Gruhajyothi Buildings & Estates Private Limited., Visakhapatnam V. The Commissioner of Income Tax, , Visakhapatnam

ITA 20/VIZ/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2859 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2004-2005
• Appeal Filed On: 18-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: T V U B S KISHORE BABU
• Keywords: Principle of natural justice; Question of law; Initiation of penalty proceedings
• Section: 271(1)(c); 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO. 20 /VIZ/201 9 ( / ASSESSMENT YEAR : 20 0 4 - 0 5 ) M/S GRUHAJYOTHI BUILDINGS & ESTATES PVT. LTD. F - 401, GSP COMPLEX, NH - 5, NARASIMHANAGAR VISAKHAPATNAM [PAN :AABCG7552M] VS. DY.COMMISSIONER OF INCOME TAX CIRCLE - 3(1) VISAKHAPATNAM ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI T.V.U.B.S.KISHORE BABU , AR / RESPONDENT BY : SMT.SUMAN MALIK, DR / DATE OF HEARING : 0 6 . 0 6 . 201 9 / DATE OF PRONOUNCEMENT : 12 .06 . 201 9 / O R D E R P ER SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)], VISAKHAPATNAM VIDE ITA NO.17/10 - 11/DCIT, CIR - 3(1)/VSP/12 - 13 DATED 28.09.2012 FOR THE A.Y.2004 - 05. 2 I.T.A. NO . 2 0/VIZ/201 9 M/S GRUHAJYOTHI BUILDINGS & ESTATES PVT. LTD., VISAKHAPATNAM 2. DURING THE APPEAL HEAR ING, THE LD.AR FILED THE FOLLOWING ADDITIONAL GROUNDS AND SUBMITTED THAT THE ADDITIONAL GROUNDS GO TO THE ROOT OF THE PENALTY IMPOSED BY THE ASSESSING OFFICER (AO) AND THEY ARE PURELY LEGAL ISSUES WHICH DO NOT REQUIRE ANY INVESTIGATION OR VERIFICATION. TH E LD.AR FURTHER SUBMITTED THAT DUE TO INADVERTENT MISTAKE, THE ADDITIONAL GROUNDS WERE NOT TAKEN BEFORE THE LD.CIT(A) THEREFORE, REQUESTED TO ADMIT THE ADDITIONAL GROUNDS. THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE READ AS UNDER: 1. THE NOTICE ISSUED U/S 274 R.W.S 271 OF THE INCOME TAX ACT, 1961 IN PAN: AABCG7552M DATED - 25 - 09 - 2009 IN THE CASE OF THE APPELLANT FOR A,Y.2004 - 05 IS AMBIGUOUS AS THE ASSESSING OFFICER DID N 'T SPECI FY THE GROUNDS ON WHICH PENALTY WAS IMPOSED I.E., WHETHER FOR CONCEALMENT OF IN COME OR FOR FURNISHING INACCURATE PARTICULARS. 2. THE ASSESSING OFFICER ERRED IN PASSING A RE - ASSESSMENT ORDER U/S 143(3) R.W.S 263 IN THE ABSENCE OF ANY DIRECTION TO REDO THE ASSESSMENT BY THE COMMISSIONER OF INCOME TAX. HENCE THE INITIATION OF PENALTY PR OCEEDINGS U/S 271(1)(C) ON 25.09.2009 IS NOT VALID AT EVERY STAGE OF MODIFICATION OF THE ASSESSMENT. 3. ON THE OTHER HAND, THE LD.DR OPPOSED FOR ADMISSION OF ADDITIONAL GROUNDS. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND AGREE WITH THE LD.AR THAT THE A DDITIONAL GROUNDS RAISED BY THE ASSESSEE ARE PURELY LEGAL GROUNDS WHICH DO NOT REQUIRE ANY SPECIFIC INVESTIGATION. HENCE, THE ADDITIONAL 3 I.T.A. NO . 2 0/VIZ/201 9 M/S GRUHAJYOTHI BUILDINGS & ESTATES PVT. LTD., VISAKHAPATNAM GROUNDS RAISED BY THE ASSESSEE ARE ADMITTED. 5. WE FIRST TAKE UP THE ADDITIONAL GROUND NO.1 WHICH IS A PURE LEGAL ISSU E. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.10,27,147/ - AND THE ASSESSMENT WAS COMPLETED U/S 143(3) ON TOTAL INCOME OF RS.38,63,030/ - . SUBSEQUENTLY, THE AO LEVIED PENALTY OF RS.18,00,000/ - FOR CONCEALMENT OF INCOME VIDE ORDER DA TED 29.03.2010. DURING THE APPEAL HEARING, THE LD.AR RAISED THE ADDITIONAL GROUNDS STATING THAT THE NOTICE ISSUED U/S 271(1)(C) R.W.S. 274 IS AMBIGUOUS AND DEFECTIVE. THE AO DID NOT SPECIFY IN THE NOTICE FOR WHICH ACT OF OFFENCE, THE PENALTY WAS PROPOSED TO BE LEVIED WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS? THEREFORE, ARGUED THAT THE ORDER PASSED U/S 271(1)(C) CANNOT SURVIVE AND REQUIRED TO BE QUASHED. 6. ON THE OTHER HAND, THE LD.DR SUPPORTED THE ORDERS OF THE LOW ER AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. IN THE INSTANT CASE, THE AO LEVIED PENALTY OF RS.18,00,000/ - U/S 271(1)(C) FOR CONCEALMENT OF INCOME. THE AO ISSUED NOTICE INITIATING PENALTY U/S 271(1)(C) VID E NOTICE DATED 25.09.09 WHICH IS PLACED IN THE 4 I.T.A. NO . 2 0/VIZ/201 9 M/S GRUHAJYOTHI BUILDINGS & ESTATES PVT. LTD., VISAKHAPATNAM PAPER BOOK IN PAGE NO.17. THE NOTICE ISSUED BY THE AO READS AS UNDER : FROM THE PERUSAL OF THE PENALTY NOTICE, IT IS OBSERVED THAT THE AO HAS INITIATED THE PENALTY PROCEEDINGS WITHOUT STRIKING THE IRRELEVANT COLUMN I.E. FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS THEREBY CASING AMBIGUITY IN INITIATION OF PENALTY PROCEEDINGS. THE ASSESSING OFFICER OUGHT TO HAVE STRUCK OFF THE IRRELEVANT COLUM NS IN THE NOTICE BEFORE ISSUE . IT IS ALSO OBSERVED FROM THE ASSESSMENT ORDER THAT THE AO HAS NOT 5 I.T.A. NO . 2 0/VIZ/201 9 M/S GRUHAJYOTHI BUILDINGS & ESTATES PVT. LTD., VISAKHAPATNAM SPECIFIED IN THE ASSESSMENT ORDER ALSO WHETHER THE PENALTY WA S INITIATED FOR CONCEALMENT OF INCOME OR FOR FURNISHING THE INACCURATE PARTICULARS. IT IS SETTLE D ISSUE THAT AT THE TIME OF INITIATING THE PENALTY, THE AO SHOULD MAKE IT CLEAR FOR WHICH CHARGE, THE PENALTY IS PROPOSED TO BE LEVIED. NON SPECIFYING THE SPECIFIC CHARGE, I.E. WHETHER FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS RENDERS THE NOTICE ISSUED U/S 271(1)(C) INVALID AND CONSEQUENT ORDERS PASSED IMPOSING THE PENALTY IS UNSUSTAINABLE . THIS VIEW IS UPHELD BY THIS TRIBUNAL IN THE CASE OF SHRI MEKA KASI VISWESWARUDU, VIDE I.T.A. NO.383/VIZ/2018 DATED 16.11.2018 FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF BAISETTY REVATHI [2017] 398 ITR 88 (ANDHRA PRADESH AND TELANGANA). FOR THE SAKE OF CLARITY AND CONVENIENCE, WE EXTRACT THE RELEVANT PART OF THE ORDER OF HONBLE HIGH COURT WHICH READS AS UNDER : 10 . A COPY OF THE PROFORMA NOTICE UNDER SECTION 271 READ WITH SECTION 274 OF THE ACT OF 1961 ADDRESSED TO THE ASSESSEE ON MARCH 22, 2013 IS PRODUCED. PERUSAL THEREOF REFLECTS THAT THE IRRELEVANT CONTENTS THEREIN, WHICH HAD NO APPLICATION TO THE ASSESSEE, WERE STRUCK OUT LEAVING ONLY ONE CLAUSE WHICH READS AS UNDER : 'WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE ASSESSMENT YEAR 2010 - 11 IT APPEARS TO ME THAT YOU HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR FURNISHED INACCURATE PARTICU LARS OF SUCH INCOME.' 11. IT WOULD BE APPOSITE AT THIS STAGE TO CONSIDER THE JUDGMENT OF THE KARNATAKA HIGH COURT IN MANJUNATHA COTTON & GINNING FACTORY'S ( SUPRA ). THEREIN, A DIVISION BENCH OF THE KARNATAKA HIGH COURT OBSERVED THAT SECTION 271 OF THE ACT OF 1961 IS A SPECIFIC PROVISION PROVIDING FOR IMPOSITION OF PENALTIES AND IS A COMPLETE CODE IN ITSELF REGULATING THE PROCEDURE FOR SUCH 6 I.T.A. NO . 2 0/VIZ/201 9 M/S GRUHAJYOTHI BUILDINGS & ESTATES PVT. LTD., VISAKHAPATNAM IMPOSITION. THE BENCH THEREFORE HELD THAT PENALTY PROCEEDINGS HAVE TO BE CONDUCTED IN ACCORDANCE THEREWITH, SUBJECT ALW AYS TO THE RULES OF NATURAL JUSTICE. IT WAS POINTED OUT THAT SECTION 271 MAKES APPROPRIATE PROVISION FOR LEVYING PENALTIES ON AN ASSESSEE IN DIFFERENT EVENTUALITIES AND ONE SUCH EVENTUALITY IS FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULA RS OF SUCH INCOME. IT WAS HELD THAT FOR STARTING THE PENALTY PROCEEDINGS, THE CONDITION PRECEDENT IS THAT THE ASSESSING OFFICER MUST BE SATISFIED THAT A PERSON HAS EITHER CONCEALED PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOM E. THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD BE MADE AWARE OF THE GROUNDS ON WHICH IMPOSITION OF PENALTY IS PROPOSED AS HE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE A FULL OPPORTUNITY TO MEET THE CASE OF THE REVENUE SO AS TO SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1)(C) DO NOT EXIST AND THAT HE IS NOT LIABLE TO PAY THE PENALTY. IT WAS FURTHER HELD THAT THE PRACTICE OF THE REVENUE IN SENDING A PRINTED FORM WHERE ALL THE GROUNDS MENTIONED IN SECTION 2 71 ARE MENTIONED WOULD NOT SATISFY THE REQUIREMENT OF LAW WHEN THE CONSEQUENCE OF THE ASSESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAS TO PAY A PENALTY RANGING FROM 100 PER CENT. TO 300 PER CENT OF THE TAX LIABILITY. AS THE PR OVISIONS OF SECTION 271(1)(C) HAVE TO BE STRICTLY CONSTRUED, THE BENCH MANDATED THAT THE NOTICE ISSUED SHOULD SET OUT THE GROUNDS WHICH THE ASSESSEE HAS TO MEET SPECIFICALLY, OTHERWISE THE PRINCIPLES OF NATURAL JUSTICE WOULD BE OFFENDED AS THE SHOW - CAUSE N OTICE WOULD BE VAGUE. DEALING WITH CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, THE BENCH OBSERVED THAT SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME, THERE MAY BE OVERLAPPING OF BOTH, BUT IN SUCH CASES INI TIATION OF THE PENALTY PROCEEDINGS MUST BE SPECIFICALLY FOR BOTH THE OFFENCES. DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OR FINDING HIM GUILTY FOR EITHER, THE ONE OR THE OTHER, WAS HELD TO BE UNSUSTAINABLE IN LAW. 12. IN CIT V. MANU ENGG. WORKS [1980] 122 ITR 306 (GUJ.) , A DIVISION BENCH OF THE GUJARAT HIGH COURT OBSERVED THAT THE ASSESSING OFFICER MUST GIVE A POSITIVE FINDING AS TO WHETHER THERE IS CONCEALMENT OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF SUCH INCOME HAD BEEN FURNISHED BY THE ASSESSEE. IN THE EVENT THERE WAS NO SUCH CLEAR - CUT FINDING, THE PENALTY ORDER WAS HELD LIABLE TO BE STRUCK D OWN. 13. SMT. KIRANMAYEE, LEARNED COUNSEL, PLACED RELIANCE ON THE JUDGMENT OF THE SUPREME COURT IN K.P. MADHUSUDHANAN V. CIT [2001] 118 TAXMAN 324/251 ITR 99 . THEREIN, T HE SUPREME COURT HELD THAT IT IS NOT NECESSARY FOR THE ASSESSING OFFICER, WHILE ISSUING A NOTICE UNDER SECTION 271(1)(C), TO EXPRESSLY INVOKE EXPLANATION 1(B) APPENDED TO THE PROVISION. IT IS HOWEVER RELEVANT TO NOTE THAT EXPLANATION 1(B) MERELY ADVERTS TO A CASE OF FAILURE OF AN ASSESSEE TO SUBSTANTIATE THE EXPLANATION OFFERED WHEREBY THE AMOUNT ADDED OR DISALLOWED WHILE COMPUTING THE TOTAL INCOME OF SUCH PERSON FOR THE PURPOSES OF THE PENALTY 7 I.T.A. NO . 2 0/VIZ/201 9 M/S GRUHAJYOTHI BUILDINGS & ESTATES PVT. LTD., VISAKHAPATNAM PROVISION SHALL BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAD BEEN CONCEALED. THE SUPREME COURT OBSERVED THAT THE STATUTORY PROVISION INCLUDED THE 'EXPLANATION' AND ONCE THE ASSESSEE WAS PUT ON NOTICE, NO EXPRESS INVOCATION OF THE 'EXPLANATION' IS NECESSARY. 14 . THIS JUDGMENT HAS NO APPLICATION TO THE CASE ON HAND AS WHAT WE ARE CONCERNED WITH PRESENTLY IS WHETHER THE ASSESSEE IS REQUIRED TO BE PUT ON NOTICE AS TO WHETHER SHE IS TO BE PENALISED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME . THESE ARE TWO DIFFERENT ACTS. CONCEALMENT OF INCOME IS AN ACT OF OMISSION WHILE FURNISHING OF INACCURATE PARTICULARS OF INCOME IS AN ACT OF COMMISSION. THE CONSEQUENCES OF SUCH ACTS, BEING PENAL IN NATURE, AN ASSESSEE HAS TO BE INFORMED AS TO WHAT EXACTL Y IS THE CHARGE AGAINST HIM SO THAT HE MAY RESPOND THERETO. 15. NO DOUBT, IN THE PRESENT CASE, THE ASSESSEE SEEMS TO HAVE SUBMITTED HER EXPLANATION ON THE MERITS WITHOUT RAISING A DOUBT AS TO WHAT WAS THE PRECISE ALLEGATION LEVELLED AGAINST HER. HOWEVER, WE ARE MORE CONCERNED WITH THE PRINCIPLE INVOLVED AND NOT JUST THE ISOLATED CASE OF ITS APPLICATION AGAINST THE ASSESSEE. FURTHER, THE PENALTY ORDER DEMONSTRATES THAT THE ASSESSING OFFICER WAS NOT EVEN CERTAIN AS TO WHAT WAS THE FINDING ON THE STRENGTH OF WHICH HE IMPOSED THE PENALTY. THIS IS CLEAR FROM THE FACT THAT THE ASSESSING OFFICER RECORDED THAT HE WAS SATISFIED THAT THE ASSESSEE HAD CONCEALED/FURNISHED INACCURATE PARTICULARS OF INCOME. IN THE ABSENCE OF A CLEAR FINDING BY THE ASSESSING OFFICER HIMSE LF, THE BENEFIT OF DOUBT CANNOT BE GIVEN TO THE REVENUE MERELY BECAUSE THE ASSESSEE DID NOT COMPLAIN OF VAGUENESS IN THE SHOW - CAUSE NOTICE EARLIER. 16. RELIANCE PLACED BY THE REVENUE UPON MAK DATA (P.) LTD. V. CIT [2013] 38 TAXMANN.COM 448/358 ITR 593 (SC) , IS OF NO ASSISTANCE AS THE SUPREME COURT MERELY OBSERVED THEREIN THAT THE ASSESSING OFFICER IS NOT REQUIRED TO RECORD HIS SATISFACTION IN A PARTICULAR MANNER WHILE IMP OSING THE PENALTY OR REDUCE IT TO WRITING. THAT IS NOT THE CONTROVERSY IN THE CASE ON HAND. 17. ON PRINCIPLE, WHEN PENALTY PROCEEDINGS ARE SOUGHT TO BE INITIATED BY THE REVENUE UNDER SECTION 271(1)(C) OF THE ACT OF 1961, THE SPECIFIC GROUND WHICH FORMS TH E FOUNDATION THEREFOR E HAS TO BE SPELT OUT IN CLEAR TERMS. OTHERWISE, AN ASSESSEE WOULD NOT HAVE PROPER OPPORTUNITY TO PUT FORTH HIS DEFENCE. WHEN THE PROCEEDINGS ARE PENAL IN NATURE, RESULTING IN IMPOSITION OF PENALTY RANGING FROM 100 PER CENT. TO 300 PER CENT. OF THE TAX LIABILITY, THE CHARGE MUST BE UNEQUIVOCAL AND UNAMBIGUOUS. WHEN THE CHARGE IS EITHER CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS THEREOF, THE REVENUE MUST SPECIFY AS TO WHICH ONE OF THE TWO IS SOUGHT TO BE PRESSED INTO SERVICE AND CANNOT BE PERMITTED TO CLUB BOTH BY INTERJECTING ONE OR BETWEEN THE TWO, AS IN THE PRESENT CASE. THIS AMBIGUITY IN THE SHOW - CAUSE NOTICE IS FURTHER COMPOUNDED PRESENTLY BY THE CONFUSED FINDING OF THE ASSESSING OFFICER THAT HE WAS SATISFIED THAT THE ASSESSEE WAS GUILTY OF BOTH. 8 I.T.A. NO . 2 0/VIZ/201 9 M/S GRUHAJYOTHI BUILDINGS & ESTATES PVT. LTD., VISAKHAPATNAM 18. WE ARE THEREFORE OF THE OPINION THAT THE ORDER UNDER APPEAL DOES NOT BROOK INTERFERENCE ON ANY GROUND. WE FIND NO QUESTION OF LAW, MUCH LESS A SUBSTANTIAL ONE, ARISING FOR CONSIDERATION WARRANTING ADMISSI ON OF THIS APPEAL. 8. SINCE THE FACTS ARE IDENTICAL AND THE AO DID NOT SPECIFY FOR WHICH ACT OF CHARGE OR OFFENCE, THE PENALTY WAS INITIATED, RESPECTFULLY FOLLOWING THE DECISION OF H O N BLE H I GH C OURT, THE NOTICE ISSUE D U/S 271(1)(C) I S TO BE HELD AS INVALID. ACCORDINGLY, WE QUASH THE NOTICE ISSUED U/S 271(1)(C ) AND CANCEL THE ORDERS OF THE LOWER AUTHORITIES AND ALLOW THE APPEAL OF THE ASSESSEE . SINCE WE HAVE QUASHED THE NOTICE AND CANCELLED THE CONSEQ UENT ORDER S OF LOWER AUTHORITIES, WE CONSIDER IT IS NOT NECESSARY TO ADJUDICATE THE OTHER GROUNDS RAISED BY THE ASSESSEE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JUNE 2019. SD / - SD / - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 12 .06.2019 L.RAMA, SPS 9 I.T.A. NO . 2 0/VIZ/201 9 M/S GRUHAJYOTHI BUILDINGS & ESTATES PVT. LTD., VISAKHAPATNAM / COPY OF THE ORDER FORWARDED TO: - 1. / THE ASSESSEE - M/S GRUHAJYOTHI BUILDINGS & ESTATES PVT. LTD. F - 401, GSP COMPLEX,NH - 5, NARASIMHANAGAR, VISAKHAPATNAM 2. / THE REVENUE DY.COMMISSIONER OF INCOME TAX, C I RCLE - 3(1), VISAKHAPATNAM 3. THE COMMISSIONER OF INCOME TAX - 1 , VISAKHAPATNAM 4. THE COMMISSIONER OF TAX (APPEALS), VISAKHAPATNAM 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM