Mr.S.Mukunda , Shimoga V. The Deputy Commissioner of Income Tax Circle-1 , Shimoga

ITA 2436/BANG/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8188 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 02-07-2019
• Assessment Year: 2007-2008
• Appeal Filed On: 27-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR
• Assessee Lawyers: A R VIVEK
• Keywords: Invalid notice; Retrospective amendment; Question of law; Set aside
• Section: 271(1)(c); 143(3); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES C BENCH: BANGALORE BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA. NO. 2436 /BANG/2018 (ASSESSMENT YEAR: 20 07 - 08 ) MR. S. MUKUNDA, SRINIVASA WINE STORES, KASHIPURA MAIN ROAD, SHIMOGA. PAN: AEJPM9628M VS. DY. COMMISSIONER OF INCOME TAX , CIRCLE 1, SHIMOGA. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI A.R. VIVEK, ADVOCATE. REVENUE BY: DR. P.V. PRADEEP KUMAR, ADDL. CIT. DATE OF HEARING : 02.07 .2019 DATE OF PRONOUNCEMENT : 15 .07 .2019 O R D E R PER SHRI PAVAN KUMAR GADALE, JM : THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), BANGALORE UNDER SECTION 271(1)(C) AND 250 OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 2 ITA NO. 2436/BANG/2018 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED RETURN OF INCOME AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S. 144 & 147 OF THE ACT WITH ADDITION OF RS.3,13,552 ON 30.12.2010. ON APPEAL, THE LEARNED CIT(APPEALS) HAS CO NFIRMED THE ADDITION AND FURTHER THE ITAT UPHELD THE ORDER OF THE LEARNED CIT(APPEALS). THE ASSESSING OFFICER SUBSEQUENTLY ISSUED NOTICE UNDER SECTION 274 OF THE ACT FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND THE ASSESSEE HAS FILED A LETT ER DT.5.1.2018 EXPLAINING THE REASONS IN THE PENALTY PROCEEDINGS WHEREAS THE ASSESSING OFFICER FOUND THA T THE ASSESSMENT ORDER IN THE 3 ITA NO. 2436/BANG/2018 QUANTUM HAS BEEN CONFIRMED BY THE TRIBUNAL, THEREFORE THE ASSESSING OFFICER HAS LEVIED A PENALTY OF RS.98 ,432 AND PASSE D ORDER UNDER SECTION 271(1)(C) OF THE ACT DT.31. 0 1 .2018 . AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE HAS APPEALED WITH THE CIT (APPEALS) AND THE ASSESSEE HAS CHALLENGED THE ISSUE OF NOTICE DT.31.12.2010 MENTIONING THAT THE ASSESSING OFFICER HAS NOT SPECIFIED WHETHER THE PENALTY IS LEVIED FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BUT CIT (APPEALS) HAS DISMISSED THE ASSESSEE'S APPEAL. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE ASSESSEE HAS FILED APPEAL WITH TRIBUNAL. 4. AT THE TIME OF HEARING, THE LEARNED AUTHORISED REPRESENTATIVE HAS ARGUED ONLY ON THE VALIDITY OF NOTICE ISSUED FOR LEVY OF PENALTY AND REFERRED TO THE PAPER BOOK FILED AT PAGE 1 WHERE THE COPY OF NOTICE HAS BEEN ENCLOSED FOR C A N C E L L A T I O N OF PENALT Y. CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF CIT(APPEALS). 5 . WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND THE ORDERS OF THE LOWER AUTHORITIES. THE ONLY PRIMA FACIE ISSUE ARGUED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ASSESSING OFFICER HAS PASSED THE ORDER U/S 271(1)(C) OF THE ACT ON THE BASIS OF INVALID NOTICE . WE FOUND, THE HONBLE APEX COURT DISMISSED THE SPECIAL LEAVE PETITION FILED BY THE REVENUE AGAINST TH E JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN ITA NO.380 OF 2015 DATED 23/11/2015 IN THE CASE OF CIT VS. M/S.SSAS EMERALD MEADOWS WHERE AN IDENTICAL 4 ITA NO. 2436/BANG/2018 ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. WE CONSIDER IT APPROPRIATE TO REFER TO THE OPERATIVE PAR T OF THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF M/S. SSAS EMERALD MEADOWS (SUPRA) WHICH IS AS UNDER: 2. THIS APPEAL HAS BEEN FILED RAISING THE FOLLOWING SUBSTANTIAL QUESTIONS OF LAW: (1) WHETHER, OMISSION IF ASSESSING OFFICER TO EXPLICITLY MENTION THAT PENALTY PROCEEDINGS ARE BEING INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OR THAT FOR CONCEALMENT OF INCOME MAKES THE PENALTY ORDER LIABLE FOR CANCELLATION EVEN WHEN IT HAS BEEN PROVED BEYOND REASONABLE DOUBT THAT THE ASSESSE E HAD CONCEALED INCOME IN THE FACTS AND CIRCUMSTANCES OF THE CASE? (2) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN LAW IN HOLDING THAT THE PENALTY NOTICE UNDER SECTION 274 R.W.S. 271(1)(C) IS BAD IN LAW AND INVALI D DESPITE THE AMENDMENT OF SECTION 27.41 13) WITH RETROSPECTIVE EFFECT AND BRA VIRTUE OF THE AMENDMENT, THE ASSESSING OFFICER HAS INITIATED THE PENALTY BY PROPERLY RECORDING THE SATISFACTION FOR THE SAME? (3) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE TRIBUNAL WAS JUSTIFIED IN DECIDING THE APPEALS AGAINST THE REVENUE ON THE BASIS OF NOTICE ISSUED UNDER SECTION 274 WITHOUT TAKING INTO CONSIDERATION THE ASSESSMENT ORDER WHEN THE ASSESSING OFFICER HAS SPECIFIED THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME? 3. THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY THE ASSESSEE HOLDING THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 274 5 ITA NO. 2436/BANG/2018 READ WITH SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT') TO BE BAD IN LAW AS IT DI D NOT SPECIFY WHICH LIMB OF SECTION 271(1)(C) OF THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED I.E., WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE TRIBUNAL, WHILE ALLOWING THE APPEAL OF THE AS SESSEE, HAS RELIED ON THE DECISION OF THE DIVISION BENCH OF THIS COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOMETAX - VS - MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565. 4 IN OUR VIEW, SINCE THE MATTER IS COVERED BY JUDGMENT OF THE DIVISION BENCH OF THIS COURT, WE ARE OF THE OPINION, NO SUBSTANTIAL QUESTION OF LAW ARISES IN THIS APPEAL FOR DETERMINATION BY THIS COURT. THE APPEAL IS ACCORDINGLY DISMISSED. 6 . WE ARE OF THE OPINION THAT PENALTY PROVISIONS U/S 271(1)(C) OF THE ACT ARE ATTR ACTED WHERE THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IT IS WELL ACCEPTED PROPOSITION THAT THE AFORESAID TWO LIMBS OF SECTION 271(1)(C) OF THE ACT CARRY DIFFERENT MEANING. THEREFORE, IT WAS I MPERATIVE FOR THE AO TO STRIKE OFF IRRELEVANT LIMB SO AS TO MAKE THE ASSESSEE AWARE AS TO WHAT IS THE CHARGE MADE AGAINST HIM AND SO THAT HE CAN RESPOND ACCORDINGLY. FURTHER, THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. MANJUNATHA COTTON GIN NING FACTORY (2013) 359 ITR 565 OBSERVED THAT THE LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB UNDER WHICH IT IS BEING LEVIED. AS PER THE HONBLE HIGH COURT, WHERE THE AO PROPOSES TO INVOKE THE FIRST LIMB BEING THE CONCEALMENT THEN, NOTICE HAS TO BE APP ROPRIATELY MARKED. FURTHER, THE HONBLE HIGH COURT HAS HELD THAT THE STANDARD PROFORMA OF NOTICE U/S 6 ITA NO. 2436/BANG/2018 274 OF THE ACT, WITHOUT STRIKING OF THE RELEVANT CLAUSES WOULD LEAD TO INFERENCE OF NON - APPLICATION OF MIND BY THE AO. IN THE PRESENT CASE, THE AO IS NOT SURE WHETHER HE WAS TO PROCEED ON THE BASIS THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE HONBLE HIGH COURT ALSO OBSERVED THAT IN SUCH A SITUATION, THE LEVY OF PENALTY SUFFERS FROM NON - A PPLICATION OF MIND. 7 . WE, CONSIDERING THE LEGAL POSITION AND THE ACTION OF THE AO IN PASSING THE P ENALTY ORDER U/S 271(1)(C) FOUND THAT THERE IS NON - APPLICATION OF MIND THEREBY THE PENALTY ORDER IS NOT SUSTAINABLE AND WE RESPECTFULLY FOLLOW THE DECISIO N OF THE HONBLE SUPREME COURT IN THE CASE OF M/S.SSAS EMERALD MEADOWS (SUPRA) AND MANJUNATHA COTTON GINNING FACTORY (SUPRA), SET ASIDE THE ORDER OF THE CIT(A) AND CANCEL THE ORDER OF THE AO DATED 31/01/2018 LEVYING PENALTY U/S 271(1)(C) OF THE ACT AND A LLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. 8 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 5 T H JULY, 2019. S D / - S D / - (A.K. GARODIA) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 5 .07. 2019. *REDDY GP 7 ITA NO. 2436/BANG/2018 COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT (A) 4. PR. CIT 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE