MRS RAJANI S.IYER, MUMBAI V. ASSTT. COMMISSIONER OF INCOME TAX 20(3), MUMBAI

ITA 2240/MUM/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 6227 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 10-10-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 20-06-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Principle of natural justice; Transactions in derivatives; Speculation loss; Reason to believe; Set aside
• Section: 147; 148; 271(1)(c); 69C; 143(3); 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “D” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI SANDEEP SINGH KARHAIL (JUDICIAL MEMBER) ITA No. 2239 & 2240/MUM/2023 Assessment Year: 2010-11 Mrs. Rajani S Iyer, 14/222, Bhaskar Bhavan, Sri Balachandra Road, Matunga, Mumbai-400019. Vs. ACIT-20(3), Mumbai-400001 PAN No. AAOPI 9178 D Appellant Respondent Assessee by : Mr. Haridas Bhat Revenue by : Mrs. Mahita Nair, DR Date of Hearing : 11/10/2023 Date of pronouncement : 25/10/2023 ORDER PER OM PRAKASH KANT, AM These appeals by the assessee are directed against two separate orders, both dated 25.4.2023, passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2010- 11, against proceedings by the Assessing Officer for quantum assessment and penalty respectively. 2. The grounds raised by the assessee in quantum proceedings in ITA No. 2239/Mum/2023 are reproduced as under: The Learned ACIT 20(3) has erred in disallowing loss in F& amounted to Rs.37,28,681/ modification done by broker. The Learned ACIT 20(3) has erred in addition of loss of Rs.37,28,681/ modification done by broker to normal business income instead reducing the same from speculation loss of Rs.73,86, 173/ determined as per assessment order passed u/s 143(3). 3. Briefly stated facts of the case are that the assessee is engaged in trading activity of the shares including both delivery based transaction and non under consideration, the assessee filed return of income on 24.09.2010 declaring Rs. Nil. In the return of income, the assessee shown net income of Rs.72,18,534/ adjusting net of loss of Rs.49,76,807/ transaction future and options (F&O) Rs.1,21,95,341/- from delivery based transactions. For both these transactions, the assessee incurred BSE/NSE charges of Rs.26,19,632/- which was debited the case of the assessee assessment u/s 143(3) of the Income Act, 1961 (in short ‘the Act’) was completed on 28.03.2013 determining total income at Rs.72,57,400/ order, the Assessing Officer disal incurred on non-delivery based transaction to be set off against delivery based transactions trading speculation loss. The Assessing Officer also disallowed ITA No The grounds raised by the assessee in quantum proceedings in ITA No. 2239/Mum/2023 are reproduced as under: The Learned ACIT 20(3) has erred in disallowing loss in F& amounted to Rs.37,28,681/- due to change in client code modification done by broker. The Learned ACIT 20(3) has erred in addition of loss of Rs.37,28,681/- due to change in client code modification done by broker to normal business income instead g the same from speculation loss of Rs.73,86, 173/ determined as per assessment order passed u/s 143(3). Briefly stated facts of the case are that the assessee is engaged in trading activity of the shares including both delivery based n-delivery based transactions. For the year under consideration, the assessee filed return of income on 24.09.2010 declaring Rs. Nil. In the return of income, the assessee shown net income of Rs.72,18,534/- from the trading activity after loss of Rs.49,76,807/- from non transaction future and options (F&O) against profit of from delivery based transactions. For both these transactions, the assessee incurred BSE/NSE charges of which was debited to the profit and loss account. In the case of the assessee assessment u/s 143(3) of the Income Act, 1961 (in short ‘the Act’) was completed on 28.03.2013 determining total income at Rs.72,57,400/-. In said assessment order, the Assessing Officer disallowed the loss of Rs.49,76,807/ delivery based transaction to be set off against delivery based transactions trading holding the same speculation loss. The Assessing Officer also disallowed Mrs. Rajani S Iyer 2 ITA Nos. 2239 & 2240/Mum/2023 The grounds raised by the assessee in quantum proceedings in ITA No. 2239/Mum/2023 are reproduced as under: The Learned ACIT 20(3) has erred in disallowing loss in F&O due to change in client code modification done by broker. The Learned ACIT 20(3) has erred in due to change in client code modification done by broker to normal business income instead g the same from speculation loss of Rs.73,86, 173/- determined as per assessment order passed u/s 143(3). Briefly stated facts of the case are that the assessee is engaged in trading activity of the shares including both delivery based delivery based transactions. For the year under consideration, the assessee filed return of income on 24.09.2010 declaring Rs. Nil. In the return of income, the assessee from the trading activity after from non-delivery based against profit of from delivery based transactions. For both these transactions, the assessee incurred BSE/NSE charges of to the profit and loss account. In the case of the assessee assessment u/s 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) was completed on 28.03.2013 . In said assessment lowed the loss of Rs.49,76,807/- delivery based transaction to be set off against holding the same as speculation loss. The Assessing Officer also disallowed proportionate BSE/NSE charges by allocating t proportion of turnover of delivery and non transaction which amounted to Rs.24,09,366/ Assessing Officer made total disallowance of Rs.73,86,173/ speculation loss of Rs.49,76,807/ Rs.24,09,366/- incurred toward speculation transaction) loss of Rs.73,86,173/ subsequent years. 4.1 Subsequently, the Assessing Officer had received information from the office of the Director of the Incom assessee was one of the beneficiary of tax evasion code modification on stock exchange and Rs.37,28,681/-. In view of the information, the Assessing Of recorded reasons to believe issued notice u/s 148 of the Act on 18.03.2015. The reassessment proceedings u/s 147 of the Act was completed on 23.03.2016 wherein the Assessing Officer disallowed the loss of Rs.37,28,681/ and also disallowed proporti worked out to 1,49,147/ disallowance of Rs.37,28,681/ “6.1 The appellant contended that the Learned ACIT20(3) has erred in addition of loss of Rs. 37,28,681/ change in client code modification done by broker to normal business income instead reducing the same from speculation loss of Rs. 73,86, 173/ assessment order passed u/s 143(3). ITA No proportionate BSE/NSE charges by allocating t proportion of turnover of delivery and non- transaction which amounted to Rs.24,09,366/-. In this manner, the Assessing Officer made total disallowance of Rs.73,86,173/ speculation loss of Rs.49,76,807/- + BSE/NSE charges of incurred toward speculation transaction) loss of Rs.73,86,173/- was allowed to be carried forward for Subsequently, the Assessing Officer had received information from the office of the Director of the Income-tax, Mumbai assessee was one of the beneficiary of tax evasion by way of on stock exchange and taking excess loss of . In view of the information, the Assessing Of recorded reasons to believe that income escaped assessment and issued notice u/s 148 of the Act on 18.03.2015. The reassessment proceedings u/s 147 of the Act was completed on 23.03.2016 wherein the Assessing Officer disallowed the loss of Rs.37,28,681/ and also disallowed proportionate brokerage charges which was worked out to 1,49,147/-. On further appeal, the Ld. CIT(A) upheld disallowance of Rs.37,28,681/- observing as under: 6.1 The appellant contended that the Learned ACIT20(3) has erred in addition of loss of Rs. 37,28,681/- due to change in client code modification done by broker to normal business income instead reducing the same from speculation loss of Rs. 73,86, 173/- determined as per assessment order passed u/s 143(3). Mrs. Rajani S Iyer 3 ITA Nos. 2239 & 2240/Mum/2023 proportionate BSE/NSE charges by allocating the same in -delivery based . In this manner, the Assessing Officer made total disallowance of Rs.73,86,173/- (i.e. + BSE/NSE charges of incurred toward speculation transaction) and said was allowed to be carried forward for Subsequently, the Assessing Officer had received information tax, Mumbai that by way of client taking excess loss of . In view of the information, the Assessing Officer that income escaped assessment and issued notice u/s 148 of the Act on 18.03.2015. The reassessment proceedings u/s 147 of the Act was completed on 23.03.2016 wherein the Assessing Officer disallowed the loss of Rs.37,28,681/- onate brokerage charges which was . On further appeal, the Ld. CIT(A) upheld 6.1 The appellant contended that the Learned ACIT20(3) due to change in client code modification done by broker to normal business income instead reducing the same from determined as per In support the appellant submitted in reference to loss of Rs.37,28,681/ code modification we would like to state that we have executed all the transactions through broker and it is not the duty of client to see what changes are done by broker in system of stock exchange as client have no access to system. All the entries in our client code were made as per the contracts and bills of our brokers and our client has no knowledge of the changes made and also our client had neither made payment nor received payments for the trade fro From the records available it is observed that the Assessing Officer disallowed the loss of Rs. 37,28,681/ client code modification on by invoking the provision of section 69C of the Act. This facility of client code modification is approved by SEBI and provided by the exchanges to brokers is meant to rectify genuine mistakes of punching of order of a particular trade given by a particular trade from one account to another account during the trading hours and exchange after the trading hours. misused this facility of CCM for creating artificial losses/profits and providing such fictitious profits/losses to various clients by charging some commission. In the subm admitted the transaction not recorded in the books of account which means the financial impact involved in it is settled out of the resources not disclosed to Income Tax. The decision of the Assessing Officer of disallowed the loss of 37,28,681/ interfere. In view of the above the appeal is dismissed 4.2 Before us the Ld. Counsel Ld. Assessing Officer has reopened the case merely for the reason to suspect that client code modification has been done for genuine purpose but without any ITA No In support the appellant submitted in reference to loss of Rs.37,28,681/- through changes in client code modification we would like to state that we have executed all the transactions through broker and it is not the duty of client to see what changes are done by broker in system of stock exchange as nt have no access to system. All the entries in our client code were made as per the contracts and bills of our brokers and our client has no knowledge of the changes made and also our client had neither made payment nor received payments for the trade from the broker. From the records available it is observed that the Assessing Officer disallowed the loss of Rs. 37,28,681/- obtained by the appellant through client code modification on by invoking the provision of section 69C of the Act. This facility of ient code modification is approved by SEBI and provided by the exchanges to brokers is meant to rectify genuine mistakes of punching of order of a particular trade given by a particular trade from one account to another account during the trading hours and time and time permitted by the stock exchange after the trading hours. Many broker misused this facility of CCM for creating artificial losses/profits and providing such fictitious profits/losses to various clients by charging some commission. In the submission the appellant admitted the transaction not recorded in the books of account which means the financial impact involved in it is settled out of the resources not disclosed to Income Tax. The decision of the Assessing Officer of disallowed the loss of 37,28,681/- is right and legal and no need to interfere. In view of the above the appeal is dismissed.” the Ld. Counsel for the assessee submitted that the Ld. Assessing Officer has reopened the case merely for the reason to client code modification has been done for but without any evidence to support Mrs. Rajani S Iyer 4 ITA Nos. 2239 & 2240/Mum/2023 In support the appellant submitted in reference to through changes in client code modification we would like to state that we have executed all the transactions through broker and it is not the duty of client to see what changes are done by broker in system of stock exchange as nt have no access to system. All the entries in our client code were made as per the contracts and bills of our brokers and our client has no knowledge of the changes made and also our client had neither made payment nor received From the records available it is observed that the Assessing Officer disallowed the loss of Rs. obtained by the appellant through client code modification on by invoking the provision of section 69C of the Act. This facility of ient code modification is approved by SEBI and provided by the exchanges to brokers is meant to rectify genuine mistakes of punching of order of a particular trade given by a particular trade from one account to another account during the trading time and time permitted by the stock Many broker misused this facility of CCM for creating artificial losses/profits and providing such fictitious profits/losses to various clients by charging some ission the appellant admitted the transaction not recorded in the books of account which means the financial impact involved in it is settled out of the resources not disclosed to Income Tax. The decision of the Assessing Officer of disallowed the loss of Rs. is right and legal and no need to interfere. In view of the above the appeal is the assessee submitted that the Ld. Assessing Officer has reopened the case merely for the reason to client code modification has been done for non- evidence to support and there was reason to believe assessment. The Ld. Counsel submitted that in the reasons recorded details of tr broker has not been pointed out and th believe being based on the suspicion law and need to quashed. support of his conte Bombay High Court in the case of M/s Ltd. v. DCIT in WRIT held the reason does not indicate basis for the Assessing Officer to make reasonable belief that there had been income due to client code modification was on account of punching the trade. 5.1 As far as the ground of the assessee on m ld Counsel of the assessee submitted the impugned order has provided detail note on the client code modification procedure but nowhere mentioned the list of the transaction in the case of the assessee wh modification has been assessee. The Assessing Officer has also nowhere mentioned that for what purpose client code modification was carried out by the broker and not substantiated with evidence that rectifying genuine error for punching of the trade ITA No reason to believe that income chargeable to tax assessment. The Ld. Counsel submitted that in the reasons recorded details of transaction of client code modification by the broker has not been pointed out and therefore entire reasons to based on the suspicion , the reassessment to quashed. The Ld. Counsel for the assessee in support of his contention relied on the decision of the Hon’ble Court in the case of M/s Coronation Agro WRIT PETITION NO. 2627 OF 2016 the reason does not indicate basis for the Assessing Officer to reasonable belief that there had been an escapement of the client code modification by the broker of the assessee was on account of non-genuine error originally occurred while As far as the ground of the assessee on merit is concerned, ld Counsel of the assessee submitted that the Assessing Officer in the impugned order has provided detail note on the client code modification procedure but nowhere mentioned the list of the in the case of the assessee where modification has been alleged carried out by the broker of the assessee. The Assessing Officer has also nowhere mentioned that for what purpose client code modification was carried out by the not substantiated with evidence that same was for rectifying genuine error for punching of the trade but was for giving Mrs. Rajani S Iyer 5 ITA Nos. 2239 & 2240/Mum/2023 that income chargeable to tax had escaped assessment. The Ld. Counsel submitted that in the reasons ansaction of client code modification by the erefore entire reasons to reassessment is bad in the assessee in ntion relied on the decision of the Hon’ble Coronation Agro Industries 2016, wherein it is the reason does not indicate basis for the Assessing Officer to escapement of the by the broker of the assessee genuine error originally occurred while erit is concerned, the that the Assessing Officer in the impugned order has provided detail note on the client code modification procedure but nowhere mentioned the list of the ere client code carried out by the broker of the assessee. The Assessing Officer has also nowhere mentioned that for what purpose client code modification was carried out by the same was for not but was for giving benefit of losses to the assessee submitted that all the transactions had been broker and it was not the duty of th stock exchange. The assessee had no access exchange. All the entries in client code were made as per the contracts and bills of the broker and the assessee had no knowledge of the changes made. are not justified in disallowing the loss to the assessee. 5.2 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that the Assessing Officer has disallowed th the allegation of the client code modification carried out by the broker of the assessee assessee by way of loss provided nowhere provided details of the transactions where client code modification was carried out nor he given reasons as why the said client code modification was not for genuine purposes and for the purpose of the evasion of material to the assessee, the addition by the Assessing Officer is against the principle has neither called for the broker and made any inquiry and made addition simply on the basis of the report of the Director of the Investigation. Thus the addition made being on presumption that the client code modification carried out ITA No benefit of losses to the assessee. Before the Ld. CIT(A), the assessee all the transactions had been executed broker and it was not the duty of the client to make . The assessee had no access to the system . All the entries in client code were made as per the contracts and bills of the broker and the assessee had no knowledge of the changes made. Therefore, the AO and Ld CIT(A) are not justified in disallowing the loss to the assessee. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that the Assessing Officer has disallowed the loss of Rs.37,28,681/ the allegation of the client code modification on exchange the broker of the assessee for benefitting the assessee by way of loss provided . But the Ld. Assessing Officer has nowhere provided details of the transactions where client code modification was carried out nor he given reasons as why the said client code modification was not for genuine purposes and for the purpose of the evasion of the tax. In absence of providing any such to the assessee, the addition by the Assessing Officer is against the principle of natural justice. The Ld. Assessing Officer has neither called for the broker and made any inquiry and made y on the basis of the report of the Director of the Investigation. Thus the addition made being on presumption that modification carried out was for non Mrs. Rajani S Iyer 6 ITA Nos. 2239 & 2240/Mum/2023 . Before the Ld. CIT(A), the assessee executed by the make changes on the to the system of stock . All the entries in client code were made as per the contracts and bills of the broker and the assessee had no re, the AO and Ld CIT(A) are not justified in disallowing the loss to the assessee. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that e loss of Rs.37,28,681/- on exchange portal was for benefitting the . But the Ld. Assessing Officer has nowhere provided details of the transactions where client code modification was carried out nor he given reasons as why the said client code modification was not for genuine purposes and for the the tax. In absence of providing any such to the assessee, the addition by the Assessing Officer is natural justice. The Ld. Assessing Officer has neither called for the broker and made any inquiry and made y on the basis of the report of the Director of the Investigation. Thus the addition made being on presumption that for non-genuine purposes. Accordingly, the addition made by the AO and upheld by the Ld. CIT(A) being based on the presumption and supporting any documentary evidence that assessee has evaded the tax on those transact the order of Ld CIT(A) is set aside. The assessee are accordingly allowed. 6. As far as appeal No. 2240/M/2023 is concerned the assessee is aggrieved against the penalty u/s 271(1)(c) of the Act levied by the Assessing Officer and upheld by the Ld. CIT(A). The grounds raised by the assessee are reprodu “The Learned ACIT 20(3) has erred in levying penalty of Rs. 27,11,625/- levied on certain disallowances made while passing order u/s 143(3) 7. Before us, the Ld. Counsel of the assessee raised the additional ground challenging the validity the ground that relevant limb for levy of the penalty i.e. of the particulars of income or the income, has not 271(1)(c) of the Act additional ground raised being legal in nature and no investigation of the fresh facts required same 8. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. Before us, the Ld. Counsel of the assessee has filed a copy of the notice dated ITA No purposes. Accordingly, the addition made by the AO and upheld by being based on the presumption and supporting any documentary evidence that assessee has evaded the tax on those transactions and shown fictitious loss, is deleted order of Ld CIT(A) is set aside. The grounds of appeal of the e are accordingly allowed. As far as appeal No. 2240/M/2023 is concerned the assessee is aggrieved against the penalty u/s 271(1)(c) of the Act levied by the Assessing Officer and upheld by the Ld. CIT(A). The grounds raised by the assessee are reproduced as under: The Learned ACIT 20(3) has erred in levying penalty of Rs. levied on certain disallowances made while passing order u/s 143(3).” Before us, the Ld. Counsel of the assessee raised the additional ground challenging the validity of the penalty levied on the ground that relevant limb for levy of the penalty i.e. of income or furnishing of inaccurate particulars of not been stricken off in the notice u/s 2 271(1)(c) of the Act and thus penalty is not sustainable. additional ground raised being legal in nature and no investigation of the fresh facts required same was admitted for adjudication. We have heard rival submission of the parties on the issue in ed the relevant material on record. Before us, the Ld. Counsel of the assessee has filed a copy of the notice dated Mrs. Rajani S Iyer 7 ITA Nos. 2239 & 2240/Mum/2023 purposes. Accordingly, the addition made by the AO and upheld by being based on the presumption and being without supporting any documentary evidence that assessee has evaded the ions and shown fictitious loss, is deleted and grounds of appeal of the As far as appeal No. 2240/M/2023 is concerned the assessee is aggrieved against the penalty u/s 271(1)(c) of the Act levied by the Assessing Officer and upheld by the Ld. CIT(A). The grounds The Learned ACIT 20(3) has erred in levying penalty of Rs. levied on certain disallowances made while passing Before us, the Ld. Counsel of the assessee raised the of the penalty levied on the ground that relevant limb for levy of the penalty i.e. concealment inaccurate particulars of stricken off in the notice u/s 274 r.w.s. and thus penalty is not sustainable. The additional ground raised being legal in nature and no investigation admitted for adjudication. We have heard rival submission of the parties on the issue in ed the relevant material on record. Before us, the Ld. Counsel of the assessee has filed a copy of the notice dated 28.03.2013 issued by the Assessing Officer u/s 274 r.w.s. 271(1)(c) of the Act. On perusal of the said notice, we find that the Assessing Officer has not stricken off the relevant limb for levy of the penalty and not specified whether the penalty has been initiated for concealment of particulars of income or furnishing inaccurate particulars of income. The Hon’ble Bombay High Court in the case of Mohd Farhan A Shaikh Vs DCIT in 125 taxmann.com 253 (Bom) held that where penalty notice has not specified for charges for levy of the penalty particulars of the income or furnishing in income, in such circumstances, levy of the penalty is bad in law and accordingly cancelled. Court is reproduced as under: 188. We may, in this context, respectfully observe that a contravention of a mandatory condit communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must give no room for ambiguity. Therefore, Dilip N. Shroff disapproves of the routine, ritualistic practice of issuing omnibus show- nonapplication of mind. And, therefore, the infraction of a mandatory procedure leading to penal consequences assumes or implies prejudice. 189. In Sudhir Kumar Singh, the Supreme Court has encapsulated the principles of prejudice. One of the principles is that "where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, “except in the case of a mandatory provision of law which is conceived not only in individual interest but also in the public interest". ITA No 28.03.2013 issued by the Assessing Officer u/s 274 r.w.s. 271(1)(c) of the Act. On perusal of the said notice, we find that the Assessing ficer has not stricken off the relevant limb for levy of the penalty and not specified whether the penalty has been initiated for concealment of particulars of income or furnishing inaccurate particulars of income. The Hon’ble Bombay High Court in the case Mohd Farhan A Shaikh Vs DCIT in 125 taxmann.com 253 held that where penalty notice has not specified for charges for levy of the penalty, whether it is for concealment of the particulars of the income or furnishing inaccurate particulars of n such circumstances, levy of the penalty is bad in law and accordingly cancelled. The relevant finding of the Hon’ble High Court is reproduced as under: 188. We may, in this context, respectfully observe that a contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must be precise. It should give no room for ambiguity. Therefore, Dilip N. Shroff disapproves of the routine, ritualistic practice of issuing -cause notices. That practice certainly betrays nonapplication of mind. And, therefore, the infraction of a mandatory procedure leading to penal consequences assumes or implies prejudice. 189. In Sudhir Kumar Singh, the Supreme Court has encapsulated the principles of prejudice. One of the principles is that "where procedural and/or substantive provisions of aw embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, “except in the case of a mandatory provision of law which is conceived not individual interest but also in the public interest". Mrs. Rajani S Iyer 8 ITA Nos. 2239 & 2240/Mum/2023 28.03.2013 issued by the Assessing Officer u/s 274 r.w.s. 271(1)(c) of the Act. On perusal of the said notice, we find that the Assessing ficer has not stricken off the relevant limb for levy of the penalty and not specified whether the penalty has been initiated for concealment of particulars of income or furnishing inaccurate particulars of income. The Hon’ble Bombay High Court in the case Mohd Farhan A Shaikh Vs DCIT in 125 taxmann.com 253 held that where penalty notice has not specified for charges whether it is for concealment of the accurate particulars of n such circumstances, levy of the penalty is bad in law The relevant finding of the Hon’ble High 188. We may, in this context, respectfully observe that a ion or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of be precise. It should give no room for ambiguity. Therefore, Dilip N. Shroff disapproves of the routine, ritualistic practice of issuing cause notices. That practice certainly betrays nonapplication of mind. And, therefore, the infraction of a mandatory procedure leading to penal consequences 189. In Sudhir Kumar Singh, the Supreme Court has encapsulated the principles of prejudice. One of the principles is that "where procedural and/or substantive provisions of aw embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, “except in the case of a mandatory provision of law which is conceived not 190. Here, section 271(1)(c) is one such provision. With calamitous, albeit commercial, consequences, the provision is mandatory and brooks no trifling with or dilution. For a further precedential prop CIT[ 74], in which the Apex Court has quoted with approval its earlier judgment in State of Orissa v. Dr. Binapani Dei[ 75]. According to it, when by reason of action on the part of a statutory authority, civil or evil con principles of natural justice must be followed. In such an event, although no express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue contravenes the principles of natural justice, it may also be held ultra vires Article 14 of the Constitution. 191. As a result, we hold that Dilip N. Shroff treats omnibus showcause notices as betraying non disapproves of the practice, to be particular, of issuing no in printed form without deleting or striking off the inapplicable parts of that generic notice. 8.1 Following the finding of the Hon’ble Bombay High Court in the case of Mohd Farhan A Shaikh Vs DCIT u/s 271(1)(c) of the Act an The grounds of appeal of the assessee are accordingly allowed. 9. In the result, both the appeal Order pronounced in the open Court on Sd/ (SANDEEP SINGH KARHAIL JUDICIAL MEMBER Mumbai; Dated: 25/10/2023 Rahul Sharma, Sr. P.S. ITA No 190. Here, section 271(1)(c) is one such provision. With calamitous, albeit commercial, consequences, the provision is mandatory and brooks no trifling with or dilution. For a further precedential prop, we may refer to Rajesh Kumar v. CIT[ 74], in which the Apex Court has quoted with approval its earlier judgment in State of Orissa v. Dr. Binapani Dei[ 75]. According to it, when by reason of action on the part of a statutory authority, civil or evil consequences ensue, principles of natural justice must be followed. In such an event, although no express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue contravenes the principles of natural justice, it may also be held ultra vires Article 14 of the 191. As a result, we hold that Dilip N. Shroff treats omnibus showcause notices as betraying non-application of mind and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that generic notice.” Following the finding of the Hon’ble Bombay High Court in the Mohd Farhan A Shaikh Vs DCIT (supra) u/s 271(1)(c) of the Act and upheld by the Ld. CIT(A) is cancelled. The grounds of appeal of the assessee are accordingly allowed. In the result, both the appeals of the assessee are allowed. Order pronounced in the open Court on 25/10/2023. Sd/- SANDEEP SINGH KARHAIL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Mrs. Rajani S Iyer 9 ITA Nos. 2239 & 2240/Mum/2023 190. Here, section 271(1)(c) is one such provision. With calamitous, albeit commercial, consequences, the provision is mandatory and brooks no trifling with or dilution. For a , we may refer to Rajesh Kumar v. CIT[ 74], in which the Apex Court has quoted with approval its earlier judgment in State of Orissa v. Dr. Binapani Dei[ 75]. According to it, when by reason of action on the part of a sequences ensue, principles of natural justice must be followed. In such an event, although no express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue contravenes the principles of natural justice, it may also be held ultra vires Article 14 of the 191. As a result, we hold that Dilip N. Shroff treats omnibus application of mind and tices in printed form without deleting or striking off the Following the finding of the Hon’ble Bombay High Court in the (supra), penalty levied d upheld by the Ld. CIT(A) is cancelled. The grounds of appeal of the assessee are accordingly allowed. of the assessee are allowed. 10/2023. Sd/- PRAKASH KANT) ACCOUNTANT MEMBER Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// ITA No Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Mrs. Rajani S Iyer 10 ITA Nos. 2239 & 2240/Mum/2023 BY ORDER, (Assistant Registrar) ITAT, Mumbai