M/S.NAVODAYA LOGISTICS PRIVATE LIMITED, MUMBAI V. DCIT-13(1)(1), MUMBAI

ITA 2475/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3325 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 23-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DHARAM V GANDHI
• Keywords: Invalid notice; Initiation of penalty proceedings; Bad and doubtful debts
• Section: 271(1)(c); 143(3); 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.2475/MUM/2018 ( ASSESSMENT YEAR: 2013-14 ) NAVODAYA LOGISTICS PVT.LTD. FLAT NO.22, VISHWATAR CONDOMINIUM, PLOT NO.310,KHAR (WEST) MUMBAI-400 052 VS. DCIT-13(1)(1) ROOM NO.218, 2 ND FLOOR AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 PAN/GIR NO. A ACCC8903H APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI DHARAM V.GANDHI, AR REVENUE BY SHRI KAILASH MANGAL, DR DATE OF HEARING 18/12/2019 DATE OF PRONOUNCEMENT 04 /03/2020 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)21, MUMBAI, DATED 29/12/2017 AND IT PERTAINS TO ASSESSMENT YEAR 2013-14. 2. THE ASSESEE HAS RAISED THE FOLLOWING GROUND S OF APPEAL: 1. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTI NY BY THE THEN ITO 8(1 )(2) AND SUBSEQUENTLY TRANSFERRED TO THE DCIT 1 3(1)(1). 2. THE LEARNED DCIT INVOKED THE PROVISION OF SECTIO N 36(2) OF THE ACT AND DISALLOWED THE CLAIM OF BAD DEBTS OF RS 1,50,00 ,000 ON THE GROUND THAT THE SAME WAS IN NON-CONFORMITY 'WITH THE CONDI TIONS PRESCRIBED BY LAW FOR ADMISSION OF THE CLAIM. ITA NO.2475/MUM/2018 NAVODAYA LOGISTICS PVT.LTD. 2 3. FURTHER FOR THE SAID DISALLOWANCE HE ALSO INITIA TED PENALTY PROCEEDINGS A PENALTY NOTICE DATED 01/03/2016 WAS SENT AND SERV ED ON THE ASSESSEE U/S 271(1)(C),OF THE ACT AND THE LEARNED DCIT PROCE EDED TO LEVY A PENALTY OF 100 PERCENT OF THE ABOVE IMPOSED TAX LIA BILITY I.E. RS 752013. 4. THE CONTENTION OF THE LEARNED DCIT IS THAT THERE HAS BEEN A REDUCTION IN THE TAXABLE INCOME BY A SUM OF RS. 1,50,00,000/- . HAD THE CASE NOT BEEN SELECTED FOR SCRUTINY THE ASSESSEE WOULD HAVE ESCAPED THE TAX LIABILITY ON THE SAME AND HENCE PENALTY U/S 271(1)( C) IS LEVIABLE. 3. THE ASSESSEE HAS ALSO FILED A PETITION FOR ADMIS SION OF ADDITIONAL GROUNDS, VIDE LETTER DATED 17/11/2019. T HE RELEVANT GROUNDS TAKEN BY THE ASSESSEE IS REPRODUCED AS UNDE R:- WITHOUT PREJUDICE TO THE OTHER GROUNDS, THE NOTICE ISSUED U/S 274 OF THE INCOME TAX ACT, 1961 IS BAD IN LAW AND DESERVES TO BE QUASHED. CONSEQUENTLY, THE PENALTY LEVIED IN PURSUANCE TO SU CH NOTICE IS LIABLE TO BE DELETED. 4. THE BRIEF FACTS OF THE CASE ARE THAT IN THIS CAS E, RETURN OF INCOME WAS FILED ON 25/09/2013, DECLARING TOTAL LOS S OF RS.1,25,66,303/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE I.T.ACT, 1961 ON 01/03/2016 ASSESSING THE TOTAL INC OME AT RS.24,33,700/-, BY MAKING ADDITIONS TOWARDS DISALLO WANCES OF BAD DEBT CLAIM OF RS. 1,50,00,000/-. SUBSEQUENTLY, THE LD. AO HAS INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T.ACT, 1961 AND AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSES SEE HAS LEVIED PENALTY OF RS.7,52,013/-, WHICH IS EQUAL TO100% TAX SOUGHT TO BE EVADED FOR FURNISHING INACCURATE PARTICULARS OF INC OME AND THEREBY CONCEALED ITS INCOME FOR THE YEAR UNDER CONSIDERATI ON, IN RESPECT OF ADDITIONS MADE TOWARDS DISALLOWANCES OF BAD DEBT C LAIM. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD .CIT(A). THE LD.CIT(A) FOR THE DETAILED REASONS RECORDED IN HIS APPELLATE ORDER, DATED 29/12/2017 UPHOLD THE PENALTY LEVIED BY THE L D. AO U/S 271(1)(C) OF THE I.T.ACT, 1961 AND DISMISSED APPEAL FILED BY THE ITA NO.2475/MUM/2018 NAVODAYA LOGISTICS PVT.LTD. 3 ASSESSEE. AGGRIEVED BY THE LD.CIT(A) ORDER, THE ASS ESSEE IS IN APPEAL BEFORE US. 5. THE LD. AR FOR THE ASSESSEE, REFERRING TO ADDITI ONAL GROUNDS OF APPEAL FILED SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEALS IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF HONBLE BOMBAY HIGH COURT, IN THE CASE OF CIT VS. S AMSON PERINCHERY 392 ITR 4, WHERE IT WAS HELD THAT IN ABS ENCE OF PROPER SATISFACTION, AS REGARDS LIMB UNDER WHICH PENALTY PROCEEDINGS ARE INITIATED OR IF PENALTY PROCEEDINGS ARE INITIATED U NDER ONE LIMB AND PENALTY IS LEVIED UNDER DIFFERENT LIMB, THEN WHOLE PENALTY PROCEEDINGS BECOME VITIATED AND CONSEQUENTLY, PENA LTY LEVIED BY THE LD. AO CANNOT SURVIVE. IN THIS REGARD, HE ALSO RELIED UPON BY THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CA SE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY 359 ITR 565. 6. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTI NG ORDER OF THE LD.CIT(A) SUBMITTED THAT THE LD. AO HAS ARRIVED AT CLEAR SATISFACTION BEFORE INITIATION OF PENALTY PROCEEDINGS, WHICH IS EVIDENT FROM FACT THAT DURING ASSESSMENT PROCEEDINGS, THE LD. AO HAS INITIATED PENALTY PROCEEDINGS FOR FURNISHING INACCURATE PARTICULARS O F INCOME. THEREFORE, THERE IS NO MERIT IN LEGAL GROUNDS TAKEN BY THE ASSESSEE. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. IT IS A SETTLED POSITION OF LAW THAT IN ABSENCE OF PROPER S ATISFACTION ARRIVED AT BEFORE ISSUE OF NOTICE, WHETHER PENALTY PROCEEDI NGS IS INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISH ING INACCURATE PARTICULARS OF INCOME, OR IF PENALTY PROCEEDINGS IS INITIATED FOR ONE ITA NO.2475/MUM/2018 NAVODAYA LOGISTICS PVT.LTD. 4 LIMB AND LEVIED UNDER DIFFERENT LIMBS, THEN THE WHO LE PENALTY PROCEEDINGS BECOMES VITIATED AND CONSEQUENTLY, PENA LTY LEVIED U/S 271(1)(C) OF THE I.T.ACT, 1961 CANNOT BE SURVIVED. THIS LEGAL PRINCIPLE IS SUPPORTED BY THE DECISION OF HONBLE KARNATAKA H IGH COURT, IN THE CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY( SUPRA),WHERE IT WAS CLEARLY THAT INITIATION OF PENALTY PROCEEDINGS UNDER ONE LIMB AND LEVYING PENALTY UNDER DIFFERENT LIMB IS BAD IN LAW. THIS LEGAL PROPOSITION IS FURTHER SUPPORTED BY THE DECISION OF HONBLE SUPREME COURT, IN THE CASE OF CIT VS SSAS EMERALD MEADOWS (2016) 242 TAXMAN 180, WHERE IT WAS HELD THAT NOTICE ISSUED U/S 274 R.W.S 271(1)(C) OF THE ACT,WAS BAD IN LAW, AS HE DID NOT SPECIFY UNDER WHICH LIMB OF SECTION 271(1)(C) OF THE I.T.ACT,1961 PENALTY PROCEEDINGS HAD BEEN INITIATED. THE HONBLE, BOMBAY HIGH COURT, IN THE CASE OF CIT VS SAMSON PERINCHERY (SUPRA) HAS TA KEN A SIMILAR VIEW AND HELD THAT ORDER IMPOSING PENALTY HAS TO BE MADE ONLY ON GROUND OF WHICH PENALTY PROCEEDINGS HAS BEEN INITIA TED AND IT CANNOT BE ON A FRESH GROUND OF WHICH ASSESSEE HAS NO NOTIC E. IN THIS CASE, ON PERUSAL OF SHOW CAUSE NOTICE ISSUED BY THE LD. A O U/S 274 R.W.S. 271(1)(C) OF THE I.T.ACT, 1961, IT IS ABUNDANTLY C LEAR THAT THE LD. AO HAS ISSUED STATUTORY NOTICE WITHOUT STRIKING OF INA PPLICABLE PART OF THE NOTICE, WHICH CLEARLY INDICATE THAT THE LD. AO HAS NOT APPLIED HIS MIND AND ARRIVED AT SATISFACTION UNDER WHICH LIMB, THE PENALTY PROCEEDINGS HAS BEEN INITIATED. THEREFORE, WE ARE O F THE CONSIDERED VIEW THAT PENALTY LEVIED BY THE LD. AO U/S 271(1)(C ) OF THE I.T.ACT, 1961, CONSEQUENT TO, INCORRECT/INVALID NOTICE BECOM ES VOID-AB-INIITO AND IS LIABLE TO BE QUASHED. HENCE, WE QUASHED PENA LTY ORDER PASSED BY THE LD. AO U/S 271(1)(C) OF THE I.T.ACT, 1961. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ITA NO.2475/MUM/2018 NAVODAYA LOGISTICS PVT.LTD. 5 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 04 /03/ 2020 SD/- (MAHAVIR SINGH) SD/- (G. MANJUNATHA) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI ; DATED 04/03/2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//