ITO International Taxation 2(1), CHENNAI V. Rajan Kalimuthu, CHENNAI

ITA 2900/CHNY/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5037 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 15-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C YAMUNA IRS
• Keywords: Principle of natural justice; Question of law; Wrong claim; Set aside
• Section: 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH : CHENNAI , . , [BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ] !' ./I.T.A. NO.2900/CHNY/2018. #$% &$ / ASSESSMENT YEAR : 2014-2015. THE INCOME TAX OFFICER, INTERNATIONAL TAXATION 2(1) NO.16, GREAMS ROAD, IV TH FLOOR, BSNL BUILDING, TOWER-I, CHENNAI 600 006. VS. SHRI. RAJAN KALIMUTHU, 9/2, PREM FLATS, 3 RD MAIN ROAD, INDIRA NAGAR, ADYAR, CHENNAI 600 020. [PAN AHHPR 9681A] ( / APPELLANT) ( /RESPONDENT) !' '( ) * / APPELLANT BY : MS. C. YAMUNA, IRS, JCIT. +,'( ) * /RESPONDENT BY : SHRI. Y. SRIDHAR, C.A. # - ) . /DATE OF HEARING : 29-04-2019 /0&% ) . /DATE OF PRONOUNCEMENT : 22-05-2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-16, CHENNAI (HEREINAFTER CALLED AS CIT(A)) DATED 10. 05.2018 DELETING ITA NO. 2900 /2018 :- 2 -: PENALTY OF RS.47,21,610/- LEVIED U/S. 271 (1) (C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) FOR THE ASSESSMENT YEAR 2014-15. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO THE LAW AND FACTS OF THE C ASE. 2. THE LD.CIT(A) ERRED IN DELETING THE PENALTY OF R S. 47,21,610/- LEVIED BY THE ASSESSING OFFICER U/S 271 (1 (C) OF THE ACT ON TECHNICAL GROUNDS, WITHOUT GOING IN THE MERI TS OF THE CASE. 2.1. THE LD. CIT(A) FAILED TO NOTE THAT THE DECISIO N OF THE SUPREME COURT IN THE CASE OF M/S SSA'S EMERALD MEAD OWS (CC 11485/ 2016), RENDERED BASED ON THE DECISION OF THE DIVISIONAL BENCH OF KARNATAKA HIGH COURT IN THE CAS E OF MANJUNATHA COTTON & GINNING FACTOR (359 ITR 565- KAR.), IS NOT APPLICABLE TO THE FACTS OF THE CASE, SINCE IN THAT CASE, THE ASSESSEE IS NOT IN THE KNOW OF THE CHARGE AGAINST, OR THE DEFAULT FOR WHIC H PENALTY IS PROPOSED TO BE LEVIED ON HIM. 2.2. THE LD. CIT(A) FAILED TO CONSIDER THE FACT THA T THE ASSESSING OFFICER HAD CLEARLY ESTABLISHED THE CONCE ALMENT AND FURNISHING OF INACCURATE PARTICULARS ON THE PART OF THE ASSESSEE IN THE ASSESSMENT ORDER, AND THE ASSESSEE HAS NOT P REFERRED ANY APPEAL AGAINST THE ASSESSMENT ORDER. 2.3 THE LD. CIT(A) FAILED TO NOTE THAT THE ISSUED I NVOLVED IN THE ASSESSEE'S CASE CAN NEVER BE A QUESTION OF LAW IN T HE CASE AND IT IS PURELY A QUESTION OF FACT AND THAT THAT, THE ASSESSE HAD AT NO EARLIER POINT OF TIME RAISED THE PLEA THA T ON ACCOUNT OF A DEFECT IN THE NOTICE, HE WAS PUT TO PREJUDICE, AS OBSERVED BY THE HON'BLE MADRAS HIGH COURT IN THE CASE OF SUN DARAM FINANCE LTD. VS. ACIT, COMPANY CIRCLE - VI(4), CHENNAI ( 403 ITR 407 ). 2.4. THE LD. CIT(A) FAILED TO OBVERVE THAT AFTER THE INS ERTION OF THE EXPLANATION, IT CANNOT BE SAID THAT THE ONUS LI ES ON THE REVENUE TO ESTABLISH MENS-REA FOR CONCEALMENT OF IN COME BEFORE IMPOSITION OF PENALTY AND IF THERE WAS FAILU RE TO RETURN THE CORRECT INCOME, THERE WOULD BE A PRESUMPTION OF ITA NO. 2900 /2018 :- 3 -: CONCEALMENT, UNLESS THE ASSESSEE WAS ABLE TO PROVE THAT HIS FAILURE TO RETURN HIS CORRECT INCOME WAS NOT DUE TO FRAUD OR NEGLECT, AS OBSERVED BY THE HON 'BLE MADRAS HIGH COURT IN THE CASE OF PR. CIT-6, CHENNAI VS. SU NDARAM FASTENERS LTD. REPORTED IN 92 TAXMANN.COM, 356. 2.5. THE LD. CIT(A) FAILED TO NOTE THE DECISIONS OF JURISDICTIONAL ITAT IN THE CASE OF R. VASUGI COIMBA TORE VS. DCIT IN ITA NO. 899/MDS/2015 DT. 1.11.2017 AND ITA VS. S. ANANDALAKSHMI IN ITA NO.1948/MDS/2016 & CO NO.142/MDS /2016, WHEREIN IT WAS HELD THAT 'A MISTAKE IN THE NOTICE DOES NOT INVALIDATE THE PENALTY PROCEEDINGS, AND EV EN GRANTING THAT THE NOTICE U/S. 274 WAS DEFECTIVE OR BAS IN LAW, THE PENALTY PROCEEDINGS WOULD NOT FAIL AS NO PREJUDICE HAD BEEN CAUSED TO THE ASSESSEE'. 2.6. THE LD. CIT(A) FAILED T NOTE THAT 'THE ISSUANCE OF NOTICE IS AN ADMINISTRATIVE DEVICE FOR IN RMING THE ASSES SEE ABOUT THE PROPOSAL TO LEVY PENALTY IN ORDER TO ENABL E HIM TO EXPLAIN AS TO WHY IT SHOULD NOT BE DONE AND MERE MISTAKE IN TH LANGUAGE USED OR MERE NON-STRIKING OF THE INAPPLICABLE PORTION CANNOT BY ITSELF INVALIDATE TH E NOTICE, ' AS OBSERVED BY THE HON'BLE BOMBAY HIG COURT IN THE CASE OF SMT. KAUSHALYA & OTHERS (SUPRA) [CIT V. SMT. AUSHALYA [1995] 216 ITR 660 (BOM). 3.FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED A T THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING O FFICER BE RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE RESPONDENT ASSESSEE IS AN INDIVIDUAL. HE FILE D RETURN OF INCOME FOR THE ASSESSMENT YEAR 2014-15 DISCLOSING T OTAL INCOME OF RS.3,60,910/-. DURING THE COURSE OF ASSESSMENT PROC EEDINGS FOR THE ASSESSMENT YEAR 2014-2015, LD. ASSESSING OFFICER NO TICED THAT RESPONDENT ASSESSEE HAD NOT RETURNED CAPITAL GAINS ARISING FROM SALE ITA NO. 2900 /2018 :- 4 -: OF LAND AND BUILDING AT PLOT NO.386, 30 FEET ROAD, NEHRU NAGAR, KOTTIVAKKAM SOLD FOR A CONSIDERATION OF RS.2,00,00 ,000/-. WHEN PUT ON NOTICE BY THE LD. ASSESSING OFFICER, IT IS STAT ED THAT HE HAD PURCHASED ANOTHER HOUSE PROPERTY AT 73, ANNAI INDIR A NAGAR, OGGIAM THORAIPAKKAM FOR A CONSIDERATION OF RS.1,55,63,000 /- OUT OF SALE CONSIDERATION RECEIVED ON SALE OF PROPERTY OF ORIGI NAL ASSET. HOWEVER HE FAILED TO SUBSTANTIATE PURCHASE OF THE PROPERTY . THEN LD. ASSESSING OFFICER BROUGHT TO TAX LONG TERM CAPITAL GAINS OF R S.47,21,610/- ON THE SALE OF PROPERTY AT KOTTIVAKKAM FOR A CONSIDERATION OF RS.2,00,00,000/. ASSESSEE HAD NOT CONTESTED THE ADDITION IN THE APP EAL. THUS, THE ASSESSMENT ORDER ATTAINED FINALITY. THE ASSESSI NG OFFICER ALSO INITIATED PENALTY PROCEEDINGS U/S.274 R.W.S. 271 (1 ) (C) OF THE ACT FOR CONCEALING OF PARTICULARS OF INCOME. THE ASSESSEE O FFERED THE EXPLANATION IN RESPECT TO THE SHOW CAUSE NOTICE S TATING THAT MERE WRONG CLAIM DOES NOT AMOUNT TO CONCEALMENT OF PARTI CULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME, P LACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD, 322 ITR 158 . HOWEVER, THE LD. ASSESSING OFFICER HAD NOT ACCEPTED THE SAID EXPLANATION AND PROCEEDED WITH LEVY PENALTY OF G 47,21,610/- U/S.271 (1) (C) OF THE ACT VIDE ORDER DATED 31.05.2017. ITA NO. 2900 /2018 :- 5 -: 4. BEING AGGRIEVED BY LEVY OF PENALTY, AN APPEAL WAS PREFERRED BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS), WH O VIDE IMPUGNED ORDER DELETED THE PENALTY ON THE TECHNICAL GROUND THAT THE LD. ASSESSING OFFICER HAD NOT STRUCK OFF THE RELEVANT C OLUMN OF THE SHOW CAUSE NOTICE BY APPLYING RATIO OF THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565. 5. BEING AGGRIEVED BY THE ABOVE DECISION OF COMMISSION ER OF INCOME TAX (APPEALS), THE REVENUE IS IN APPEAL BEFO RE US. 6. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE ISSUE IN THE APPEAL RELATES TO WHETHER OR NOT THE PENALTY ORDER CAN BE SQUASHED FOR REASON THAT LD. ASSESSI NG OFFICER HAD NOT STRUCK OFF THE RELEVANT COLUMN OF THE SHOW CAUSE NO TICE. THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF P.M.ABDULLA VS. ITO (IN ITA NOS.1223 & 1224/BANGALORE/2012, DATED 17.10.20 16 ) HAD HELD THAT THIS CANNOT BE A VALID REASON FOR DELETION OF THE PENALTY U/S.271(1) (C) OF THE ACT BY HOLDING AS UNDER:- 9. WE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. THE ONLY ISSUE INVOLVED IS WHETHER LEVY OF PENALTY U/S. 271(1) ( C) IS VALID IN LAW KEEPING IN VIEW THE DECISION OF THE JURISDIC TIONAL HIGH COURT IN THE CASE OF MANJUNATHA COTTON &GINNING FACTORY (SUP RA). THE CONTENTION OF THE ASSESSEE IS THAT SINCE THE ASSESS ING OFFICER HAD NOT TICKED OFF THE RELEVANT COLUMN IN THE SHOW CAUSE NO TICE, IT GOES TO PROVE THAT THE ASSESSING OFFICER HAD NOT REACHED SA TISFACTION BEFORE INITIATING PROCEEDINGS U/S.271(1) ( C). THE CONTEN TION OF THE LEARNED COUNSEL FOR ASSESSEE THAT THE RELEVANT COLUMN HAS N OT BEEN TICKED, ITA NO. 2900 /2018 :- 6 -: CANNOT BE ACCEPTED AS IT IS FOUND FROM MATERIAL PLA CED BEFORE US THAT FOR BOTH THE YEARS, THE COLUMN RELEVANT TO CONCEALM ENT OF PARTICULARS OF INCOME HAS BEEN TICKED BY THE ASSESSING OFFICER. IN ANY EVENT, IT IS FOUND THAT THE ASSESSEE HAD OFFERED AN EXPLANATION FOR CONCEALMENT OF PARTICULARS OF INCOME ONLY. THE ASSESSEE, AT NO STAGE OF PENALTY PROCEEDINGS AND AT NO STAGE HAD COMPLAINED OF VIOLA TION OF THE PRINCIPLES OF NATURAL JUSTICE. THUS, NO PREJUDICE I S CAUSED ON ACCOUNT OF ANY OMISSION OR COMMISSION IN THE SHOW CAUSE ISS UED. THE PROVISIONS OF SECTION 292B CLEARLY LAY DOWN THAT :- RETURN OF INCOME, ETC, NOT TO BE INVALID ON CERT AIN GROUNDS: 292B:- NO RETURN OF INCOME, ASSESSMENT, NOTICE, SUM MONS OR OTHER PROCEEDING FURNISHED OR MADE OR ISSUED OR TAK EN OR PURPORTED TO HAVE BEEN FURNISHED OR MADE OR ISSUED OR TAKEN IN PURSUANCE OF ANY OF THE PROVISIONS OF THIS ACT S HALL BE INVALID OR SHALL BE DEEMED TO BE INVALID MERELY BY REASON O F ANY MISTAKE, DEFECT OR OMISSION IN SUCH RETURN OF INCOM E, ASSESSMENT, NOTICE, SUMMONS OR OTHER PROCEEDING IF SUCH RETURN OF INCOME, ASSESSMENT, NOTICE, SUMMONS OR OT HER PROCEEDING IS IN SUBSTANCE AND EFFECT IN CONFORMITY WITH OR ACCORDING TO THE INTENT AND PURPOSE OF THIS ACT. THE HONBLE JURISDICTIONAL HIGH COURT HAD NEITHER C ONSIDERED NOR BROUGHT TO THE NOTICE OF THE HONBLE HIGH COURT, PR OVISIONS OF SECTION 292B OF THE ACT. EVEN ASSUMING THAT THERE IS A DEFE CT IN THE SHOW CAUSE NOTICE ISSUED, AS CANVASSED BY THE LEARNED CO UNSEL FOR ASSESSEE THAT WILL VITIATE THE ENTIRE PENALTY PROC EEDINGS, THE JUDGMENT WAS RENDERED BY THE HONBLE HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA) WITHOUT CONSIDERING THE PROVISIONS OF SECTION 292B. SUBSEQUENTLY, THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SRI DURGA ENTER PRISES (2014) 44 TAXMANN.COM 442 (KAR) WHILE DEALING WITH THE VALIDI TY OF NOTICE U/S.148 OF THE ACT AS VALID AND RESPONDED TO IT IN LETTER AND SPIRIT AND PARTICIPATED IN THE PROCEEDINGS AND IN LIGHT OF THE PROVISIONS OF SECTION 292B, NOTICE ISSUED U/S.148 WAS HELD TO BE VALID. THE RELEVANT PARAGRAPH OF JUDGMENT IS EXTRACTED BELOW:- 9. IN THE PRESENT CASE, AS OBSERVED EARLIER, THE AS SESSEE NOT ONLY RESPONDED TO THE NOTICE UNDER SECTION 148 OF T HE ACT WITHIN ONE MONTH, BUT ON THE BASIS OF THE RETURN FI LED EARLIER, PARTICIPATED IN THE PROCEEDINGS TILL THE MATTER REA CHED THE FAA AND WAS DISPOSED OF. A GLANCE AT SECTION 292B OF TH E ACT, SHOWS THAT UNDER THIS PROVISION, CERTAIN ACTS ARE N OT TO BE ITA NO. 2900 /2018 :- 7 -: TREATED AS INVALID, MAY BE BY REASON OF ANY MISTAKE , DEFECT OR OMISSIONS, EITHER IN RETURN OF INCOME, ASSESSMENT, NOTICE, SUMMONS OR OTHER PROCEEDINGS. IN OTHER WORDS, A NOT ICE CANNOT BE INVALIDATED BY REASON OF ANY MISTAKE, SUC H AS THE ONE OCCURRED IN THE PRESENT CASE, NAMELY, THE PERIO D OF FILING RETURN OF INCOME WAS NOT SPECIFIED AS CONTEMPLATED BY SECTION 148 OF THE ACT. IF SUCH A DEFECT IS NOT ALLOWED TO BE CURED, OR TREATED AS INVALID SO AS TO DECLARE THE NOTICE INVA LID, DESPITE THE FACT THAT ASSESSEE HAD TAKEN THAT NOTICE AS VAL ID AND RESPONDED TO IT IN LETTER AND SPIRIT AND PARTICIPAT ED IN THE PROCEEDINGS, THE VERY PURPOSE/OBJECTIVE OF THE PROV ISIONS CONTAINED IN SECTION 292B OF THE ACT WOULD STAND FRUSTRATED/DEFEATED. THE INTENT OF THE LEGISLATURE IS CLEAR FROM THE LANGUAGE EMPLOYED IN THIS PROVISION WHICH STATE S THAT A DEFECTIVE NOTICE, SUCH AS THE ONE IN THE PRESENT CA SE, CANNOT BE DECLARED INVALID BY REASON OF ANY MISTAKE, DEFEC T OR OMISSION, IF THE NOTICE IN `SUBSTANCE' AND IN `EFFE CT' IS IN CONFORMITY WITH OR ACCORDING TO THE INTENT OF PURPO SE OF THIS ACT. THE INTENT OR PURPOSE OF ISSUING THE NOTICE IS TO CALL UPON THE ASSESSEE TO FILE RETURN, IF THE ASSESSING OFFIC ER FINDS THAT INCOME HAS ESCAPED THE ASSESSMENT. THIS BEING THE I NTENT AND PURPOSE OF THE PROVISIONS CONTAINED IN SECTION 148 OF THE ACT, IN OUR OPINION, IT STANDS SATISFIED IF THE NOTICE I S RESPONDED WITHIN REASONABLE TIME, WHICH IN THE PRESENT CASE W AS 30 DAYS, IRRESPECTIVE OF THE FACT WHETHER THE PERIOD WAS SPE CIFIED OR NOT IN THE NOTICE FOR FILING RETURN OF INCOME. IN THE P RESENT CASE, IF THE ASSESSEE HAD NOT RESPONDED TO THIS NOTICE AT AL L AND HAD RAISED SUCH GROUND OF CHALLENGE, PERHAPS, HE WOULD NOT SUCCEED. BUT HAVING RESPONDED AND PARTICIPATED IN T HE PROCEEDINGS, HE CANNOT BE ALLOWED TO TURN AROUND AN D RAISE OBJECTION FOR THE FIRST TIME BEFORE THE TRIBUNAL SE EKING INVALIDATION OF THE PROCEEDINGS INITIATED BY ISSUIN G NOTICE UNDER SECTION 148 OF THE ACT. IN THE CIRCUMSTANCE, WE ALLOW THIS APPEAL ANSWERING BOTH THE SUBSTANTIAL QUESTION S OF LAW IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. IN VIEW OF THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, THERE SHALL BE NO ORDER AS TO COSTS. THUS, HAVING REGARD TO THE RATIO LAID DOWN BY THE H ONBLE JURISDICTIONAL HIGH COURT IN THE SUBSEQUENT DECISIO N IN THE CASE OF SRI DURGA ENTERPRISE (SUPRA) WE HOLD THAT SHOW CAUSE NO TICE ISSUED U/S.274 R.W.S 271(1) ( C) CANNOT BE HELD TO BE INVA LID. ITA NO. 2900 /2018 :- 8 -: IN THE LIGHT OF THE ABOVE DECISION, WE ARE OF THE CONSIDERED OPINION THAT LD.CIT(A) OUGHT NOT HAVE DELETED THE PENALTY BASED ON THE DECISION OF MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) AND THEREFORE WE REMAND THE MATTER BACK TO THE LD. COMM ISSIONER OF INCOME TAX (APPEALS) FOR ADJUDICATION OF THE APPEAL ON MERITS. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 22ND DAY OF MAY, 2019, AT CHE NNAI. SD/- SD/- ( . ! ) (DUVVURU RL REDDY) ' # /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER 1 #- / CHENNAI 2# / DATED: 22 ND MAY, 2019. KV 3 ) +.4 5' !6 5&. / COPY TO: 1 . !' '( / APPELLANT 3. 7. (!' ) / CIT(A) 5. 5 :; +.#< / DR 2. +,'( / RESPONDENT 4. 7. / CIT 6. ;$ =- / GF