Rajivji Sahakari Soot Girni Ltd, Kolhapur V. Assistant Commissioner of Income-tax, Circle - 1, Kolhapur

ITA 1873/PUN/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0937 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 02-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HOSHANG BOMAN IRANI
• Keywords: Principle of natural justice; Initiation of penalty proceedings; Capital receipt; Set aside
• Section: 271(1)(c); 201; 13; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE BEFORE SHRI ANIL CHATURVEDI , AM AND SHRI PARTHA SARATHI CHAUDHURY , JM . / I TA NO. 1873 /PUN/20 17 / ASSESSMENT YEAR : 2012 - 13 RAJIVJI SAHAKARI SOOT GIRNI LTD. MOUJE DINDNERLI, TALUKA KARVEER, DIST. KOLHAPUR - 416 210. PAN : AAAAR5233K ....... / APPELLANT / V/S. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 1, KOLHAPUR. / RESPONDENT A SSESSEE BY : SHRI PRAMOD SHINGTE REVENUE BY : SHRI HOSHANG BOMAN IRANI / DATE OF HEARING : 20 . 1 2 .2019 / DATE OF PRONOUNCEMENT : 20 .12 .2019 / ORDER PER PARTHA SARATHI CHAUDHU RY, JM : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(APPEALS) - 2, KOLHAPUR DATED 18.05.2017 FOR THE ASSESSMENT YEAR 2012 - 13 AS PER THE GROUNDS OF APPEAL ON RECORD. 2 ITA NO. 1873 /PUN/20 17 A.Y. 2012 - 13 2. THOUGH THE ASSESSEE HAS PREFERRED MULTIPLE GROUNDS OF APPEAL, THE CRUX OF THE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS AGAINST THE IMPOSITION OF PENALTY LEVIED U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) BY THE ASSESSING OFFICER AND AS CONFIRMED BY THE LD. CIT(APPEALS). 3. THE BRIEF FACTS IN THIS CASE ARE THAT THE ASSESSEE HAD CREDITED TO ITS RESERVES A SUM OF RS.1,10,94,000/ - BEING SUBSIDY RECEIVED FROM IDBI BANK UNDER THE TECHNOLOGY UP GRADATION FUND SCHEME (TUFS). THE ASSESSEE WAS ASKED TO PRODUCE DETAILS OF THE SAME IN RESPONSE TO WHICH VIDE LETTER DATED 20.03.2015, THE ASSESSEE PRODUCED A LETTER FROM THE MAHARASHTRA STATE COOPERATIVE BANK DATED 09.11.2011. THE SAID LETTER FROM THE MSCB CLEARLY STATED THAT THE SUBSIDY BEING GRANTED TO THE ASSESSEE IS INTEREST SUBSIDY . ON THESE FACTS, THE ASSESSING OFFICER CONFRONTED THE ASSESSEE ONCE AGAIN AS TO WHY THE SAME SHOULD BE ASSESSED AS A REVENUE RECEIPT. VIDE ITS SUBMI SSION DATED 24.03.2015, THE ASSESSEE ADMITTED ITS MISTAKE STATING THAT THE SUBSIDY IS INDEED A REVENUE RECEIPT AND THE SAME WAS ACCOUNTED AS A CAPITAL RECEIPT DUE TO ACCOUNTING MISTAKE. THE ASSESSEE FURTHER SUBMITTED THAT THE ACCOUNTING ENTRIES ARE BEING SET RIGHT IN THEIR BOOKS IN THE CURRENT YEAR AND ACCORDINGLY, THE ASSESSING OFFICER ADDED THE SUM OF RS.1,10,94,000/ - AS INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS WERE INITIATED ON THE GROUNDS THAT THE ASSESSEE DID NOT VOLUNTARILY DECLARE THE SUBSIDY AS INCOME BUT DID SO ONLY AFTER THE ASSESSING OFFICER CONFRONTED HIM WITH THE FACTS AND LEVIED PENALTY OF RS.34,28,046/ - . IN THE FIRST APPELLATE PROCEEDINGS, THE LD. CIT(APPEALS) CONFIRMED THE PENALTY IMPOSED OF RS.34,28,046 / - U/S.271(1)(C) OF THE ACT. 3 ITA NO. 1873 /PUN/20 17 A.Y. 2012 - 13 4. B EING FURTHER AGGRIEVED, ASSESSEE PREFERRED THIS APPEAL BEFORE US. THE LD.AR FOR THE ASSESSEE AT THE TIME OF HEARING BASED HIS ARGUMENT REFERRING TO GROUNDS SUBMITTED THAT THIS IS A CASE WHERE THE A SSESSING O FFICER FAILED TO RECORD VALID SATISFACTION IN THE ASSESSMENT ORDER DURING WHICH THE PENALTY PROCEEDINGS WERE INITIATED. HIGHLIGHTING THE LEGAL REQUIREMENT OF MAKING A SPECIFIC REFERENCE TO THE SPECIFIC LIMB OF CLAUSE (C) OF SECTION 271(1) OF THE ACT AND RELYING ON VARIOUS BINDING JUDGMENTS IN THE CASE CIT VS. SHRI SAMSON PERINCHERY (2017) 392 ITR 4 (BOM.) AS WELL AS THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY 359 ITR 565 LD. COUNSEL DEMONSTRATED THAT THE PENALTY LEVIED BY THE A SSESSING O FFICER IS UNSUSTAINABLE IN LAW. IN THIS REGARD, HE BROUGHT OUR ATTENTION TO THE ASSESSMENT ORDER AS WELL AS THE PENALTY ORDER HIGHLIGHTING THE ABOVE LEGAL DEFICIENCIES. IN THE ASSESSMENT ORDER, VIDE PARA 4. 2, PAGE 3 , T HE ASSESSING OFFICER RECORDED HIS SATISFACTION BY MENTIONING BOTH THE LIMBS OF SECTION 271(1)(C) OF THE ACT FOR INITIATION OF PENALTY PROCEEDINGS WHICH READS AS UNDER: 4. 2 . IT IS IMPORTANT TO NOTE HERE THAT THIS IS CONCEALMENT OF PARTICULARS OF HIS IN COME OR SHOWING INACCURATE PARTICULARS OF SUCH INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE I.T. ACT. ACCORDINGLY, PENALTY PROCEEDING UNDER SECTION 271(1)(C) OF THE I.T. ACT, 1961 ARE INITIATED SEPARATELY . 4.1 THE LD. AR FOR THE ASSESSEE FURTHER SUBMITTED THAT T HE A SSESSING O FFICER VIDE PARA 5 IN THE PENALTY ORDER DATED 28.09.2015 HAS IMPOSED T HE PENALTY U/S.271(1)(C) OF THE ACT BY OBSERVING AS UNDER: 5 . IN VIEW OF THE ABOVE, IT IS HELD THAT THE ASSESSEE FAILED TO SATISFY THE CONDITIONS AS LAID DOWN IN EXPLANATION 1(B) OF SECTION 271(1)(C) OF THE ACT AND ACCORDINGLY, I AM SATISFIED THAT THE ASSESSEE HAD CONCEALED PARTICULARS OF ITS INCOME IN AS MUCH AS FILED INACCURATE PARTICULARS OF INCOME THEREBY MAKING LIABLE FOR LEVY OF PENALTY WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT, THE MINIMUM PENALTY U/S.271(1)(C) OF THE ACT 4 ITA NO. 1873 /PUN/20 17 A.Y. 2012 - 13 IS LEVIABLE OF 100% OF THE TAX SOUGHT TO BE EVADED WHICH IS RS.34,28,046/ - . 5 . PER CONTRA, LD. DR FOR THE REVENUE RELIED ON THE ORDERS OF A SSESSING O FFICER / LD. CIT(A). 6. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTIONS ON THIS LEGAL ISSUE. WE FIND THAT THE PUNE BENCH OF THE TRIBUNAL ON EARLIER OCCASION FACED WITH THE SIMILAR ISSUE IN THE CASE OF MACHINDRA TUKARAM PAGIRE VS. ACIT, ITA NO. 1925 & 1926/PUN/2017 FOR THE ASSESSMENT YEAR 2012 - 13 & 2013 - 14 DECIDED ON 18.11.2019 WHEREIN THE TRIBUNAL HAS DECIDED THE SAID ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER: 7. WE HEARD BOTH THE PARTIES ON THIS SPECIFIC LEGAL ISSUE, I.E. RECORDI NG OF PROPER SATISFACTION BY THE ASSESSING OFFICER. WE HAVE PERUSED THE ORDER OF THE ASSESSING OFFICER AND FIND THE SATISFACTION RECORDED BY THE ASSESSING OFFICER VIDE PARA - 10 OF THE ASSESSMENT ORDER FOR INITIATING THE PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT IS RELEVANT FOR EXTRACTION. THEREFORE, THE SAME IS REPRODUCED AS UNDER: 10 ISSUED PENALTY NOTICE U/S.274 R.W.S U/S.271(1) (C) R.W. EXPLANATION 1 FOR FURNISHING INACCURATE PARTICULARS OF INCOME/CONCEALING PARTICULARS OF INCOME 8. WE HAVE ALSO PERUSED THE PENALTY ORDER DATED 28.09.2016 AND FIND THE SATISFACTION RECORDED BY THE ASSESSING OFFICER VIDE PARA - 11 IN THE PENALTY ORDER FOR LEVYING THE PENALTY U/S.271(1)(C) OF THE ACT IS RELEVANT FOR EXTRACTION. THE SAID SATISFACTION READS AS UNDER: 11. IN VIEW OF THE DISCUSSION MADE IN THE PRECEDING PARAGRAPHS, IT IS HELD THAT THE INCOME OF RS.27,01,875/ - REPRESENTS THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED AS PROVIDED IN EXPLANATION BELOW SECTION 271(1)(C) OF THE ACT AN D HENCE, IT IS LIABLE FOR PENALTY U/S.271(1)(C) OF THE ACT. I AM THEREFORE SATISFIED THAT THIS IS A FIT CASE FOR LEVY OF PENALTY U/S.271(1)(C) OF THE ACT FROM THE ABOVE, IT IS EVIDENT THAT SO FAR AS ASSESSMENT ORDER IS CONCERNED, THE ASSESSING OFFICER H AS INITIATED PENALTY PROCEEDINGS MENTIONING BOTH LIMBS OF CLAUSE (C) OF SECTION 271(1) OF THE ACT I.E. FURNISHING OF INACCURATE PARTICULARS OF INCOME/CONCEALING PARTICULARS OF INCOME. HOWEVER, AT THE TIME OF LEVYING PENALTY IN THE ASSESSMENT, ASSESSING O FFICER HAS NOT MENTIONED ANY LIMB OF SECTION 271(1)(C) OF THE ACT. THIS MANNER OF RECORDING OF SATISFACTION SUGGESTS THE EXISTENCE OF AMBIGUITY WITH REFERENCE TO APPLICABILITY OF SPECIFIC LIMB. THEREFORE, WE ARE OF THE OPINION THAT CONSIDERING THE ABOVE REFERRED BINDING JUDGMENTS 5 ITA NO. 1873 /PUN/20 17 A.Y. 2012 - 13 SUCH PENALTY ORDER IS UNSUSTAINABLE IN LAW LEGALLY. THE ASSESSING OFFICER IS UNDER OBLIGATION TO SPECIFY THE CORRECT LIMB AT THE TIME OF INITIATION AS WELL AS AT THE TIME OF LEVY OF PENALTY. THAT TAKING GUIDANCE FROM THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SAMSON PERINCHERY (SUPRA.) WHEREIN THE HON'BLE BOMBAY HIGH COURT HAS CONSIDERED THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATH COT TON AND GINNING FACTORY (SUPRA.), THE LEGAL PROPOSITION THAT COMES OUT AND WHICH IS BINDING IN NATURE IS THAT THE ASSESSING OFFICER SHOULD BE CLEAR AS TO WHICH OF THE TWO LIMBS UNDER WHICH PENALTY IS IMPOSABLE, HAS BEEN CONTRAVENED OR INDICATE THAT BOTH H AVE BEEN CONTRAVENED WHILE INITIATING PENALTY PROCEEDINGS. IT CANNOT BE THAT THE INITIATION OF PENALTY PROCEEDINGS WOULD BE ON BOTH THE LIMBS I.E. FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME OR WITHOUT ANY LIMBS OF SECTION 271(1)(C) OF THE ACT. THE ASSESSING OFFICER HAS TO MENTION SPECIFIC LIMBS WHILE IMPOSING PENALTY U/S.271(1)(C) OF THE ACT. 9. THE SANCTITY IN TERMS OF NATURAL JUSTICE WITH REGARD TO THIS PROPOSITION IS THAT THE ASSESSEE UNDER THE SCHEME OF WELFARE LEGIS LATION WHICH IS EMBEDDED IN THE INCOME TAX ACT, 1961 SHOULD GET AN OPPORTUNITY TO PREPARE HIMSELF FOR THE DEFENSE AS REGARDS TO THE EXACT CHARGE ON WHICH PENALTY IS IMPOSED UPON HIM U/S. 271(1)(C) OF THE ACT. IN THE INSTANT CASE, THE CHARGE IS VAGUE AND TH EREFORE, LEVY OF PENALTY IS NOT WARRANTED. TAKING TOTALITY OF FACTS AND LEGAL SCENARIO INTO CONSIDERATION, WE SET ASIDE THE ORDER OF THE LD. CIT(APPEALS) AND DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY FROM THE HANDS OF THE ASSESSEE. RESPECTF ULLY FOLLOWING OUR DECISION REFERRED HEREINABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT(APPEALS) AND DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY FROM THE HANDS OF THE ASSESSEE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRO NOUNCED ON 20 TH DAY OF DECEMBER , 201 9 . SD/ - SD/ - ANIL CHATURVEDI PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER / PUNE; / DATED : 20 TH DECEMBER , 2019 . SB 6 ITA NO. 1873 /PUN/20 17 A.Y. 2012 - 13 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS) - 2, KOLHAPUR. 4. THE PR. CIT - 2, KOLHAPUR. 5 . , , , / DR, ITAT, B BENCH, PUNE. 6 . / GUARD FILE. // TRUE COPY // / BY ORDER, / PRIVATE SECRETARY , / ITAT, PUNE . 7 ITA NO. 1873 /PUN/20 17 A.Y. 2012 - 13 DATE 1 DRAFT DICTATED ON 20 .1 2 .2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 20 . 12 .201 9 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER