATED THAT THE NOTI CE HAVING BEEN ISSUED UNDER SECTION 274 READ WITH SECTION 271 (1)(C) OF THE ACT IN A MECHANICAL MANNER, THE PENALTY ORDER P ASSED UNDER SECTION 271(1)(C) OF THE ACT IS NOT SUSTAINAB LE IN THE EYE OF LAW. THE APPELLANT BEGS TO SUBMIT THAT THE DECISION OF T HE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MA NJUNATHA COTTON & GINNING FACTORY (2013) 359 ITR 565 (KARN) IS SQUARELY APPLICABLE AND THEREFORE THE IMPUGNED ORDE R OF THE AUTHORITIES BELOW IS REQUIRED TO BE SET ASIDE. PAGE 3 OF 7 ITA 1709 & 1710/BANG/2019 A. YS : 2012 13 & 2013-14 THE LEARNED ASSESSING AUTHORITY OUGHT TO HAVE APPRE CIATED THE OMISSION TO OFFER THE INCOME WAS ONLY AN INADVE RTENT MISTAKE ON WHICH THE PENALTY IS NOT EXIGIBLE. WITHOUT PREJUDICE THE DISALLOWANCES AS GENERAL CONF IRMED BY THE LEARNED CIT (A) ARE ARBITRARY EXCESSIVE AND OUG HT TO BE REDUCED SUBSTANTIALLY FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE GENERA L URGED AT THE TIME OF HEARING THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED. 2. BRIEF FACTS FOR ASSESSMENT YEAR 2012-13 ARE AS UND ER: ASSESSEE FILED ITS RETURN OF INCOME FOR YEAR UNDER CONSIDERATION ON 27/09/2012 DECLARING TOTAL INCOME OF RS.7,84,360 /-. LD.AO COMPLETED ASSESSMENT UNDER SECTION 143(3) AT AN INC OME OF RS.17,99,882/- BY MAKING FOLLOWING DISALLOWANCES: DISALLOWANCE UNDER SECTION 36 (1) (VA) RS.55,512/- DISALLOWANCE UNDER SECTION 14 A OF THE ACT RS. 15,956/- DISALLOWANCE OF DIMINUTION IN VALUE OF INVESTMENT CLAIMED RS.9,07,000/- INTEREST ON INCOME TAX REFUND RS. 37, 054/-. 3. AGGRIEVED BY ADDITIONS MADE BY LD.AO ASSESSEE PREFERRED APPEAL BEFORE LD.CIT (A). LD.CIT (A) UPHELD THE ADD ITIONS MADE BY LD.AO. IT HAS BEEN SUBMITTED THAT ASSESSEE DID NOT PURSUE THE APPEAL ANY FURTHER. 4. IN THE MEANWHILE, LD.AO INITIATED PENALTY PROCEE DINGS UNDER SECTION 271 (1) (C) OF THE ACT. ASSESSEE FIL ED RESPONSE TO THE NOTICE BY GIVING EXPLANATION TO VARIOUS EXPENSE S AND DEDUCTIONS CLAIMED. LD.AO DID NOT CONSIDER EXPLANAT IONS AND SUBMISSIONS OFFERED BY ASSESSEE AND HELD THAT ASSES SEE HAS FURNISHED INACCURATE PARTICULARS RESULTING IN CONCE ALMENT OF INCOME IN CLAIMING DEDUCTION/SHORT COMPUTATION OF I NCOME PAGE 4 OF 7 ITA 1709 & 1710/BANG/2019 A. YS : 2012 13 & 2013-14 AGGREGATING TO RS.10,15,522/-. HE THUS LEVIED 100% PENALTY OF THE TAX, WORKING OUT TO RS.3,13,796/- FOR YEAR UNDE R CONSIDERATION. 5. AGGRIEVED BY PENALTY LEVIED BY LD.AO, ASSESSEE P REFERRED APPEAL BEFORE LD.CIT (A). LD.CIT (A) PLACING RELIAN CE ON DECISION OF THIS TRIBUNAL IN CASE OF SHRI P.M.ABDULLA VS ITO IN ITA NO. 1223 AND 1234/BE/2012, UPHELD THE PENALTY LEVIED BY LD. AO. 6. AGGRIEVED BY ORDER PASSED BY LD.CIT (A) ASSESSEE IS IN APPEAL BEFORE US NOW. 7. LD.AR SUBMITTED THAT, PENALTY PROCEEDINGS INITIA TED BY LD.AO VIDE NOTICE DATED 27/07/2015 UNDER SECTION 27 1 READ WITH 274 OF THE ACT LEVYING PENALTY UNDER SECTION 271 (1 ) (C) OF THE ACT IS BAD IN LAW AND DESERVES TO BE QUASHED. HE PLACED RELIANCE ON DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF MANJUNATHA COTTON AND GINNING FACTORY REPORTED IN 359 ITR 565 WHICH HAS BEEN SUBSEQUENTLY UPHELD IN SSAS EMERALD MEADOWS IN SLP (CC 141485/2016) PASSED BY HONBLE SUPREME COURT VIDE ORDER DATED 05/08/2016 . 8. REFERRING TO NOTICE ISSUED UNDER SECTION 274 REA D WITH 271 OF THE ACT, LD.AR SUBMITTED THAT NOTICE DOES NOT SP ECIFY AS TO WHETHER ASSESSEE IS GUILTY OF HAVING FURNISHED INA CCURATE PARTICULARS OF INCOME OR CONCEALED PARTICULARS OF INCOME. HE SUBMITTED THAT HONBLE JURISDICTIONAL HIGH COURT IN CASE OF MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HAS HELD THAT WHERE A SHOW CAUSE NOTICE UNDER SECTION 274 OF THE ACT DOES NOT SPECIFY AS TO EXACT CHARGE BY STRIKING OUT THE IRRE LEVANT PORTION OF THE PRINTED SHOW CAUSE NOTICE, IMPOSITION OF PENALT Y ON THE BASIS OF SUCH INVALID SHOW CAUSE NOTICE CANNOT BE SUSTAIN ED. PAGE 5 OF 7 ITA 1709 & 1710/BANG/2019 A. YS : 2012 13 & 2013-14 9. ON THE CONTRARY, LD.SR.DR SUBMITTED THAT ISSUE R AISED BY ASSESSEE HAS BEEN CONSIDERED BY LD.CIT(A) AT LENGTH . IT HAS BEEN SUBMITTED THAT THIS IS A CURABLE DEFECT UNDER 292B OF THE ACT. LD,SR.DR SUPPORTED THE ORDERS PASSED BY LD.CIT (A). WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN LIGHT OF RECORDS PLACED BEFORE US. 10. HONBLE KARNATAKA HIGH COURT IN PARA 59 OF ITS ORDER PASSED IN CASE OF MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) OBSERVED AND HELD AS UNDER: 59. AS THE PROVISION STANDS, THE PENALTY PROCEEDINGS C AN BE INITIATED ON VARIOUS GROUND SET OUT THEREIN. IF THE ORDER PASSED BY THE AUTHORITY CATEGORICALLY RECORDS A FINDING REGARDING THE EXIST ENCE OF ANY SAID GROUNDS MENTIONED THEREIN AND THEN PENALTY PROCEEDINGS IS I NITIATED, IN THE NOTICE TO BE ISSUED UNDER SECTION 274, THEY COULD CONVENIENTLY R EFER TO THE SAID ORDER WHICH CONTAINS THE SATISFACTION OF THE AUTHORITY WH ICH HAS PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD N OT BE DISCERNED FROM THE SAID ORDER AND IF IT IS A CASE OF RELYING ON DEEMIN G PROVISION CONTAINED IN EXPLANATION 1 OR IN EXPLANATION 1(B), THEN THOUG H PENALTY PROCEEDINGS ARE IN THE NATURE OF CIVIL LIABILITY, IN FACT, IT IS PE NAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED I N SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND I MPOSING PENALTY ON HIM AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OPPORTUNITY T O MEET THE CASE OF THE DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(L)(C) DO NOT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED FORM WHERE ALL THE GROUND MENTION ED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASSESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS S ERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 100% TO 300% OF THE TAX LIABILI TY. AS THE SAID PROVISIONS HAVE TO BE HELD TO BE STRICTLY CONSTRUED, NOTICE IS SUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPE CIFICALLY. OTHERWISE, PAGE 6 OF 7 ITA 1709 & 1710/BANG/2019 A. YS : 2012 13 & 2013-14 PRINCIPLES OF NATURAL JUSTICE IS OFFENDED IF THE SH OW CAUSE NOTICE IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. 11. THE PRESENT FACTS OF THE CASE WE NOTE THAT IN T HE ASSESSMENT ORDER PENALTY HAS BEEN SIMPLY INITIATED WITHOUT REC ORDING ANY SATISFACTION OF THE AUTHORITY WHO PASSED THE ASSESS MENT ORDER. FROM ASSESSMENT ORDER PASSED U/S 143(23), IT IS NOT DISCERNIBLE AS TO WHETHER PENALTY IS LEVIED FOR CONCEALING PART ICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME. SUBSEQUENTLY NOTICE U/S 274 R.W.S 271 ALSO DO NOT S PECIFY IT. THEREAFTER WHEN LD.AO PASSED PENALTY ORDER ON 15/03 /2018, PENALTY IS LEVIED FOR FURNISHING OF INACCURATE PART ICULARS RESULTING IN CONCEALMENT OF INCOME. IN OUR OPINION THERE IS A CLEAR VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AND LD. AO HAS PAS SED PENALTY ORDER WITHOUT APPLICATION OF MIND. FURTHER DISALLO WANCE MADE ARE MOSTLY DEBATABLE AND LD. AO REJECTED EXPLANATIO N OFFERED BY ASSESSEE WITHOUT THERE BEING ANY ADVERSE FINDINGS. CONSIDERING TOTALITY OF FACTS, WE DO NOT FIND IT A PROPER CASE FOR LEVY OF PENALTY. 12. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF MANJUNATHA COTTON AND GINNING FACTORY (SUPRA), WE QUASH AND SET-ASIDE THE NOTICE DATED 27/07/2015 UNDER SECTION 271 READ WITH 274 OF THE ACT. AS THE NOTICE HAS BEEN QUASHED THE PENALTY ORDER PASSED BY LD. AO ALS O STANDS QUASHED. ACCORDINGLY APPEAL FILED BY ASSESSEE STANDS ALLOWED . ------- THIS SPACE IS LEFT VACANT INTENTIONALLY - ------- PAGE 7 OF 7 ITA 1709 & 1710/BANG/2019 A. YS : 2012 13 & 2013-14 ASSESSMENT YEAR 2013-14: 13. ADMITTEDLY, FACTS AND CIRCUMSTANCES IN THIS ASS ESSMENT YEAR IS ALSO SIMILAR TO THAT DISCUSSED HEREIN ABOVE FOR ASSESSMENT YEAR 2012-13. 14. APPLYING THE VIEW TAKEN HEREINABOVE MUTATIS MUT ANDIS TO THE FACTS OF PRESENT CASE, WE QUASH AND SET-ASIDE T HE NOTICE DATED 23/12/2015 UNDER SECTION 271 READ WITH 274 OF THE A CT. AS THE NOTICE HAS BEEN QUASHED THE PENALTY ORDER PASSED BY LD. AO ALSO STANDS QUASHED. ACCORDINGLY APPEAL FILED BY ASSESSEE STANDS ALLOWED . IN THE RESULT APPEAL FILED BY ASSESSEE FOR ASSESSME NT YEAR 2012-13 AND 2013-14 STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH MARCH, 2020. SD/- SD/- (B. R. BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 13 TH MARCH, 2020. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL. BANGALORE.