T.Satyanarayana, Visakhapatnam V. The ACIT, Visakhapatnam

ITA 319/VIZ/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5657 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 26-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Keywords: Principle of natural justice; Question of law; Capital Gains
• Section: 271(1)(c); 143(3); 153A; 201; 274; 73; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 319 / VIZ /201 7 (ASST. YEAR : 20 04 - 05 ) TALLURI SATYANARAYANA, PROP. : SAIRAM PARLOUR, D.NO. 47 - 11 - 9, DIAMOND PARK, VISAKHAPATNAM. V S . AC IT, CIRCLE - 1(1) , VISAKHAPATNAM . PAN NO. AAQPT 9170 N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI , ADV OCATE . DEPARTMENT BY : SMT. U.MINI CHANDRAN, SR. DR DATE OF HEARING : 17 / 0 2 /20 20 . DATE OF PRONOUNCEMENT : 17 / 0 2 /2020 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 1 , VISAKHAPATNAM , DATED 2 7 /0 4 /201 7 FOR THE ASSESSMENT YEAR 20 04 - 05 . 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS THE PROPRIETOR OF M/S. SAIRAM PARLOUR , FILED HIS RETURN OF INCOME BY DECLARING TOTAL INCOME OF RS. 12,34,930 / - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED UNDER 2 ITA NO. 319/VIZ/2017 ( TALLURI SATYANARAYANA ) SECTION 143(3) R.W.S. 153A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE 'ACT') ON 31/12/2009 BY MAKING CERTAIN ADDITIONS . SUBSEQUENTLY, PENAL TY NOTICE U / SEC . 274 R.W.S. 271(1)(C) OF THE ACT, DATED 3 1 / 12 /20 09 WAS ISSUED AND THEREAFTER PENALTY ORDER U/SEC. 271(1)(C) WAS PASSED ON 31 / 1 0/201 2 . 3 . ON APPEAL, LD. CIT(A) CONFIRMED THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER. 4 . AGGRIEVED, THE ASSESSEE HAS RAISED THE FOLLOWING ADDITIONAL GROUND BEFORE THE TRIBUNAL. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER DT 31 - 1 0 - 201 2 LEVYING PENALTY U/S 271(1)(C) IS LIABLE TO BE CANCELLED IN AS MUCH AS THE NOTICE DT. 31 - 12 - 20 09 INITIATING THE PENALTY PROCEEDINGS DID NOT SPECIFY CLEARLY AS TO WHETHER THE PENALTY PROCEEDINGS WERE INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME.' 5 . LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTE D THAT THE NOTICE ISSUED BY THE ASSESSING OFFICER DATED 31/12/2009 , IS A VAGUE NOTICE AND THEREFORE, THE ADDITIONAL GROUND RAISED BEFORE THE TRIBUNAL IS A LEGAL ISSUE, WHICH GOES TO THE ROOT OF THE MATTER AND THEREFORE THE SAME MAY BE ADMITTED. 6 . ON THE O THER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE HAS RAISED AN OBJECTION FOR ADMISSION OF ADDITIONAL LEGAL GROUND RAISED BY THE ASSESSEE. 3 ITA NO. 319/VIZ/2017 ( TALLURI SATYANARAYANA ) 7 . WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW. 8. WE FI ND THAT THE ISSUE RAISED BY THE ASSESSEE IS A LEGAL ISSUE AND ALL THE FACTS ARE AVAILABLE ON RECORD. IN THIS CONTEXT, THE HON'BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT (229 ITR 383) HAS CONSIDERED THE ISSUE AND HELD THAT WH ERE THE TRIBUNAL IS ONLY REQUIRED TO CONSIDER A QUESTION OF LAW ARISING FROM THE FACTS WHICH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS WE FAIL TO SEE WHY SUCH A QUESTION SHOULD NOT BE ALLOWED TO BE RAISED WHEN IT IS NECESSARY TO CONSIDER THAT QUESTION IN ORDER TO CORRECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE . FROM THE ABOVE, IT IS VERY CLEAR THAT THERE IS NO FRESH INVESTIGATION ON FACTS IS REQUIRED, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE HAS TO BE ADJUDICATED, HENCE, THE SAME HAS TO BE ADMITTE D BY FOLLOWING THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD., (SUPRA), THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ADMITTED. 9. NOW COMING TO THE VALIDITY OF THE NOTICE ISSUED BY THE ASSESSING OFFICER DATED 31 /12/2009 . IN THIS CONTEXT, LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE NOTICE ISSUED BY THE ASSESSING OFFICER IS NOT CLEAR WHETHER NOTICE ISSUED UNDER SECTION 271(1)(C) IS FOR CONCEALMENT OF INCOME OR FURNISHED 4 ITA NO. 319/VIZ/2017 ( TALLURI SATYANARAYANA ) INACCURATE PARTICULARS. THEREFOR E, THE NOTICE ISSUED BY THE ASSESSING OFFICER IS NOT A VALID NOTICE IN THE LIGHT OF THE LATEST JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SSAS EMERALD MEADOWS [(2016) 73 TAXMAN.COM 248 (SC)] AND ALSO THE HON'BLE HIGH COURT OF TELANGANA & A.P. IN I.T.T.A. NO. 684/2016 IN PR.CIT VS. SMT. BAISETTY REVATHI , DATED 13 /07/2017. 10. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT AT THE TIME OF ISSUANCE OF NOTICE, THE ASSESSING OFFICER IS NOT SURE ABOUT THE PENALTY EITHER FOR CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THEREFORE, IT IS A PREM ATURE NOTICE AND SUBMITTED THAT THE NOTICE ISSUED BY THE ASSESSING OFFICER IS A VALID NOTICE. 11. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW. 12 . THE ONLY ISSUE FOR ADJUDICATION BEFORE US IS WHETHER THE NOTICE ISSUED BY THE ASSESSING OFFICER DATED 31/12/2009 IS VALID OR NOT. FOR THE SAKE OF CONVENIENCE, THE NOTICE IS EXTRACTED AS UNDER: - WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE ASSES SMENT YEAR 20 04 - 05 , IT APPEARS TO ME THAT YOU: - (I) X X X X (II) X X X X (III) HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 5 ITA NO. 319/VIZ/2017 ( TALLURI SATYANARAYANA ) 13 . FROM THE ABOVE, IT IS NOT CLEAR WHETHER ASSESSING OFFICER HAS INITIATED PENALTY PROCEEDINGS FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHED INACCURATE PARTICULARS. THEREFORE, THE NOTICE ISSUED BY THE ASSESSING OFFICER IS A VAGUE NOTICE AND IS LIABLE TO BE QUASHED IN THE LIGHT OF THE DECISION OF THE HON'BLE HIGH COURT OF TE LANGANA & A.P. IN THE CASE OF SMT. BAISETTY REVATHI (SUPRA) AND ALSO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SSAS EMERALD MEADOWS (SUPRA). THE COORDINATE BENCH OF THE VISAKHAPATNAM TRIBUNAL IN THE CASE OF KONCHADA SREERAM VS. ITO IN ITA NO. 388/VIZ/2015, BY ORDER DATED 06/10/2017 HAS CONSIDERED THE VALIDITY OF NOTICE BY FOLLOWING THE ABOVE REFERRED TO JUDGMENTS AND HELD THAT NOTICE ISSUED BY THE ASSESSING OFFICER IS NOT A VALID NOTICE AND ACCORDINGLY QUASHED. FOR THE SAKE OF CONV ENIENCE, THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: - 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. IN THIS CASE, THE ASSESSEE HAS NOT FILED THE RETURN OF INCOME. THE DEPARTMENT HAS CONDUCTED THE SURVEY U/S 133 A AND COMPLETED THE ASSESSMENT U/S 143(3) ON TOTAL INCOME OF RS.15,43,041/ - AND INITIATED PENALTY PROCEEDINGS U/S 271(1)(C). THE FACT IS THAT LONG TERM CAPITAL GAINS FOR SALE OF THE PROPERTY HAVE COME TO THE NOTICE OF THE ASSESSING OFFICER BECAUSE OF THE E FFORTS MADE BY THE DEPARTMENT. THEREFORE, THE AO HAS INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) AND ISSUED SHOW CAUSE NOTICE IN THE PRINTED PROFORMA OF PENALTY. THE AO HAS ISSUED THE PENALTY NOTICE WHICH READS AS UNDER : WHEREAS IN THE COURSE OF THE PROCEEDING BEFORE ME FOR THE ASST. YEAR 2007 - 08 IT APPEARS TO ME THAT YOU HAVE CONCEALED THE PARTICULARS OF YOUR SOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 6 ITA NO. 319/VIZ/2017 ( TALLURI SATYANARAYANA ) 6.1. FROM THE NOTICE ISSUED BY THE AO, IT IS OBSERVED THAT THE ASSESSING OFFICER H AD ISSUED THE NOTICE FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS. AS PER THE NOTICE, THE ASSESSING OFFICER WAS NOT SURE OF WHICH LIMB OF THE OFFENCE HE SOUGHT THE EXPLANATION FROM THE ASSESSEE, WHETHER IT WAS FOR THE CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS. AS PER THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT CITED, FOR STARTING THE PENALTY PROCEEDINGS, THE CONDITION PRECEDENT IS THAT THE ASSESSING OFFICER MUST BE SATISFIED THAT A PERSON HAS EITH ER CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD BE MADE AWARE OF THE GROUNDS ON WHICH IMPOSITION OF PENALTY IS PROPOSED AS HE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE THE FULL OPPORTUNITY TO MEET THE CASE OF THE REVENUE SO AS TO SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1)(C) DO NOT EXIST AND THAT HE IS NOT LIABLE TO PAY THE PENALTY. THE HONBLE HIGH COURT OF K ARNATAKA IN THE CASE LAW CITED HELD THAT THE PRACTICE OF THE REVENUE IN SENDING THE PRINTED FORM WHERE ALL THE GROUNDS MENTIONED IN 271(1)(C) ARE MENTIONED WOULD NOT SATISFY THE REQUIREMENT OF LAW WHEN THE CONSEQUENCE OF THE ASSESSEE NOT REBUTTING THE INIT IAL PRESUMPTION IS SERIOUS IN NATURE AND HAS TO PAY THE PENALTY RANGING FROM 100% TO 300% OF THE TAX LIABILITY. AS THE PROVISIONS OF SECTION 271(1)(C) HAVE TO BE STRICTLY CONSTRUED, THE HONBLE HIGH COURT OF KARNATAKA MANDATED THAT THE NOTICE ISSUED SHOU LD BE SET OUT THE GROUNDS WHICH THE ASSESSEE HAS TO MEET SPECIFICALLY, OTHERWISE THE PRINCIPLES OF NATURAL JUSTICE WOULD BE OFFENDED AS THE SHOW CAUSE NOTICE WOULD BE VAGUE. ON THE SIMILAR FACTS, HONBLE SUPREME COURT DISMISSED THE SLP IN THE CASE OF SSA S EMERALD MEADOWS (2016) 73 TAXMAN.COM 248(SC). LD. DRS ARGUMENT THAT THE CASE IS DISTINGUISHABLE ON FACTS IS NOT ACCEPTABLE SINCE THE LD. DR RELIED ON THE PASSING OBSERVATION OF THE HONBLE HIGH COURT OF AP. IN THE ASSESSEES CASE, THE ISSUE IS THE DEFE CTIVE NOTICE U/S 271(1)(C) BUT NOT THE PENALTY ORDER. UNLESS THE NOTICE ISSUED U/S 271(1)(C) IS VALID THE PENALTY ORDER CANNOT BE HELD TO BE VALID. THE ASSESSING OFFICER DID NOT STRIKE OFF THE IRRELEVANT COLUMN IN THE NOTICE AND MADE KNOWN THE ASSESSEE WH ETHER THE PENALTY WAS INITIATED FOR THE CONCEALMENT OF INCOME OR FOR FURNISHING THE INACCURATE PARTICULARS. IN THE ASSESSMENT ORDER ALSO THE AO SIMPLY RECORDED THAT THE PENALTY PROCEEDINGS U/S 271(1)(C) ARE INITIATED SEPARATELY. NEITHER IN THE ASSESSMENT ORDER NOR IN THE PENALTY NOTICE, THE ASSESSING OFFICER HAS PUT THE ASSESSEE ON NOTICE FOR WHICH OFFENCE, THE PENALTY U/S 271 WAS INITIATED. THEREFORE, THE CASE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OF CITED (SUPRA) WHEREIN THE HONBLE HIGH COURT HELD AS UNDER: ON PRINCIPLE, WHEN PENALTY PROCEEDINGS ARE SOUGHT TO BE INITIATED BY THE REVENUE UNDER SECTION 271(1)(C) OF THE ACT OF 1961, THE SPECIFIC GROUND WHICH FORMS THE FOUNDATION THEREFORE HAS TO BE SPELT OUT IN CLEAR TERMS OTHERWISE , ON ASSE S SEE WOULD NOT HAVE PROPER OPPORTUNITY TO PUT FORTH HIS DEFENCE. WHEN THE PROCEEDINGS ARE PENAL IN NATURE RESULTING IN IMPOSITION OF PENALTY RANGING FROM 100% TO 300% OF THE 7 ITA NO. 319/VIZ/2017 ( TALLURI SATYANARAYANA ) TAX LIABILITY, THE CHARGE MUST BE UNEQUIVOCAL AND UN AMBIGUOUS. WHEN THE CHARGE IS EITHER CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS THEREOF , THE REVENUE MUST SPECI F Y AS TO WHICH ONE OF THE TWO IS SOUGHT TO BE PRESSED INTO SERVICE AND CANNOT BE PERMITTED TO CLUB BOTH BY INTE RJECTING AN 'OR' BETWEEN THE TWO, AS IN THE PRESENT CASE. THIS AMBIGUITY IN THE SHOW - CAUSE NOTICE IS FURTHER COMPOUNDED PRESENTLY BY THE CONFUSED FINDING OF THE ASSESSING OFFICER THAT HE WAS SATISFIED THAT THE ASSESSEE WAS GUILTY OF BOTH. WE ARE THEREFORE OF THE OPINION THAT THE ORDER UNDER APPEAL DOES NOT BROOK INTERFERENCE ON ANY GROUND. WE FIND NO QUESTION OF LAW, MUCH LESS A SUBSTANTIAL ONE, ARISING FOR CONSIDERATION WARRANTING ADMISSION OF THIS APPEAL. 6.2. ON THE SIMILAR FACTS, THE COORDINATE BENCH OF ITAT, VISAKHAPATNAM IN ITA NO.229/VIZ/2015 IN THE CASE OF NARAYANA REDDY ENTERPRISES, FOLLOWING THE ORDER OF THE COORDINATE BENCH IN THE CASE OF SMT. MAKINA ANNAPURNA VS. ITO, VISAKHAPATNAM IN ITA NOS.604 & 605 /VIZAG/2014 DATED 2.2.2017 HELD THAT NON - STRIKING OF THE IRRELEVANT COLUMN RENDERS THE NOTICE ISSUED U/S 271 AS INVALID. RESPECTFULLY, FOLLOWING THE DECISION OF THE HONBLE AP HIGH COURT CITED SUPRA AND THE DECISION OF THIS TRIBUNAL CITED (SUPRA), WE HOLD THAT THE NOTICE ISSUED U/S 271 IS INVALID AND CONSEQUENT PENALTY IMPOSED BY THE AO IS CANCELLED. 14. WE FIND THAT THE HON'BLE HIGH COURT OF TELANGANA & A.P. IN THE CASE OF SMT. BAISETTY REVATHI (SUPRA) HAS CONSIDERED THE VERY SAME ISSUE AND HELD THAT NON - STRIKING OF THE IRRELEVANT PORTION OF THE NOTICE ISSUED U/SEC. 274 IS INVALID. THE VERY SAME JUDGMENT HAS BEEN FOLLOWED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF KONCHADA SREERAM (SUPRA) . T HEREFORE, RESPECTFULLY FOLLOWING ABOVE REFERRED TO JUDICIAL PRECEDENTS, WE HOLD THAT THE NOTICE ISSUED UNDER SECTION 274 READ WITH SECTION 271 , DATED 31/12/2009 IS INVALID AND, THEREFORE PENALTY ORDER PASSED BY THE ASSESSING OFFICER , DATED 31 / 1 0/201 2 IS HEREBY CANCELLED. 8 ITA NO. 319/VIZ/2017 ( TALLURI SATYANARAYANA ) 15. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON TH IS 1 7 T H DAY OF FEB . , 20 20 . S D / - S D / - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 7 T H FEBRUARY , 20 20 . VR/ - COPY TO: 1. THE ASSESSEE - TALLURI SATYANARAYANA, PROP. : SAIRAM PARLOUR, D.NO. 47 - 11 - 9, DIAMOND PARK, VISAKHAPATNAM. 2. THE REVENUE - ACIT, CIRCLE - 1(1), VISAKHAPATNAM. 3. THE PR. CIT - 1, VISAKHAPATNAM. 4. THE CIT(A) - 1, VISAKHAPATNAM. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.