THE LIQUIDATOR, MUMBAI V. DCIT 1(3), MUMBAI

ITA 2978/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9846 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 17-04-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 18-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Keywords: Initiation of penalty proceedings
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2978 /MUM/201 5 ASSESSMENT YEAR: 20 10 - 11 THE LIQUIDATOR THE MEMON CO - OPERATIVE BANK LTD. (UNDER LIQUIDATION) PATEL & SONY ARCADE, 234 BELLASISARD, NAGPADA, MUMBAI 400 008 VS. DCIT 1(3) R. NO. 5 40 , 5 TH FLOOR, AAYAKARBHAVAN, M.K. MARG MUMBAI 400020 PAN NO. AA AAT 006G (APPELLANT) (RESPONDENT) APPELLANT BY: MR. PANKAJ R. TOPRANI , AR RESPONDENT BY: M S . VIDISHA KALRA , CIT - DR DATE OF HEARING: 17 /0 4 /2017 DATE OF ORDER: 12/07/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 20 10 - 1 1 . THE APPEAL IS DIRECTED AGAINST THE ORDER COMMISSIONER (APPEALS) 3 , MUMBAI AND ARISES OUT OF ORDER U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING: - A. THAT THE APPELLANT WAS BEING RUN AND CONDUCTED BY THE ADMINISTRATOR APPOINTED BY THE RESERVE BANK OF INDIA (RBI) EFFECTIVE 23 RD JANUARY, 2009; B. THAT UNDER THE SCHEME DULY APPROVED BY THE RBI, EFFECTIVE 18.04.2011, SPECIFIED ASSETS AND LIABILITIES OF THE APPELLANT ARE ITA NO. 2978/MUM/2015 2 TAKEN OVER BY THE BANK OF BARODA AND ACCORDINGLY, THE EMPLOYEES, BRANCHES, COMPUTER SYSTEMS AND INFRASTRUCTURE B ECAME A PART OF BANK OF BARODA PURSUANT TO THE SAID SCHEME AND THE APPELLANT DID NOT HAVE ACCESS TO IT; C. THAT THE AO DISALLOWED THE LOSS MAINLY ON ACCOUNT OF NON - SUBMISSION OF DOCUMENTARY EVIDENCE CALLED FOR IN RELATION TO THE EXPENDITURE ACCOUNTED DURING T HE YEAR. THE MAJOR HEAD OF EXPENDITURE ACCOUNTED IS IN RELATION TO THE FOLLOWING: (I) INTEREST ON DEPOSITS; (II) STAFF SALARIES (III) RENT D. THAT THE APPELLANT CEASED ITS EXISTENCE AS A SEPARATE INDEPENDENT ENTITY AND WAS PLACED UNDER LIQUIDATION EFFECTIVE 18.04.2011; E. THAT THE FACTS APPLICABLE IN RELATION TO DISALLOWANCE BY THE AO OF LOSS RETURNED IN ASSESSING THE INCOME FOR THE YEAR VIDE ORDER DATED 28 TH DECEMBER, 2012 PASSED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CANNOT BE EQUATED TO FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE APPELLANT; F. HENCE, EXPLANATION 1 TO SECTION 271 IS NOT APPLICABLE TO DISALLOWANCE OF LOSS RETURNED; 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN NOT HOLDING THAT: A) T HE DISALLOWANCE MADE OF LOSS RETURNED CANNOT BE EQUATED TO FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE APPELLANT; B) PENALTY IS NOT LEVIABLE ON THE APPELLANT U/S. 271(1) (C) OF THE ACT; C) PENALTY LEVIED BY THE AO IS TO BE DELETED. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY 2010 - 11 ON 01.10.2010 DECLARING TOTAL LOSS AT RS.18,12,68,079/ - . THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S 143(3) ON 28.12.2012 DETERMINING THE TOTAL INCOME ITA NO. 2978/MUM/2015 3 AT RS. NIL, AFTER DISALLOWING VARIOU S EXPENSES OF RS.18,12,68,079/ - . IN THE ASSESSMENT ORDER DATED 28.12.2012, THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME. IN THE PENALTY ORDER U/S 271(1)( C) DATED 28.06.2013, THE AO HAS MENTIONED THAT PENALTY PROCEEDINGS U/S 271(1)(C) WAS INITIATED FOR CONCEALMENT/FURNISHING INACCURATE PARTICULARS OF INCOME. ALSO AT THE CONCLUDING PARA OF THE SAID PENALTY ORDER, THE AO HAS MENTIONED THAT THE ASSESSEE COMMIT TED DEFAULT U/S 271(1)(C) OF THE ACT BY FURNISHING INACCURATE PARTICULARS OF CERTAIN INCOME / CONCEALMENT. THE AO THEN IMPOSED A PENALTY OF RS.5,43,80,424/ - . 4. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A), WHO HELD A S UNDER: - 2.3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAD ASKED THE ASSESSEE TO FILE DETAILS AND VERIFICATIONS WITH REGARD TO EXPENSES DEBITED TO THE P&L A/ C . IN RESPONSES TO THE SAID QUERY, THE APPELLANT FILED NO DETAILS. INSTEAD THE APPELLANT SUBMITTED THAT ALL THE DETAILS WERE WITH BANK OF BARODA. CLAUSE (B) TO EXPLANATION 1 TO SECTION 271(1)(C) CLEARLY STATES THAT WHERE A PERSON IS UNABLE TO SUBSTANTIATE T HE EXPLANATION OFFERED BY HIM, THEN THE AMOUNT ADDED SHALL DEEM TO REPRESENT INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED WITHIN THE MEANING OF CLAUSE (C) TO SECTION 271(1). THE CASE OF THE APPELLANT IS CLEARLY HIT BY THIS PROVISIONS OF THE E XPLANATION, INASMUCH AS, THE APPELLANT HAS NOT BEEN ABLE TO SUBSTANTIATE WITH T HE HELP OF DOCUMENTARY EVIDENCE HIS EXPLANATION THAT THE EXPENSES WERE GENUINE. THE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS, 299 ITR 244, HAS HELD THAT THE ONUS TO OFFER AN EXPLANATION TO PROVE HIS BONA FIDES LIES ON THE ASSESSEE AND THE ASSESSING OFFICER IS NOT OBLIG ED TO PROVE THAT THERE WAS A WILFUL ATTEMPT BY THE ASSESSEE. IN THE CIRCUMSTANCES, THE IMPOSITION OF PENALTY IS UPHELD. ITA NO. 2978/MUM/2015 4 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE AO HAS NOT SPECIFIED WHETHER THE PENALTY PROCEEDINGS U/S 271(1)(C) HAS BEEN INITIATED FOR CONCEALMENT OR FURNISHING INACCURATE PARTICULARS OF INCOME. RELIANCE IS PLACED BY HIM ON THE DECISION IN THE CASE OF CIT VS. MANJUNATH COTTON AND GINNING FACTORY (2013) 359 ITR 565 (KARN.), CIT VS. SSAS EMERALD MEADOWS (2016) 73 TAXMANN. COM 248 (SC) AND CIT VS. SHRI SAMSON PERINCHERY IN ITA NO. 953, 1097, 1154 & 1226/2014 (BOMBAY HIGH COURT). 6. ON THE OTHER HAND, THE LD. DR FILES A WRITTEN SUBMISSION PLACING RELIANCE ON THE DECISION DATED 14.01.1992 IN THE CASE OF CIT VS. SMT. KAUSHALYA 216 ITR 660 (BOM). THE LD. DR STATES THAT WHILE DECIDING THE APPEAL IN THE CASE OF SAMSON PERINCHERY (SUPRA) , THE DECISION IN THE CASE OF SMT. KAUSHALYA (SUPRA) WAS NOT BROUGHT TO THE NOTICE OF THE HONBLE HIGH COURT. HAD THIS ORDER BEEN BROUGHT TO THE NOTICE OF THE HONBLE HIGH COURT, THE DECISION WOULD HAVE BEEN DIFFERENT. REGARDING THE ASSESSEES RELIANCE ON THE DECISION IN SSAS EMERALD MEADOWS (SUPRA), IT IS SUBMITTED BY HER THAT THE REVENUES SLP F OR ADMISSION AGAINST THE DECISION I N MANJUNATH COTTON AND GINNING FACTORY (SUPRA) WAS DISMISSED IN LIMINE AND THEREFORE DOES NOT HAVE BINDING EFFECT IN OTHER CASES. ALSO RELIANCE WAS PLACED BY HER ON THE ORDER OF THE ITAT D BENCH MUMBAI IN THE CASE OF DHAVAL K. JAIN VS. ITO (I TA NO. 996/M UM/2014 FOR THE AY 2003 - 04). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IN THE CASE OF SMT. KAUSHALYA (SUPRA) RELIED ON BY THE LD. DR , THE HONBLE HIGH COURT HAS OBSERVED THAT THE TRIBUNAL HAS GONE MERELY ON THE USE OF THE WORD OR IN BETWEEN THE TWO GROUPS OF WORDS CONCEALED THE PARTICULARS OF YOUR INCOME AND FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THE TRIBUNAL HELD THAT THE PENALTY WERE FOUNDE D UPON AMBIGUOUS AND VAGUE SHOW CAUSE NOTICES AND THAT VITI ATED ITA NO. 2978/MUM/2015 5 THE OPPORTUNITY OF HEARING CONTEMPLATED U/S 274(2). THE HON BLE HIGH COURT HAS HELD THAT MERE MISTAKE IN LANGUAGE USED OR MERE NON - STRIKING OFF OF INACCURATE PORTION CANNOT BY ITSELF INVALIDATE THE NOTICE . 7.1. IN THE INSTANT APPEAL IN THE PENALTY OR DER DATED 28.06.2013, THE AO HAS CATEGORICALLY STATED THAT PENALTY PROCEEDING U/S 271(1)(C) WAS INITIATED FOR CONCEALMENT/FURNISHING INACCURATE PARTICULARS OF INCOME. THE AO HAS CONCLUDED IN THE SAME PENALTY ORDER THAT THE ASSESSEE HAS COMMITTED THE DEFAUL T U/S 271(1)(C) BY FURNISHING INACCURATE PARTICULARS OF CERTAIN INCOME /CONCEALMENT. THEREAFTER, THE AO HAS IMPOSED A PENALTY OF RS.5,43,80,424/ - U/S 271(1)(C) OF THE ACT. 7.2. AGAINST THE ABOVE BACKGROUND OF FACTS, WE MAY REFER TO THE RECENT DECISION IN SHRI SAMSON PERINCHERY (SUPRA) . THE HONBLE BOMBAY HIGH COURT VIDE ORDER DATED 05.01.2017 HELD AS UNDER: 5. THE GRIEVANCE OF THE REVENUE BEFORE US IS THAT THERE IS NO DIFFERENCE BETWEEN FURNISHING OF INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INC OME. THUS, DISTINCTION DRAWN BY THE IMPUGNED ORDER IS BETWEEN TWEEDLEDUM AND TWEEDLEDEE. IN THE ABOVE VIEW, THE DELETION OF THE PENALTY IS UNJUSTIFIED. 6. THE ABOVE SUBMISSION ON THE PART OF THE REVENUE IS IN THE FACE OF THE DECISION OF THE SUPREME COURT IN ASHOK PAI VS. CIT 292 ITR 11 [RELIED UPON IN MANJUNATH COTTON & GINNING FACTORY (SUPRA)] WHEREIN IT IS OBSERVED THAT CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME IN SECTION 271(1)(C) OF THE ACT, CARRY DIFFERENT MEANING/CONN OTATIONS. THEREFORE, THE SATISFACTION OF THE ASSESSING OFFICER WITH REGARD TO ONLY ONE OF THE TWO BREACHES MENTIONED UNDER SECTION 271(1)(C) OF THE ACT, FOR INITIATION OF PENALTY PROCEEDINGS WILL NOT WARRANT/PERMIT PENALTY BEING IMPOSED FOR THE OTHER BREAC H. THIS IS MORE SO, AS AN ASSESSEE WOULD RESPOND TO THE GROUND ON WHICH THE PENALTY HAS BEEN INITIATED/NOTICE ISSUED. IT MUST, THEREFORE, FOLLOW THAT THE ORDER ITA NO. 2978/MUM/2015 6 IMPOSING PENALTY HAS TO BE MADE ONLY ON THE GROUND OF WHICH THE PENALTY PROCEEDINGS HAS BEEN INI TIATED, AND IT CANNOT BE ON A FRESH GROUND OF WHICH THE ASSESSEE HAS NO NOTICE. 7. THEREFORE, THE ISSUE HEREIN STANDS CONCLUDED IN FAVOUR OF THE RESPONDENT - ASSESSEE BY THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATH COTTON AND GINNING FA CTORY (SUPRA). NOTHING HAS BEEN SHOWN TO US IN THE PRESENT FACTS WHICH WOULD WARRANT OUR TAKING A VIEW DIFFERENT FROM THE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATH COTTON AND GINNING FACTORY (SUPRA). 7.3 FACTS BEING SIMILAR, WE FOLLOW THE RECENT DECIS ION DATED 05.01.2017 OF THE HONBLE BOMBAY HIGH COURT IN SHRI SAMSON PERINCHERY (SUPRA) AND CANCEL THE PENALTY IMPOSED BY THE AO U/S 271(1)(C). 8. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 12/07/2017. SD/ - SD/ - (D.T. GARASIA) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : DATED: 12/07/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI