Shri. Suryanarayanan Venkataraman, Bangalore V. Assistant Commissioner Of Income Tax, Circle- 5(3)(2), Bangalore

ITA 1772/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7664 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 13-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NARENDRA JAIN
• Keywords: Principle of natural justice; Initiation of penalty proceedings
• Section: 271(1)(c); 250; 274; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 1772 / BANG /201 9 ASSESSMENT YEAR : 20 1 4 - 1 5 SHRI. SURYANARAYANAN VENKATARAMAN, NO.4-104, PURVA FAIRMONT APARTMENT, 24 TH MAIN, 2 ND SECTOR, HSR LAYOUT, BENGALURU 560 102. PAN : A GZPS 6616 D VS. THE ASSISTANT COMMISSIONER OF INCOME TAX , CIRCLE 5(3)(2), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI. NARENDRA JAIN , ADVOCATE REVENUE BY : SHRI. SUNIL KUMAR AGARWAL, ADDL. CIT DATE OF HEARING : 25 . 11 .201 9 DATE OF PRONOUNCEMENT : 30 . 01 .20 20 O R D E R PER A. K. GARODIA, AM THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-5, BENGALURU, DATED 22.06.2019, FOR ASSESSMENT YEAR 2014-15. ALTHOUGH THE ASSESSEE HAS RAISED SEVERAL GROUNDS OF APPEAL BUT THE ONLY GRIEVANCE OF THE ASSESSEE IS REGARDING PENALTY OF RS.8,32,767/- IMPOSED BY THE AO UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 2. IN THE COURSE OF HEARING, LEARNED AR OF THE ASSESSEE SUBMITTED A COPY OF NOTICE ISSUED BY AO UNDER SECTION 274 R.W.S. 271 OF THE IT ACT 1961 ON 30.12.2016 AND IT IS AVAILABLE ON PAGE 61 OF THE APPEAL MEMO AND HE POINTED OUT THAT IN THIS NOTICE, ALLEGATION IS NOT MADE CLEAR BY THE AO AND HE STATED THAT THE ASSESSEE IS GUILTY OF CONCEALMENT OF INCOME OR FURNISHING OF INADEQUATE PARTICULARS OF INCOME. HE SUBMITTED THAT UNDER THESE FACTS, THE ITA NO. 1772/BANG/2019 PAGE 2 OF 6 PENALTY ORDER OF THE AO IS NOT SUSTAINABLE AND IN THIS REGARD, HE PLACED RELIANCE ON THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY AS REPORTED IN 35 TAXMANN.COM 250 (KARN.). 3. AS AGAINST THIS, LEARNED DR OF THE REVENUE SUPPORTED THE ORDER OF LEARNED CIT(A). HE ALSO PLACED RELIANCE ON TRIBUNAL ORDER RENDERED IN THE CASE OF P. M. ABDULLA VS. ITO IN ITA NOS.1223 AND 1224/BANG/2012 DATED 17.10.2016. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE NOTE THAT AS PER NOTICE ISSUED BY THE AO UNDER SECTION 274 R.W.S. 271 OF THE IT ACT, 1961 ON 30.12.2016, THE ALLEGATION OF THE AO IS VAGUE BECAUSE THE AO IS SAYING THAT THE ASSESSEE HAS CONCEALED THE PARTICULAR OF HIS INCOME OR FURNISHED INADEQUATE PARTICULARS OF SUCH INCOME AND THIS IS NOT CLEARLY ALLEGED AS TO WHETHER THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INADEQUATE PARTICULARS OF INCOME. AS PER THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT CITED BY THE LEARNED AR OF THE ASSESSEE HAVING BEEN RENDERED IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY (SUPRA), THE CONCLUSION OF THE HONBLE HIGH COURT IS AVAILABLE IN PARA NO.63 OF THIS JUDGMENT WHICH IS REPRODUCED HEREINBELOW FOR READY REFERENCE: 63. IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EMERGES IS AS UNDER: A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIABILITY. B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSING PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. C)WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY. ITA NO. 1772/BANG/2019 PAGE 3 OF 6 D)EXISTENCE OF CONDITIONS STIPULATED IN SECTION 271(1)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271. E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DIS CERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORITY OR REVISIONAL AUTHORITY. F) 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) & (B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALMENT BECAUSE OF DEEMING PROVISION. G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE ASS ESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDINGS UNDER SECTION 271(1)(C) IS A SINE QUA NON FOR THE ASSESSMENT OFFICER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SECTION 1(B). H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND THE COMMISSIONER. I)THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. J)IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADM ITTED IS NOT AUTOMATIC. K)EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORDER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TAX AND INTEREST 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 IT 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 AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. ITA NO. 1772/BANG/2019 PAGE 4 OF 6 L)ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXP LANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT BONAFIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED. M)IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUBSTANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. N) THE DIRECTION REFERRED TO IN EXPLANATION 1B TO SEC TION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. P) NOTICE UNDER SECTION 274 OF THE ACT 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 Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. R) 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. S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AND FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. ITA NO. 1772/BANG/2019 PAGE 5 OF 6 T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EMANATE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEPENDENT AND SEPARATE ASPECT OF THE PROCEEDINGS. U) 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. 5. IN CLAUSE (P) OF THIS PARA 63, THIS IS THE CONCLUSION OF THE HONBLE KARNATAKA HIGH COURT THAT NOTICE UNDER SECTION 274 OF THE IT ACT, 1961 SHOULD SPECIFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C) OF THE ACT, I.E. WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INADEQUATE PARTICULARS OF INCOME. 6. IN CLAUSE (R) OF THIS PARA 63 OF THIS JUDGMENT, IT IS ALSO CONCLUDED THAT THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY BECAUSE OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. AS PER THIS JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE FACTS OF THE PRESENT CASE AS NOTED ABOVE, THE PENALTY ORDER PASSED BY THE AO IS NOT SUSTAINABLE. NOW, WE EXAMINE THE APPLICABILITY OF THIS TRIBUNAL ORDER CITED BY LEARNED DR OF THE REVENUE HAVING BEEN RENDERED IN THE CASE OF SHRI. P. M. ABDULLA VS. ITO (SUPRA). IN PARA NO.9 OF THE TRIBUNAL ORDER, THIS FACT IS NOTED BY THE TRIBUNAL IN THAT CASE THAT THE COLUMN RELEVANT TO CONCEALMENT OF INCOME HAS BEEN TICKED BY THE AO. HENCE, IN OUR CONSIDERED OPINION, THIS TRIBUNAL ORDER IS UNDER DIFFERENT STATE OF FACTS WHERE THE AO HAS TICKED THE COLUMN RELEVANT TO ITA NO. 1772/BANG/2019 PAGE 6 OF 6 CONCEALMENT OF INCOME. BUT IN THE PRESENT CASE, THE AO HAS NOT SPECIFICALLY STATED AS TO WHETHER THE ASSESSEE IS GUILTY OF CONCEALMENT OF INCOME OR FURNISHING OF INADEQUATE PARTICULARS OF INCOME AND THEREFORE, THIS TRIBUNAL ORDER RENDERS NO HELP TO THE REVENUE IN THE PRESENT CASE BECAUSE OF DIFFERENCE IN FACTS. HENCE, WE RESPECTFULLY FOLLOW THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) AND HOLD THAT THE PENALTY IMPOSED BY THE AO UNDER SECTION 271 (1) (C) OF THE IT ACT, 1961 IS NOT SUSTAINABLE AND WE DELETE THE SAME. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- SD/- (PAVAN KUMAR GADALE) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE. DATED: 30 TH JANUARY, 2020. /NS/* COPY TO: 1. APPELLANT S 2. RESPON DENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.