THE THANE DISTRICT CENTRAL CO OP BANK LTD, THANE V. ACIT CIR 3, THANE

ITA 3043/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0401 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 09-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 20-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B PRUSETH
• Assessee Lawyers: ASHOK J PATIL
• Keywords: Principle of natural justice
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH D, MU MBAI BEFORE SHRI P.K. BANSAL, VICE-PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 3043/MUM/2015 (ASSESSMENT YEAR- 2008-09) THE THANE DISTRICT CENTRAL CO. OP. BANK LTD. SHIVAJI PATH, THANE-(W), 400601. PAN: AAAAT0739N VS. ACIT CIRCLE(3), 6 TH FLOOR, ASHAR I.T. PARK, ROAD NO. 16-Z, WAGLE INDL. ESTATE, THANE-400604. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHOK J. PATIL (AR) REVENUE BY : SHRI B. PRU SETH (CIT-DR) DATE OF HEARING : 13.06.2017 DATE OF PRONOUNCEMENT : 16.06.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE U/S. 253 OF THE INCOME-TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEAL S)-2 [THE CIT(A)], THANE DATED 11.02.2015 FOR THE ASSESSMENT YEAR 2008-09. T HE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE L EARNED ACIT-CIRCLE 3- THANE ERRED IN PASSING THE PENALTY ORDER U/S. 271(1)(C) OF INCO ME TAX ACT, 1961 OF RS. 5,06,20,290/- AND CIT(A)-L THANE ERRED IN CONFIRMIN G THE SAME THOUGH THERE WAS NO 'MENS REA' OR 'GUILTY MIND' WHICH IS A VITAL POINT IN THE EXPRESSION 'CONCEALMENT' AS ENVISAGED IN SECTION 271(1)(C) AND IF THERE IS N O GUILTY MIND, NO PENALTY CAN BE LEVIED. FURTHER, MERELY BECAUSE THE CLAIM OF THE AP PELLANT U/S.36(1)(VIIA) IS FOUND TO BE EXCESS/NOT ACCEPTABLE AND RESTRICTED TO THE EXTE NT OF PROVISION FOR BAD AND DOUBTFUL DEBT DEBITED TO PROFIT AND LOSS ACCOUNT BY ANY STRETCH OF IMAGINATION DOES NOT TANTAMOUNT TO CONCEALMENT OF INCOME OR FURNISHI NG INCORRECT PARTICULARS OF INCOME. 'FURTHER FOR FEW RURAL BRANCHES ADVANCES NO T FOUND TO BE ELIGIBLE FOR CLAIM IX], 36(1)(VIIA) IS BROUGHT TO THE NOTICE OF LEARN ED A.O. BY APPELLANT HIMSELF, DURING THE COURSE OF ASSESSMENT AND THE SAID CLAIM WAS MADE ON THE BASIS OF DATA, INFORMATION THEN AVAILABLE TO BANK FROM BRANCHES IS NOT AMOUNTS TO CONCEALMENT OF ITA NO.3043/M/2015- THE THANE DISTRICT CENTRAL CO. OP. BANK LTD. 2 INCOME OR FURNISHING INCORRECT DETAILS AND ACIT -CI RCLE-3 PASSING AND CIT(A)-L THANE CONFIRMING THE PENALTY ORDER U/S. 271 (1)(C) LEVY OF PENALTY IS FOR AWAY FROM REAL FACTS BASELESS, IGNORING LAW, AGAINST WEIGHT O F EVIDENCE, AGAINST PRINCIPLE AND NATURAL JUSTICE AND BAD IN LAW THEREFORE PENALTY OR DER DESERVED TO BE QUASHED IN TOTO. 2. THE LEARNED CIT(A)1-THANE FAILED TO APPRECIATE THAT THE BANK HAS CLAIMED DEDUCTION U/S. 36(1)(VIIA) IN GOOD FAITH AND ON THE BASIS OF THEN AVAILABLE DATA FROM THE BRANCHES WITH THE BANK WHICH IS NOT AMOUNTS TO CONC EALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME AS ENVI SAGED U/S. 271(1)(C) OF INCOME TAX ACT, 1961. 3. THE LEARNED CIT(A) 1-THANE COMPLETELY FAILED TO APP RECIATE THAT THE 'EXPLANATION 1' LAID U/S.271(1)(C) IN CONFIRMING PENALTY ORDER U NDER THIS SECTION NOTWITHSTANDING THE FACT THAT THERE IS NO ANY FAILURE ON PART OF AP PELLANT TO OFFER AN EXPLANATION TO A.O. 2. THE ASSESSEE VIDE APPLICATION DATED 21.04.2017 RAIS ED THE FOLLOWING ADDITIONAL GROUNDS OF APPEAL: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE PENALTY LEVIED IS BAD IN LAW AS THE ASSESSING OFFICER HAS FAILED TO M ENTION IF THE PENALTY IS BEING LEVIED FOR CONCEALMENT OR INACCURATE PARTICUL ARS OF INCOME IN THE ASSESSMENT ORDER AND THE SHOW CAUSE NOTICE DATED 19 .01.2011 U/S 271(1)(C) OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CO-OPERATIVE BANK REGISTERED UNDER MAHARASHTRA CO-OPERATIVE SOCIETY ACT, FILED RETURN OF INCOME FOR RELEVANT AY ON 30.09.2008 DECLARING TOTAL INCOME AT RS. NIL. THE A SSESSMENT ORDER WAS PASSED ON 26.12.2010 U/S 143(3) ASSESSING THE TOTAL INCOME AT RS. 16,38,29,172/-. WHILE FRAMING ASSESSMENT, THE ASSESSING OFFICER (AO) DISA LLOWED DEDUCTION U/S 36(1)(VIIA) OF THE ACT. THE AO ALSO LEVIED THE PENA LTY U/S 271(1)(C) OF THE ACT OF RS. 5,06,20,290/-. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF AO WAS CONFIRMED. THUS, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE PRESENT APPEAL IS FILED BEFORE US. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AN D PERUSED THE MATERIAL ITA NO.3043/M/2015- THE THANE DISTRICT CENTRAL CO. OP. BANK LTD. 3 AVAILABLE ON RECORD. THE LD. AR OF THE ASSESSEE ARG UED THAT THE ASSESSEE FILED RETURN OF INCOME AFTER CLAIMING ELIGIBLE DEDUCTION U/S 36( 1)(VIIA) IN GOOD FAITH ON THE BASIS OF DATA, INFORMATION THEN AVAILABLE TO THE BA NK FROM VARIOUS BRANCHES. THE ASSESSEE FURNISHED THE TRUE AND CORRECT PARTICULARS OF INCOME AND NOTHING MATERIAL FACT WAS CONCEALED. THE ASSESSEE SHOWN DECLARED COR RECT INFORMATION AND PARTICULARS OF INCOME AND PROFIT & LOSS A/C, STATEM ENT OF TOTAL INCOME AND CLAIMED ELIGIBLE DEDUCTION. THUS, THERE WAS NO OCCA SION FOR CONCEALMENT OR FURNISHING THE INACCURATE INFORMATION. IT WAS ARGUE D THAT MERELY THE CLAIM OF ASSESSEE WAS FOUND NOT ACCEPTABLE BY AO, IT CANNOT BE SAID THAT ASSESSEE CONCEALED THE PARTICULAR OF INCOME. IT WAS FURTHER ARGUED THAT MERE ADDITION/DISALLOWANCE DOES NOT AUTOMATICALLY LEAD T O LEVY OF PENALTY. IN SUPPORT OF ADDITIONAL GROUNDS OF APPEAL, THE LD. AR OF THE ASSESSEE ARGUED THAT THE PENALTY ORDER PASSED BY AO IS BAD-IN-LAW. THE AO FAILED TO MENTION, IF THE PENALTY IS BEING LEVIED FOR CONCEALMENT OR FOR FURNISHING INAC CURATE PARTICULARS OF INCOME IN THE ASSESSMENT ORDER. THE SHOW-CAUSE NOTICE DATED 1 9.01.2011 U/S 274 R.W.S. 271(1)(C) OF THE ACT DOES NOT SATISFIED THE SPECIFI C CHARGE AS THE AO HAS NOT SPECIFIED THE CHARGE THE NOTICE OF PENALTY IS BAD I N LAW. THE LD. AR OF THE ASSESSEE PLACED ON RECORD THE COPY OF NOTICE DATED 19.11.201 1 ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT ALONG WITH THE COMPUTATION OF INCOME, BALANCE-SHEET AND PROFIT & LOSS A/C. IN SUPPORT OF HIS SUBMISSION, TH E LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN C ASE OF CIT VS. SAMSON PERINCHARY (392 ITR 4) AND THE DECISION OF CO-ORDI NATE BENCH OF TRIBUNAL IN CASE ITA NO.3043/M/2015- THE THANE DISTRICT CENTRAL CO. OP. BANK LTD. 4 OF MEHERJEE CASSINATH HOLDINGS P. LTD. V/S. ACIT IN ITA NO. 2555/MUM/2012 DATED 28.04.2017. 5. ON THE OTHER HAND, LD. DR FOR THE REVENUE STRONGLY SUPPORTED THE ORDER OF AUTHORITIES BELOW AND WOULD ARGUE THAT THE ASSESSEE WAS GIVEN FULL OPPORTUNITY BEFORE LEVYING THE PENALTY. THE ASSESSEE FURNISHED ITS REPLY TO THE SHOW-CAUSE NOTICE ISSUED U/S 271(1)(C) R.W.S. 274 OF THE ACT. THE REPLY OF THE ASSESSEE WAS CONSIDERED. THE ASSESSEE HAS NOT RAISED ANY SUCH GR OUND ABOUT NONE MENTIONING THE SPECIFIC CHARGE IN THE NOTICE. DURING THE ASSES SMENT PROCEEDING, IT WAS NOTICED THAT THE ASSESSEE FILED WRONG PARTICULAR ABOUT THE RURAL BRANCHES, WITHOUT QUALIFICATION OF RURAL BRANCHES. DURING THE ASSESSM ENT PROCEEDING, EIGHT BRANCHES WERE DISCOVERED TO BE NOT RURAL BRANCHES AS THE AVE RAGE POPULATION OF THE LOCALITY, WHERE THE BRANCHES ARE LOCATED WAS MORE THAN 10,000 . ALL THIS FACTS WERE IN THE KNOWLEDGE OF ASSESSEE AT THE TIME OF FILING THE RET URN OF INCOME. ACCORDINGLY, THE AO HOLD THAT ASSESSEE FURNISHED INACCURATE PARTICUL ARS OF INCOME IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF JURISDICTIONAL HIGH COURT IN CASE OF CIT V/S. SMT. KAUSHALYA & ORS ( 216 ITR 660 (BOM), DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN STATE BANK OF PATIALA V/S ACIT (2005) 272 ITR 0054 (P&H) , HONBLE DELHI HIGH COURT IN CIT V/S ZOOM COMMUNICATION PVT. LTD. [372 ITR 510 (DEL.)] AND T HE DECISION OF CO-ORDINATE BENCH IN CASE OF DHAVAL K. JAIN V/S. ITO IN ITA NO. 996/MUM/2014. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDER OF AUTHORITIES BELOW. WE HAVE PERUSED THE COP Y OF SHOW-CAUSE NOTICE U/S 274 R.W.S. 271(1)(C) OF THE ACT DATED 19.01.2011. T HE SAID NOTICE DOES NOT CONTAIN ITA NO.3043/M/2015- THE THANE DISTRICT CENTRAL CO. OP. BANK LTD. 5 THE REFERENCE ABOUT THE SPECIFIC CHARGE IF IT WAS I SSUED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS. THE LD. AR OF THE ASSESSEE, AS WE HAVE REFERRED EARLIER ARGUED THAT N OTICE WAS ISSUED WITHOUT SPECIFYING THE CHARGE. WE FIND FORCE IN THE SUBMISS IONS OF LD. AR FOR THE ASSESSEE, THAT THE NOTICE DOES NOT CONTAIN ANY REFERENCE ABOU T THE SPECIFIC CHARGE, IF THE SAME WAS ISSUED FOR CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE LD. AR OF THE ASSESSEE BESIDES THE OTHER RELIED UPON TH E DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. SAMSON PERINCH ARY (SUPRA) AND THE DECISION OF MEHERJEE CASSINATH HOLDINGS P. LTD. (SUPRA), ( IN W HICH ONE OF US IS COAUTHORED) IN THE SAID DECISION, THE CO-ORDINATE BENCH OF THIS TRIBUNAL MADE THE FOLLOWING OBSERVATIONS: 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. SEC. 271(1)(C) OF THE ACT EMPOWERS THE ASSESSING OFFICER TO IMPOSE PENALTY TO THE EXTENT SPECIFIED IF, IN THE COURSE OF ANY PROCEEDINGS UNDER THE ACT, HE IS SATI SFIED THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF SUCH INCOME. IN OTHER WORDS, WHAT SEC. 271(1)(C) OF THE ACT POSTULATES IS THAT THE PENALTY CAN BE LEVIED ON THE EXISTENCE OF ANY OF THE TWO SI TUATIONS, NAMELY, FOR CONCEALING THE PARTICULARS OF INCOME OR FOR FURNISHING INACCUR ATE PARTICULARS OF INCOME. THEREFORE, IT IS OBVIOUS FROM THE PHRASEOLOGY OF SE C. 271(1)(C) OF THE ACT THAT THE IMPOSITION OF PENALTY IS INVITED ONLY WHEN THE COND ITIONS PRESCRIBED U/S 271(1)(C) OF THE ACT EXIST. IT IS ALSO A WELL ACCEPTED PROPOSITI ON THAT 'CONCEALMENT OF THE PARTICULARS OF INCOME' AND 'FURNISHING OF INACCURAT E PARTICULARS OF INCOME' REFERRED TO IN SEC. 271(1)(C) OF THE ACT DENOTE DIFFERENT CONNO TATIONS. IN FACT, THIS DISTINCTION HAS BEEN APPRECIATED EVEN AT THE LEVEL OF HON'BLE SUPRE ME COURT NOT ONLY IN THE CASE OF DILIP N. SHROFF (SUPRA) BUT ALSO IN THE CASE OF T. ASHOK PAI, 292 ITR 11 (SC). THEREFORE, IF THE TWO EXPRESSIONS, NAMELY 'CONCEALM ENT OF THE PARTICULARS OF INCOME' AND 'FURNISHING OF INACCURATE PARTICULARS OF INCOME ' HAVE DIFFERENT CONNOTATIONS, IT IS IMPERATIVE FOR THE ASSESSEE TO BE MADE AWARE AS TO WHICH OF THE TWO IS BEING PUT AGAINST HIM FOR THE PURPOSE OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT, SO THAT THE ASSESSEE CAN DEFEND ACCORDINGLY. IT IS IN THIS BACK GROUND THAT ONE HAS TO APPRECIATE THE PRELIMINARY PLEA OF ASSESSEE, WHICH IS BASED ON THE MANNER IN WHICH THE NOTICE U/S 274 R.W.S. 271(1)(C) OF THE ACT DATED 10.12.201 0 HAS BEEN ISSUED TO THE ASSESSEE- COMPANY. A COPY OF THE SAID NOTICE HAS BEEN PLACED ON RECORD AND THE LEARNED ITA NO.3043/M/2015- THE THANE DISTRICT CENTRAL CO. OP. BANK LTD. 6 REPRESENTATIVE CANVASSED THAT THE SAME HAS BEEN ISS UED BY THE ASSESSING OFFICER IN A STANDARD PROFORMA, WITHOUT STRIKING OUT THE IRRELEV ANT CLAUSE. IN OTHER WORDS, THE NOTICE REFERS TO BOTH THE LIMBS OF SEC. 271(1)(C) O F THE ACT, NAMELY CONCEALMENT OF THE PARTICULARS OF INCOME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. QUITE CLEARLY, NON-STRIKING-OFF OF THE IRRELEVANT L IMB IN THE SAID NOTICE DOES NOT CONVEY TO THE ASSESSEE AS TO WHICH OF THE TWO CHARG ES IT HAS TO RESPOND. THE AFORESAID INFIRMITY IN THE NOTICE HAS BEEN SOUGHT TO BE DEMON STRATED AS A REFLECTION OF NON- APPLICATION OF MIND BY THE ASSESSING OFFICER, AND I N SUPPORT, REFERENCE HAS BEEN MADE TO THE FOLLOWING SPECIFIC DISCUSSION IN THE OR DER OF HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA):- '83. IT IS OF SOME SIGNIFICANCE THAT IN THE STANDAR D PROFORMA USED BY THE ASSESSING OFFICER IN ISSUING A NOTICE DESPITE THE FACT THAT T HE SAME POSTULATES THAT INAPPROPRIATE WORDS AND PARAGRAPHS WERE TO BE DELET ED, BUT THE SAME HAD NOT BEEN DONE. THUS, THE ASSESSING OFFICER HIMSELF WAS NOT SURE AS TO WHETHER HE HAD PROCEEDED ON THE BASIS THAT THE ASSESSEE HAD CONCEA LED HIS INCOME OR HE HAD FURNISHED INACCURATE PARTICULARS. EVEN BEFORE US, T HE LEARNED ADDITIONAL SOLICITOR GENERAL WHILE PLACING THE ORDER OF ASSESSMENT LAID EMPHASIS THAT HE HAD DEALT WITH BOTH THE SITUATIONS. 84. THE IMPUGNED ORDER, THEREFORE, SUFFERS FROM NON -APPLICATION OF MIND. IT WAS ALSO BOUND TO COMPLY WITH THE PRINCIPLES OF NATURAL JUSTICE. ( SEE MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 2 SCC 718]' 9. FACTUALLY SPEAKING, THE AFORESAID PLEA OF ASSESS EE IS BORNE OUT OF RECORD AND HAVING REGARD TO THE PARITY OF REASONING LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA), THE NOTICE IN THE INSTANT CASE DOES SUFFER FROM THE VICE OF NON-APPLICATION OF MIND BY THE ASSESSING OF FICER. IN FACT, A SIMILAR PROPOSITION WAS ALSO ENUNCIATED BY THE HON'BLE KARN ATAKA HIGH COURT IN THE CASE OF M/S. SSA'S EMERALD MEADOWS (SUPRA) AND AGAINST SUCH A JUDGMENT, THE SPECIAL LEAVE PETITION FILED BY THE REVENUE HAS SINCE BEEN DISMISSED BY THE HON'BLE SUPREME COURT VIDE ORDER DATED 5.8.2016, A COPY OF WHICH IS ALSO PLACED ON RECORD. 10. IN FACT, AT THE TIME OF HEARING, THE LD. CIT-DR HAS NOT DISPUTED THE FACTUAL MATRIX, BUT SOUGHT TO POINT OUT THAT THERE IS DUE APPLICATI ON OF MIND BY THE ASSESSING OFFICER WHICH CAN BE DEMONSTRATED FROM THE DISCUSSION IN TH E ASSESSMENT ORDER, WHEREIN AFTER DISCUSSING THE REASONS FOR THE DISALLOWANCE, HE HAS RECORDED A SATISFACTION THAT PENALTY PROCEEDINGS ARE INITIATED U/S 271(1)(C) OF THE ACT FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN OUR CONSIDERED OPINION, T HE ATTEMPT OF THE LD. CIT-DR TO DEMONSTRATE APPLICATION OF MIND BY THE ASSESSING OF FICER IS NO DEFENCE INASMUCH AS THE HON'BLE SUPREME COURT HAS APPROVED THE FACTUM O F NON-STRIKING OFF OF THE IRRELEVANT CLAUSE IN THE NOTICE AS REFLECTIVE OF NO N-APPLICATION OF MIND BY THE ASSESSING OFFICER. SINCE THE FACTUAL MATRIX IN THE PRESENT CASE CONFORMS TO THE PROPOSITION LAID DOWN BY THE HON'BLE SUPREME COURT, WE PROCEED TO REJECT THE ARGUMENTS ADVANCED BY THE LD. CIT-DR BASED ON THE O BSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. FURTHER, IT IS ALS O NOTICEABLE THAT SUCH PROPOSITION HAS BEEN CONSIDERED BY (SUPRA) AND THE DECISION O F THE TRIBUNAL HOLDING LEVY OF PENALTY IN SUCH CIRCUMSTANCES BEING BAD, HAS BEEN A PPROVED. ITA NO.3043/M/2015- THE THANE DISTRICT CENTRAL CO. OP. BANK LTD. 7 11. APART FROM THE AFORESAID, THE LD. CIT-DR MADE A N ARGUMENT BASED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF SMT. KAUSHALYA & OTHERS, 216 ITR 660 (BOM.) TO CANVASS SUPPORT FOR HIS PLEA THAT NON-STRIKING OFF OF THE IRRELEVANT PORTION OF NOTICE WOULD NOT INVALIDATE T HE IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT. WE HAVE CAREFULLY CONSIDERED THE SAID ARGUMENT SET-UP BY THE LD. CIT-DR AND FIND THAT A SIMILAR ISSUE HAD COME U P BEFORE OUR COORDINATE BENCH IN THE CASE OF DR. SARITA MILIND DAVARE (SUPRA). OUR C OORDINATE BENCH, AFTER CONSIDERING THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN TH E CASE OF SMT. KAUSHALYA & ORS., (SUPRA) AS ALSO THE JUDGMENTS OF THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA) AND DHARMENDRA TEXTILE PROCESSORS , 306 ITR 277 (SC) DEDUCED AS UNDER :- '12. A COMBINED READING OF THE DECISION RENDERED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF SMT. B KAUSHALYA AND OTHERS (SUPRA) AND THE DECISION RENDERED BY HON'BLE SUPREME COURT IN THE CASE OF DILIP N SHROFF (SUPRA) WOULD MAKE IT CLEAR THAT THERE SHOULD BE APPLICATION OF MIND ON THE PAR T OF THE AO AT THE TIME OF ISSUING NOTICE. IN THE CASE OF LAKHDIR LALJI (SUPRA ), THE AO ISSUED NOTICE U/S 274 FOR CONCEALMENT OF PARTICULARS OF INCOME BUT LEVIED PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE HON'BLE GUJAR AT HIGH COURT QUASHED THE PENALTY SINCE THE BASIS FOR THE PENALTY PROCEEDINGS DISAPPEARED WHEN IT WAS HELD THAT THERE WAS NO SUPPRESSION OF INCOME. THE HON'BL E KERALA HIGH COURT HAS STRUCK DOWN THE PENALTY IMPOSED IN THE CASE OF N.N. SUBRAMANIA IYER VS. UNION OF INDIA (SUPRA), WHEN THERE IS NO INDICATION IN THE N OTICE FOR WHAT CONTRAVENTION THE PETITIONER WAS CALLED UPON TO SHOW CAUSE WHY A PENA LTY SHOULD NOT BE IMPOSED. IN THE INSTANT CASE, THE AO DID NOT SPECIFY THE CHARGE FOR WHICH PENALTY PROCEEDINGS WERE INITIATED AND FURTHER HE HAS ISSUED A NOTICE M EANT FOR CALLING THE ASSESSEE TO FURNISH THE RETURN OF INCOME. HENCE, IN THE INSTANT CASE, THE ASSESSING OFFICER DID NOT SPECIFY THE CHARGE FOR WHICH THE PENALTY PROCEE DINGS WERE INITIATED AND ALSO ISSUED AN INCORRECT NOTICE. BOTH THE ACTS OF THE AO , IN OUR VIEW, CLEARLY SHOW THAT THE AO DID NOT APPLY HIS MIND WHEN HE ISSUED NOTICE TO THE ASSESSEE AND HE WAS NOT SURE AS TO WHAT PURPOSE THE NOTICE WAS ISSUED. THE HON'BLE BOMBAY HIGH COURT HAS DISCUSSED ABOUT NON-APPLICATION OF MIND I N THE CASE OF KAUSHALYA (SUPRA) AND OBSERVED AS UNDER:- '....THE NOTICE CLEARLY DEMONSTRATED NON-APPLICATIO N OF MIND ON THE PART OF THE INSPECTING ASSISTANT COMMISSIONER. THE VAGUENESS AN D AMBIGUITY IN THE NOTICE HAD ALSO PREJUDICED THE RIGHT OF REASONABLE OPPORTU NITY OF THE ASSESSEE SINCE HE DID NOT KNOW WHAT EXACT CHARGE HE HAD TO FACE. IN T HIS BACK GROUND, QUASHING OF THE PENALTY PROCEEDINGS FOR THE ASSESSMENT YEAR 196 7-68 SEEMS TO BE FULLY JUSTIFIED.' IN THE INSTANT CASE ALSO, WE ARE OF THE VIEW THAT T HE AO HAS ISSUED A NOTICE, THAT TOO INCORRECT ONE, IN A ROUTINE MANNER. FURTHER THE NOT ICE DID NOT SPECIFY THE CHARGE FOR WHICH THE PENALTY NOTICE WAS ISSUED. HENCE, IN OUR VIEW, THE AO HAS FAILED TO APPLY HIS MIND AT THE TIME OF ISSUING PENALTY NOTICE TO T HE ASSESSEE.' 12. THE AFORESAID DISCUSSION CLEARLY BRINGS OUT AS TO THE REASONS WHY THE PARITY OF REASONING LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA) IS TO PREVAIL. FOLLOWING THE DECISION OF OU R COORDINATE BENCH IN THE CASE OF ITA NO.3043/M/2015- THE THANE DISTRICT CENTRAL CO. OP. BANK LTD. 8 DR. SARITA MILIND DAVARE (SUPRA), WE HEREBY REJECT THE AFORESAID ARGUMENT OF THE LD. CIT-DR. 13. APART FROM THE AFORESAID DISCUSSION, WE MAY ALS O REFER TO THE ONE MORE SEMINAL FEATURE OF THIS CASE WHICH WOULD DEMONSTRATE THE IM PORTANCE OF NON-STRIKING OFF OF IRRELEVANT CLAUSE IN THE NOTICE BY THE ASSESSING OF FICER. AS NOTED EARLIER, IN THE ASSESSMENT ORDER DATED 10.12.2010 THE ASSESSING OFF ICER RECORDS THAT THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ARE TO BE INIT IATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. HOWEVER, IN THE NOTICE ISSUE D U/S 274 R.W.S. 271(1)(C) OF THE ACT OF EVEN DATE, BOTH THE LIMBS OF SEC. 271(1)(C) OF THE ACT ARE REPRODUCED IN THE PROFORMA NOTICE AND THE IRRELEVANT CLAUSE HAS NOT B EEN STRUCK-OFF. QUITE CLEARLY, THE OBSERVATION OF THE ASSESSING OFFICER IN THE ASSESSM ENT ORDER AND NON-STRIKING OFF OF THE IRRELEVANT CLAUSE IN THE NOTICE CLEARLY BRINGS OUT THE DIFFIDENCE ON THE PART OF ASSESSING OFFICER AND THERE IS NO CLEAR AND CRYSTAL LISED CHARGE BEING CONVEYED TO THE ASSESSEE U/S 271(1)(C), WHICH HAS TO BE MET BY HIM. AS NOTED BY THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA ), THE QUASI-CRIMINAL PROCEEDINGS U/S 271(1)(C) OF THE ACT OUGHT TO COMPLY WITH THE P RINCIPLES OF NATURAL JUSTICE, AND IN THE PRESENT CASE, CONSIDERING THE OBSERVATIONS OF T HE ASSESSING OFFICER IN THE ASSESSMENT ORDER ALONGSIDE HIS ACTION OF NON-STRIKI NG OFF OF THE IRRELEVANT CLAUSE IN THE NOTICE SHOWS THAT THE CHARGE BEING MADE AGAINST THE ASSESSEE QUA SEC. 271(1)(C) OF THE ACT IS NOT FIRM AND, THEREFORE, THE PROCEEDI NGS SUFFER FROM NON-COMPLIANCE WITH PRINCIPLES OF NATURAL JUSTICE INASMUCH AS THE ASSESSING OFFICER IS HIMSELF UNSURE AND ASSESSEE IS NOT MADE AWARE AS TO WHICH OF THE T WO LIMBS OF SEC. 271(1)(C) OF THE ACT HE HAS TO RESPOND . 14. THEREFORE, IN VIEW OF THE AFORESAID DISCUSSION, IN OUR VIEW, THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S 274 R.W.S. 271(1)(C) OF T HE ACT DATED 10.12.2010 IS UNTENABLE AS IT SUFFERS FROM THE VICE OF NON- APPLI CATION OF MIND HAVING REGARD TO THE RATIO OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA) AS WELL AS THE JUDGMENT OF THE HON'BLE BOMB AY HIGH COURT IN THE CASE OF SHRI SAMSON PERINCHERY (SUPRA). THUS, ON THIS COUNT ITSELF THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT IS LIABLE TO BE DELETED . 7. THE LD. DR FOR THE REVENUE RELIED UPON THE DECISION OF CO-ORDINATE BENCH IN DHAVAL K. JAIN (SUPRA) AND THE DECISION OF JURISDIC TIONAL HIGH COURT IN CIT V/S SMT. KAUSHALYA & ORS. (SUPRA) MAY REFER THAT THE HO NBLE JURISDICTIONAL HIGH COURT IN A RECENT DECISION OF SIMILAR GROUND AS RAI SED BY ASSESSEE IN THE PRESENT APPEAL IN CASE OF CIT VS. SAMSON PERINCHARY (SUPRA) HELD THAT THE FAILURE ON THE PART OF AO TO SPECIFY IN THE NOTICE U/S 274 WHETHER THE PENALTY IS BEING INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME OR FOR CONCEALMENT OF INCOME (IS ITA NO.3043/M/2015- THE THANE DISTRICT CENTRAL CO. OP. BANK LTD. 9 FATAL). THE HONBLE COURT FURTHER HELD THAT NONE-ME NTIONING OF CHARGE REFLECTS NON-APPLICATION OF MIND AND RENDERS THE LEVY OF PEN ALTY INVALID. THE HONBLE JURISDICTIONAL HIGH COURT FOLLOWED THE DECISION OF KARNATAKA HIGH COURT IN CIT V/S. MANJUNATHA COTTON AND GINNING FACTORY [(2013) 359 ITR 0565]. THE HONBLE COURT DELIVERED THE SAID DECISION ON 05.01.2017. TH E LD. DR FOR THE REVENUE FURTHER RELIED UPON THE DECISION OF CO-ORDINATE BEN CH IN CASE OF DHAVAL K. JAIN (SUPRA) (AUTHORED BY ONE OF US). WE MAY REFER THAT THE SAID DECISION WAS PASSED ON 30.09.2016 I.E. MUCH PRIOR TO THE DECISION OF HONB LE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS. SAMSON PERINCHERY (SUPRA). WE MAY F URTHER OBSERVE THAT THE DECISION OF JURISDICTIONAL HIGH COURT IS A BINDING PRECEDENT ON US. THUS, CONSIDERING THE DECISION OF SAMSON PERINCHERY (SUP RA) AND THE LATEST DECISION OF CO-ORDINATE BENCH IN MEHERJEE CASSINATH HOLDINGS P. LTD. (SUPRA), WE FIND THAT AO FAILED TO SPECIFY THE SPECIFIC CHARGE IN THE NOT ICE U/S 274 R.W.S. 271(1)(C) OF THE ACT. 8. THUS, RESPECTFULLY FOLLOWING THE LATEST DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN SAMSON PERINCHERY (SUPRA), WE ALLOWED THE ADDITIONAL GROUND OF APPEAL RAISED BY ASSESSEE. SINCE WE HAVE ALLOWED THE ADDIT IONAL GROUND OF APPEAL, THUS, THE DISCUSSION ON OTHER GROUND BECAME ACADEMIC. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH DAY OF JUNE 2017. SD/- SD/- ( P.K. BANSAL) (PAWAN SINGH) (VICE-PRESIDENT) JUDICIAL MEMBER MUMBAI; DATED 16/06/2017 S.K.PS ITA NO.3043/M/2015- THE THANE DISTRICT CENTRAL CO. OP. BANK LTD. 10 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/