DHARNI DEVELOPERS, BHIWANDI V. ACIT CEN CIR 2, THANE

ITA 1850/MUM/2012

• Counselvise Citation: 185019914 RSA 2012
• Duration Of Justice: 2 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 28-10-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 16-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA SWAMY
• Assessee Lawyers: DHARMESH SHAH
• Keywords: Principle of natural justice; Initiation of penalty proceedings
• Section: 27

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE HONBLE S/SHRI H.L. KARWA, PRESIDENT AND B. R.BASKARAN (AM) . . , . . , ./ I.T.A. NO.1848 TO 1851/MUM/2012 ( / ASSESSMENT YEARS :2003-04 TO 2006-07) M/S DHARNI DEVELOPERS S NO.131, GROUND FLOOR, DHARNI ARCADE, VILLAE RAHNAL, ANJUR PHATA, BHIVANDI-421302 / VS. ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, THANE. ( ! / APPELLANT) .. ( '# ! / RESPONDENT) ./ $% ./ PAN/GIRNO.:AADFD6145N ! & / ASSESSEE BY : SHRI DHARMESH SHAH '# ! ' & /RESPONDENT BY : SHRI.MANJUNATHA SWAMY ( ) ' * + / DATE OF HEARING : 28.10.2014 ,- ' * + /DATE OF PRONOUNCEMENT : 07.01.2015 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: ALL THE FOUR APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE LD.CIT(A)-1, THANE CONFI RMING THE PENALTY LEVIED U/S 271(1)( C ) OF THE INCOME TAX ACT, 1961(THE AC T) FOR THE ASSESSMENT YEARS 2003-04 TO 2006-07. 2. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO THE ADDITIONAL GROUND RAISED BY THE AS SESSEE, WHEREIN THE ASSESSEE HAD CHALLENGED THE VALIDITY OF PENALTY ORDERS. THE LD A.R SUBMITTED THAT THE AO HAS STATED IN THE ASSESSMENT ORDER FOR THE YEARS UN DER CONSIDERATION THAT THE ASSESSEE HAS CONCEALED ITS PARTICULARS OF INCOME A ND HENCE PENAL PROCEEDINGS ITA NO.1848 TO 1851/M/2012 2 ARE INITIATED UNDER SECTION 271(1)(C) OF THE ACT. HOWEVER, IN THE PENALTY ORDER, THE AO HAS CONCLUDED THAT THE ASSESSEE HAS DELIBERA TELY FURNISHED INACCURATE PARTICULARS OF THEIR INCOME AND ACCORDINGLY LEVIED PENALTY. THE LD A.R SUBMITTED THAT THE ASSESSING OFFICER HAS INITIATED PENALTY PR OCEEDINGS UNDER ONE LIMB OF THE PROVISIONS OF SEC. 271(1)(C) OF THE ACT, BUT LEVIED PENALTY UNDER ANOTHER LIMB WHICH IS NOT PERMISSIBLE UNDER THE ACT. 3. THE LD. COUNSEL, BY PLACING RELIANCE ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SHRI SAMSON PERINC HERY V/S ACIT IN ITA NO.4625/MUM/2013 (AY-2003-04) DATED 11.10.2013 AND ALSO ON THE DECISION OF THE HONBLE KARNARAKA HIGH COURT RENDERED IN THE C ASE OF CIT V/S MANJUNATHA COTTON AND GINNING FACTORY (KARN) REPORTED IN 359 ITR 565 (KARN), SUBMITTED THAT THE AO SHOULD BE CLEAR AS TO THE LIMB FOR WHIC H HE HAS INITIATED PENALTY PROCEEDINGS. THE LD. COUNSEL SUBMITTED THAT THE AO HAVING INITIATED PENALTY PROCEEDINGS FOR CONCEALMENT OF PARTICULARS OF ITS I NCOME SHOULD NOT HAVE LEVIED PENALTY FOR FURNISHING INACCURATE PARTICULARS OF IN COME. ACCORDINGLY, HE SUBMITTED THAT THE IMPUGNED PENALTY ORDERS FOR ALL THE ASSESS MENT YEARS UNDER CONSIDERATION ARE LIABLE TO BE SET ASIDE ON THIS LE GAL/TECHNICAL GROUND. 4. ON THE CONTRARY, THE LD. DR SUBMITTED THAT THE A O HAS ISSUED PENALTY NOTICES BY STATING THAT IT APPEARS TO HIM THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF ITS INCOME OR FURNISHED INACCURATE P ARTICULARS OF INCOME. ACCORDINGLY, THE LD. DR SUBMITTED THAT THE ASSESSIN G OFFICER HAS INITIATED PENALTY PROCEEDINGS FOR BOTH THE DEFAULTS PRESCRIBED UNDER SEC. 271(1)(C) OF THE ACT. ACCORDINGLY HE SUBMITTED THAT THE ASSESSEE WAS NOT RIGHT IN SUBMITTING THAT THE AO HAS INITIATED PENALTY PROCEEDINGS FOR THE DEFAUL T RELATING TO CONCEALMENT OF ITS PARTICULARS OF INCOME ONLY. THE LD. DR SUBMITTED T HAT THE AO, DURING THE COURSE OF PENALTY PROCEEDINGS, HAS COME TO THE CONCLUSION THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. ACCORD INGLY THE LD D.R CONTENDED THAT THE THESE ORDERS CANNOT BE FOUND FAULT ON THIS LEGAL/TECHNICAL GROUND, SINCE THE PENALTY PROCEEDINGS HAVE BEEN INITIATED FOR BOT H THE DEFAULTS WHICH FACT IS EVIDENCE FROM THE PENALTY NOTICES ISSUED BY THE ASS ESSING OFFICER. THE LD D.R FURTHER SUBMITTED THAT THE TWO TYPES OF DEFAULTS ME NTIONED IN SEC. 271(1)(C) ULTIMATELY LEAD TO EVASION OF TAX THROUGH CONCEALME NT OF INCOME AND THE PENALTY IS ULTIMATELY LEVIED ON THE BASIS OF AMOUNT OF TAX SOUGHT TO BE EVADED. THIS IS ITA NO.1848 TO 1851/M/2012 3 VERY MUCH MADE CLEAR UNDER EXPLANATION 1 TO SEC. 27 1(1)(C), WHICH PROVIDES FOR DEEMED CONCEALMENT OF INCOME. 5. WE HAVE HEARD THE PARTIES ON THIS LEGAL ISSUE AN D PERUSED THE RECORD. WE NOTICE THAT THE AO HAS OBSERVED AS UNDER IN THE ASS ESSMENT ORDER RELATING TO THE ASSESSMENT YEAR 2003-04: SINCE THE ASSESSEE HAD NOT OFFERED THIS AMOUNT OF RS.7,63,600/- IN ITS RETURN OF INCOME FILE U/S 139(1) OF THE IT ACT, THE ASSESSEE HAS CONCEALED HIS PARTICULARS OF INCOME AND PENAL PROCE EDINGS ARE INITIATED U/S 271(1)( C) OF THE ACT. IDENTICAL OBSERVATIONS HAVE BEEN MADE BY THE AO IN OTHER YEARS UNDER CONSIDERATION ALSO. SINCE THE PENALTY NOTICES ARE ISSUED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IN OUR VIEW, THE SAID NOTIC ES HAVE TO BE READ ALONG WITH THE ASSESSMENT ORDER. ACCORDINGLY, EVEN IF THE ASS ESSING OFFICER HAS FAILED TO STRIKE DOWN ANY ONE OF THE TWO DEFAULTS, THE INTENT ION OF THE ASSESSING OFFICER FOR INITIATING THE PENALTY PROCEEDINGS COULD BE ASCERTA INED FORM THE ASSESSMENT ORDER. IN ALL THE YEARS UNDER CONSIDERATION, THE S OLITARY ADDITION MADE BY THE ASSESSING OFFICER WAS RELATED TO UNACCOUNTED BUSINE SS RECEIPTS. THE ABOVE SAID OBSERVATIONS MADE BY THE ASSESSING OFFICER IN THE A SSESSMENT ORDERS WOULD SHOW THAT THE PENALTY PROCEEDINGS WERE INITIATED FO R CONCEALMENT OF PARTICULARS OF INCOME ONLY. HOWEVER IN THE PENALTY ORDER, TH E AO HAS CONCLUDED AS UNDER : THUS IT IS CLEAR THAT THE ASSESSEE HAS TRIED TO EV ADE THE TAXES ON INCOME BY FILING INACCURATE PARTICULARS OF THEIR INCOME AN D THEREBY CONCEALING THE SAME. I THEREFORE, HOLD THAT THE ASSESSEE IN THIS CASE HAS DELIBERATELY FURNISHED INACCURATE PARTICULARS OF THEIR INCOME FOR RELEVANT PREVIOUS YEAR THEREBY ATTRACTING PENALTY PROVISION U/S 271(1)(C) OF THE IT ACT. I AM THEREFORE, SATISFIED THAT THIS IS A FIT CASE FOR LE VY OF PENALTY U/S 271(1)( C ) OF THE ACT, 1961. THUS, IT CAN BE NOTICED THAT THE AO, AFTER HAVING I NITIATED PROCEEDINGS FOR CONCEALING THE PARTICULARS OF INCOME, HAS LEVIED PENALTY FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 6. AT THIS STAGE, IT IS PERTINENT TO REFER TO THE D ECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF K.M.BHATIA (QUARRY) V/S CIT REPORTED IN 193 ITR 379(GUJ), WHEREIN THE HONBLE GUJARAT HIGH COURT HA S HELD THAT PENALTY PROCEEDING HAVING BEEN INITIATE ON THE GROUND OF F URNISHING INACCURATE ITA NO.1848 TO 1851/M/2012 4 PARTICULARS OF INCOME, IMPOSITION OF PENALTY ON TH E GROUND OF CONCEALMENT OF INCOME WAS NOT JUSTIFIED. IDENTICAL VIEW HAS BEE N EXPRESSED BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V/S LAKHDHIR LALJI [1972] 85 ITR 77 (GUJ). 7. A CO-ORDINATE BENCH OF THE MUMBAI TRIBUNAL HAS A LSO CONSIDERED AN IDENTICAL ISSUE IN THE CASE OF SHRI SAMSON PERINCHERY (SUPRA), WHEREIN THE AO HAD INITIATED PENALTY PROCEEDINGS FOR FURNISHING I NACCURATE PARTICULARS OF INCOME, HOWEVER, LEVIED PENALTY FOR CONCEALMENT OF PARTICULARS OF INCOME. THE CO-ORDINATE BENCH AFTER CONSIDERING THE DECISIO N OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V/S MANJUNATHA COTTO N AND GINNING FACTORY (KARN) (SUPRA) HAS OBSERVED AND HELD AS UNDER : 12. THE ABOVE EXTRACTS REVEAL THAT THE AO HAS NOT APPLIED HIS MIND TO THE FACT FOR WHICH REASON OF THE PENALTY, THE NOTICES W ERE ISSUED. THE ABOVE DOCUMENTS REVEAL THAT THE PENALTY PROCEEDINGS WERE INITIATED FOR FAILURE TO FURNISH INACCURATE PARTICULARS OF INCOME AND HOW EVER, THE PENALTY WAS LEVIED FOR CONCEALMENT OF INCOME . 12.1. IN THIS REGARD, WE HAVE PERUSED THE SAID PARA S 59 TO 61 OF THE HON4BLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNA THA COTTON & GINNING FACTORY (SUPRA) AND THE SAME READ AS UNDER: NOTICE UNDER SECTION 274 59. AS THE PROVISION STANDS, THE PENALTY PROCEEDING S CAN 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 REFER 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 THOUGH 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 MENTION ED IN SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEN D IMPOSING 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(1)(C) DO NOT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED FORM W HERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIRE MENT OF LAW WHEN THE CONSEQUENCES OF THE ASSESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 10 0% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HAVE TO BE HELD T O BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY . OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFEN DED ITA NO.1848 TO 1851/M/2012 5 IF THE SHOW CAUSE NOTICE IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT I S TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INAC CURATE PARTICULARS OF INCOME . NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOT H THE OFFENCES AND IN SOME CASES THERE MAY BE OVERLAPPING OF THE T WO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE PENALTY PROCEEDINGS ALS O MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR F INDING HIM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW . IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROU NDS MENTIONED IN SECTION 271(L)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUND S 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 U PON TO ANSWER. IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENA LTY TO IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDI NGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEN D PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROC EEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON T HE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IM POSITION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERM INED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERI ALS IN THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDE R WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAI NABLE. 61 THE ASSESSING OFFICER IS EMPOWERED UNDER THE ACT TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COURSE OF A NY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURAT E PARTICULARS OF TOTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING IN ACCURATE PARTICULARS OF INCOME ARE DIFFERENT. THUS THE ASSESSING OFFICER WH ILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT WHETHER IS IT A CASE OF CONCEALMENT OF INCOME OR IS IT A CASE OF FURNISHING OF INACCURATE PARTICULAR S. THE APEX COURT IN THE CASE OF ASHOK PAL REPORTED IN (2007) 292 ITR 11 (C) AT P AGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PAR TICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN T HE CASE OF MANU ENGINEERING REPORTED IN 122 ITR 306 AND THE DELHI H IGH COURT IN THE CASE OF VIRGO MARKETING REPORTED IN 171 TAXMANN 156, HAS HELD THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NOT SUSTAINABLE . THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE STANDARD PROF ORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS T O NON-APPLICATION OF MIND . 13. FROM THE ABOVE, IT IS CLEAR THAT THE PENALTY SH OULD BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR HERE THE PENALTY IS NOT SUSTAINABLE. THEREFORE, CONSIDERING THE SAM E, WE ARE OF THE OPINION THAT THE GROUND RAISED BY THE ASSESSEE SHOULD BE AL LOWED ON TECHNICAL ITA NO.1848 TO 1851/M/2012 6 GROUNDS. ACCORDINGLY, ADJUDICATION OF THE PENALTIE S ON MERITS BECOME AN ACADEMIC EXERCISE. THEREFORE, THE GROUNDS RAISED IN ALL THE SIX ASSESSMENT YEARS ARE ALLOWED. 8. IN THE INSTANT CASES ALSO, WE HAVE NOTICED THA T THE ASSESSING OFFICER HAS INITIATED PENALTY PROCEEDINGS UNDER ONE DEFAULT OR LIMB OF SEC. 271(1)(C) OF THE ACT, BUT LEVIED FOR ANOTHER DEFAULT OR LIMB OF THAT SECTION. CONSISTENT WITH THE VIEW EXPRESSED BY THE TRIBUNAL AND HIGH COURTS, WE HOLD THAT THE IMPUGNED PENALTY LEVIED IN ALL THE YEARS UNDER CONSIDERATION IS NOT SUSTAINABLE. HENCE, WE DO NOT FIND IT NECESSARY TO ADDRESS THE ISSUES URGE D ON MERITS. ACCORDINGLY WE SET ASIDE THE ORDERS OF LD CIT(A) AND DIRECT THE AS SESSING OFFICER TO DELETE THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT FOR ALL THE YEARS UNDER CONSIDERATION. 9 IN THE RESULT, ALL THE FOUR APPEALS OF THE A SSESSEE STAND ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 7TH JAN,2015 . ,- ( . /0 1 2 7TH JAN 2015 - ' 3) 4 SD SD ( . . / H.L. KARWA) ( . . , / B.R. BASKARAN ) / PRESIDENT / ACCOUNTANT MEMBER / ( ) MUMBAI: 7TH JAN, 2015. . . ./ SRL , SR. PS ! ' / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT. 3. ( 8* ( ) / THE CIT(A)- CONCERNED 4. ( 8* / CIT CONCERNED 5. 6. 9: 3 '*; , + ; , / ( ) / DR, ITAT, MUMBAI CONCERNED 3 < ) / GUARD FILE. = ( / BY ORDER, TRUE COPY > $ (ASSTT. REGISTRAR) + ; , / ( ) /ITAT, MUMBAI