Vinayak Remedies Ltd., New Delhi V. ACIT CIRCLE-26(2), New Delhi

ITA 2886/DEL/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2947 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 03-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SENKAR NAVKOR
• Keywords: Opportunity of being heard; Reasonable cause
• Section: 271(1)(c); 143(3); 274; 73

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI SMC-2 BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 2886/DEL/2019 [ASSESSMENT YEAR: 2010-11] VINAYAK REMEDIES LTD VS. THE A.C.I.T . 1141/1, 16, BEHIND BAGGA LINK CIRCLE 26(2) SERVICE STATION, RITHALA, NEW DELHI NEW DELHI PAN: AACCV 3031 F [APPELLANT] [RESPONDENT] DATE OF HEARING : 12.03.2020 DATE OF PRONOUNCEMENT : 12.03.2020 ASSESSEE BY : NONE REVENUE BY : SHRI SENKAR NAVKOR, SR. DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS] - 24, DATED 23 .01.2019 PERTAINING TO ASSESSMENT YEAR 2010-11. 2 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE AS SESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE PENA LTY LEVIED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE INCOM E-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT']. 3. ROOTS FOR LEVY OF PENALTY LIE IN THE ASSESSMENT ORDER DATED 18.03.2013 FRAMED U/S 143(3) OF THE ACT. 4. THE RETURNED LOSS OF RS. 66.92 LAKHS WAS ASSESSE D AT A PROFIT OF RS. 12.57 LAKHS AFTER MAKING THE FOLLOWIN G DISALLOWANCES: A) ADDITION ON ACCOUNT OF SHARE CAPITAL RS. 20 LAKH S A) ADDITION ON ACCOUNT OF UNSECURED LOSS RS. 29.50 LAKHS A) ADDITION ON ACCOUNT OF EXPENSES RS. 30 LAKHS 5. ASSESSMENT WAS CHALLENGED BEFORE THE LD. CIT(A) AND THE LD. CIT(A), VIDE APPELLATE ORDER DATED 18.04.2016 D ELETED THE ADDITION OF RS. 20 LAKHS, REDUCED THE ADDITION OF R S. 29.50 LAKHS TO RS. 12.35 LAKHS AND ADDITION OF RS. 30 LAK HS WAS REDUCED TO RS. 5 LAKHS, WHICH WAS UPHELD BY THE ITA T. 3 6. THEREAFTER, PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED AND THE ASSESSING OFFICER COMPLETED THE PROCEEDINGS BY LEVYING PENALTY OF RS. 5,36,115/- U/ S 271(1)(C) OF THE ACT. 7. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) BUT WITHOUT ANY SUCCESS. 8. BEFORE ME, NONE APPEARED ON BEHALF OF THE ASSESS EE. NOTICE ISSUED BY THE REGISTRY RETURNED UNSERVED. T HEREFORE, I HEARD THE LD. DR AT LENGTH AND HAVING HEARD THE L D. DR, I HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIE S BELOW AND MATERIAL AVAILABLE ON RECORD. 8. THE NOTICE U/S 274 OF THE ACT WHICH WAS ISSUED A ND SERVED UPON THE ASSESSEE IS AS UNDER: TO M/S VINAYAK REMEDIES LTD. 1141/1,16 BEHIND BAGGA LINK SERVICE STATION, RITHALA, NEW DELHI-110086 4 WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE ASSESSMENT YEAR 2010-11 IT APPEARS TO ME THAT YOU:- I HAVE WITHOUT REASONABLE CAUSE FAILED TO COMPLY WI TH A NOTICE U/S 142(1)/143(2) OF THE INCOME TAX ACT, 1961. I HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME IN TERMS OF E XPLANATION 1,2,3,4 AND 5. YOU ARE HEREBY REQUESTED TO APPEAR BEFORE ME AT 02. 00 AM/P.M. ON 29-08-2017 AND SHOW CAUSE WHY AN ORDER I MPOSING A PENALTY ON YOU SHOULD NOT BE MADE UNDER SECTION 271 OF THE INCOME TAX ACT, 1961. IF YOU DO NOT WISH TO AVAIL Y OURSELF OF THIS OPPORTUNITY OF BEING HEARD IN PERSON OR THROUG H AUTHORISED REPRESENTATIVE YOU MAY SHOW CAUSE IN WRITING ON OR BEFORE THE SAID DATE WHICH WILL BE CONSIDERED BEFORE ANY SUCH ORDER IS MADE UNDER SECTION 271. PENALTY U/S 271(1)(C) ASSESSING OFFICER [ARINDAM MISRA] ASSTT COMMISSIONER OF IT NEW DELHI 5 9. A PERUSAL OF THE AFOREMENTIONED NOTICE CLEARLY S HOWS THAT THE ASSESSING OFFICER DID NOT SPECIFY UNDER WH ICH LIMB OF THE PROVISION HE HAS INITIATED THE PROCEEDINGS. MO REOVER, THE PENAL PROCEEDINGS ARE SEPARATE FROM ASSESSMENT PROC EEDINGS AND WHILE INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT, IT IS INCUMBENT UPON THE ASSESSING OFFICER TO DEMONSTRATE UNDER WHI CH LIMB HE IS PROPOSING LEVY OF PENALTY. 10. ON IDENTICAL CIRCUMSTANCES, THE HON'BLE HIGH CO URT OF DELHI IN THE CASE OF SAHARA INDIA LIFE INSURANCE COMPANY LTD ITA NO. 475 OF 2019 ORDER DATED 02.08.2019 HAS HELD AS UNDER: 21. THE RESPONDENT HAD CHALLENGED THE UPHOLDING OF THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT, WHICH W AS ACCEPTED BY THE ITAT. IT FOLLOWED THE DECISION OF THE KARNAT AKA HIGH COURT IN CIT V. MANJUNATHA COTTON & GINNING FACTORY 359 ITR 565 (KAR) AND OBSERVED THAT THE NOTICE ISSUED BY TH E AO WOULD BE BAD IN LAW IF IT DID NOT SPECIFY WHICH LIMB OF S ECTION 271(1) (C) THE PENALTY PROCEEDINGS HAD BEEN INITIATED UNDE R I.E. WHETHER FOR CONCEALMENT OF PARTICULARS OF INC ME OR FOR FUR NISHING OF INACCURATE PARTICULARS OF INCOME. THE KARNATAKA HIG H COURT HAD FOLLOWED THE ABOVE JUDGMENT IN THE SUBSEQUENT ORDER IN COMMISSIONER OF INCOME TAX V. SSA'S EMERALD MEADOWS (2016) 6 73 TAXMAN.COM 241 (KAR) , THE APPEAL AGAINST WHICH WAS DISMISSED BY THE SUPREME COURT OF INDIA IN SLP NO. 11485 OF2016 BY ORDER DATED 5TH AUGUST, 2016. 11. IF THE NOTICE IS READ WITH THE DECISION OF THE HON'BLE HIGH COURT OF DELHI [SUPRA], IN OUR CONSIDERED OPINION, THE PE NALTY WILL NOT SURVIVE. IT WOULD NOT BE OUT OF PLACE TO REFER TO THE DECISION OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF VIRGO MA RKETING PVT LTD [2008] 171 TAXMANN 156 [DELHI] WHEREIN THE HON'BLE HIGH COURT HELD AS UNDER: WE ARE UNABLE TO DISCERN FROM A READING OF THE ASS ESSMENT ORDER WHY THE ASSESSING OFFICER CHOSE TO INITIATE P ENALTY PROCEEDINGS AGAINST THE ASSESSED AND UNDER WHICH PA RT OF SECTION 271(1)(C) OF THE ACT. IN OTHER WORDS, WE ARE UNABLE TO DISCERN FROM THE ASSESSMENT ORDER THE REASON FOR IN ITIATING PENALTY PROCEEDINGS. THEREFORE, THE CONCURRENT VIEW HELD BY BOTH THE AUTHORITIES BELOW MUST BE ACCEPTED. 12. FURTHER, THE HON'BLE SUPREME COURT IN THE CASE OF SSAS EMERALD MEADOWS PVT LTD [2016] 8 TMI 1145 THE HON'BLE APE X COURT HELD THAT THE HIGH COURT ORDER CONFIRMED IN [2015] (11) TMI 1 620 KARNATAKA HIGH COURT. NOTICE ISSUED BY THE ASSESSING OFFICER U/S 274 R.W.S 271(1)(C) OF THE ACT TO BE BAD IN LAW AS IT DID NOT SPECIFY WHICH LIMB OF 7 SECTION 271(1)(C) OF THE ACT THE PENALTY PROCEEDING S HAD BEEN INITIATED I.E. WHETHER FOR CONCEALMENT OF PARTICULARS OF INCO ME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE ISSUE WAS DE CIDED IN FAVOUR OF THE ASSESSEE. 13. CONSIDERING THE FACTS OF THE CASE IN TOTALITY, IN THE LIGHT OF JUDICIAL DECISIONS REFERRED TO HEREINABOVE, I SET A SIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY OF RS. 5,36,115/-. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 2886/DEL/2019 IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 12.03. 2020. SD/- [N.K. BILLAIYA] ACCOUNTANT MEMBER DATED: 12 TH MARCH, 2020. VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) ASST. REGISTRAR, 8 5. DR ITAT, NEW DELHI DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER