QUARTET THERMAL ENGINEERING P.LTD, MUMBAI V. ASST CIT 8(1)(2), MUMBAI

ITA 3241/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7214 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 04-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Bogus purchase; Principle of natural justice
• Section: 271(1)(c); 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.3241/M/2017 ASSESSMENT YEAR: 2009-10 M/S. QUARTET THERMAL ENGG. PVT. LTD., SION VIJAYANAND CHS LTD., R.NO.2, PLOT NO.267, SCHEME NO.6, ROAD NO.31, NEAR GANDHI MARKET, SION, MUMBAI 400 022 PAN: AAACQ0125B VS. ACIT 8(1)(2), ROOM NO.624, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI M. SUBRAMANIAN, A.R. REVENUE BY : SHRI D.G. PANSARI, D.R. DATE OF HEARING : 18.02.2019 DATE OF PRONOUNCEMENT : 22.04.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 28.02.2017 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2009-10. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE VAR IOUS GROUNDS OF APPEAL IS AGAINST THE CONFIRMATION OF PE NALTY OF RS.9,70,800/- BY LD. CIT(A) AS IMPOSED UNDER SECTIO N 271(1)(C) OF THE ACT. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSMENT IN TH IS CASE WAS COMPLETED VIDE ORDER DATED 30.12.2014 PASSED UNDER SECTION ITA NO.3241/M/2017 M/S. QUARTET THERMAL ENGG. PVT. LTD. 2 143(3) READ WITH SECTION 147 WHEREIN THE INCOME WAS ASSESSED AT RS.43,10,500/- AS AGAINST THE RETURN OF INCOME O F RS.11,68,751/- BY MAKING AN ADDITION OF RS.31,41,75 2/- IN RESPECT OF BOGUS PURCHASES. THE PENALTY PROCEEDING S WERE INITIATED IN THE SAID ASSESSMENT ORDER UNDER SECTIO N 271(1)(C) FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AMO UNTING TO CONCEALMENT OF INCOME. ACCORDING TO THE ASSESSEE, THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ W ITH SECTION 147 NEVER SERVED ON THE ASSESSEE AND THEREFORE NO A PPEAL COULD BE FILED. THE SAID FACT WAS BROUGHT TO THE NOTICE O F THE ACIT VIDE LETTER DATED 16.06.2015 BY THE ASSESSEE WHEREIN THE ASSESSEE STATED THAT SINCE ASSESSMENT ORDER WAS NOT SERVED AND RECEIVED BY THE ASSESSEE, THEREFORE IT IS NOT IN A POSITION TO SUBMIT ITS REPLY ON THE PENALTY PROCEEDINGS INITIATED BY THE A O. THE SAID RESPONSE WAS SENT BY THE ASSESSEE TO THE AO IN RE PLY TO LETTER DATED 10.06.2015 WHICH WAS ADDRESSED TO THE PRINCIP AL OFFICER OF THE ASSESSEE GIVING A SHOW CAUSE NOTICE TO THE A SSESSEE AS TO WHY THE PENALTY SHOULD NOT BE IMPOSED UNDER SECTION 271(1) OF THE ACT. THE ADDITION IN QUESTION WAS IN RESPEC T OF BOGUS PURCHASES TO THE TUNE OF RS.31,41,752/- AND IN THE PENALTY ORDER THE AO OBSERVED THAT ASSESSEE HAS FURNISHED I NACCURATE PARTICULARS OF INCOME AND THEREBY CONCEALED THE INC OME TO THE EXTENT OF RS.31,41,752/- AND HENCE IMPOSED A PENA LTY OF RS.9,70,800/- VIDE ORDER DATED 29.06.2015 PASSED UN DER SECTION 271(1)(C) OF THE ACT. 4. THE LD. CIT(A) ALSO UPHELD THE PENALTY AS IMPOSE D BY THE AO BY OBSERVING THAT THE ASSESSEE HAS NOT BEEN COOP ERATIVE IN THE ASSESSMENT PROCEEDINGS AND THE ADDITION WAS MAD E ONLY WHEN ASSESSEE DID NOT REPLY TO THE VARIOUS NOTICES ISSUED BY THE ITA NO.3241/M/2017 M/S. QUARTET THERMAL ENGG. PVT. LTD. 3 AO. MOREOVER, THE DEPARTMENT HAD RECEIVED INFORMAT ION FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE IS BENE FICIARY OF BOGUS PURCHASES FROM HAWALA PARTIES. ACCORDINGLY, THE LD. CIT(A) HELD THAT ONUS CAST UPON THE ASSESSEE TO SUB STANTIATE THE PURCHASES WAS NOT DISCHARGED AND THUS JUSTIFIED THE ORDER OF AO BY DISMISSING THE APPEAL OF THE ASSESSEE. 5. THE LD. A.R. SUBMITTED BEFORE US THAT IN THIS CA SE THERE HAS BEEN NO SERVICE OF ASSESSMENT ORDER ON THE ASSE SSEE AND IT IS ONLY WHEN THE ASSESSEE RECEIVED NOTICE SHOWING C AUSE THE IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF T HE ACT. THE ASSESSEE CAME TO KNOW ABOUT THE ASSESSMENT ORDER HA VING BEEN PASSED BY THE AO ONLY WHEN THE SHOW CAUSE NOTICE WA S ISSUED. THE LD. A.R. HAS SUBMITTED BEFORE THE BENCH THAT TH E AO WAS REQUESTED TO SUPPLY COPY OF THE ORDER AND ALSO THE PROOF OF SERVICE OF THE ASSESSMENT ORDER. THE LD. A.R. SUBM ITTED THAT THE AO SUPPLIED A COPY OF THE ACKNOWLEDGEMENT DATED 05. 01.2015 STATING THEREIN THAT THE ORDER HAS BEEN RECEIVED BY THE ASSESSEE ON 13.12.2014 WHICH IS NOT CORRECT. THE LD. A.R. T HUS SUBMITTED THAT THE PENALTY IMPOSED IN A CASE WHERE ASSESSMENT ORDER HAS NOT BEEN SERVED IS BAD IN LAW AND HAS TO BE QUASHED ON THE PRINCIPLE OF NATURAL JUSTICE. THE LD. A.R., REFERRING TO THE NOTICE ISSUED DATED 30.12.2014 UNDER SECTION 274 RE AD WITH SECTION 271(1)(C) OF THE ACT, SUBMITTED THAT THE NO TICE HAS BEEN ISSUED IN A MECHANICAL MANNER WITHOUT ANY APPLICATI ON OF MIND IN A STANDARD FORMAT WITHOUT STRIKING OFF THE IRREL EVANT LIMB IN THE NOTICE. THE LD. A.R. SUBMITTED THAT THE SPECIF IC CHARGE ON WHICH THE PENALTY WAS PROPOSED WAS NOT MENTIONED I N THE NOTICE AND THEREFORE THE PENALTY LEVIED ON THE BASI S OF SAID NOTICE ITA NO.3241/M/2017 M/S. QUARTET THERMAL ENGG. PVT. LTD. 4 IS NOT VALID AND HAS TO BE DELETED. IN DEFENCE OF HIS ARGUMENTS, THE LD. A.R. RELIED ON A SERIES OF DECISIONS AS UND ER: I. MEHERJEE CASSINATH HOLDINGS PVT. LTD., ITA NO. 2555/MUM/2012 DATED 28.04.2017 II. JEHANGIR HC JEHANGIR, ITA NO. 1261/MUM/2011 DAT ED 17.05.2017 III. M/S. WADHWA ESTATE & DEVELOPERS INDIA PVT. LTD ., ITA NO. 2158/MUM/2016 DATED 24.02.2017 IV. SHRI SAMSON PERINCHERY, ITA NOS. 1154 OF 2014, 953 OF 2014, 1097 OF 2014 & 1226 OF 2014 DATED 05.01.2017 (HON'BLE BOMBAY HIGH COURT) V. M/S. SSA'S EMERALD MEADOWS, CC NO. 11485/2016 DATED 05.08.2016 (HON'BLE SUPREME COURT) VI. M/S. SSA'S EMERALD MEADOWS, ITA NO. 380 OF 2015 DATED 23.11.2015 (HON'BLE KARNATAKA HIGH COURT) VII. MRS. PIEDADE PERINCHERY, ITA NO. 1310 OF 2014 DATED 10.01.2017 (HON'BLE BOMBAY HIGH COURT) 6. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE O RDER OF LD. CIT(A) HEAVILY AND SUBMITTED THAT THE PENALTY WAS R IGHTLY LEVIED BY THE AO FOR CONCEALMENT OF INCOME BY THE ASSESSEE BY WAY OF CLAIMING BOGUS PURCHASES. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD INCLUDING THE IMPUGNED ORDER AND DECISION S REFERRED BY BOTH THE PARTIES. THE UNDISPUTED FACTS ARE THAT THE AO, WHILE FRAMING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT INITIATED PENALTY PROCEEDINGS FOR CONCEALMENT OF INCOME AND F ILING OF INACCURATE PARTICULARS OF INCOME, THUS THEREBY INIT IATING PENALTY PROCEEDINGS UNDER BOTH THE LIMBS. SIMILARLY, WHILE ISSUING PENALTY NOTICE UNDER SECTION 274 R.W.S. 271(1)(C) O F THE ACT DATED 27.12.2010 , THE AO DID NOT STRIKE OFF ONE OF THE T WO LIMBS WHICH ITA NO.3241/M/2017 M/S. QUARTET THERMAL ENGG. PVT. LTD. 5 WAS RELEVANT AND ON WHICH THE PENALTY WAS PROPOSE. THUS THE ASSESSEE WAS NOT DEPRIVED OF THE OPPORTUNITY TO RE PLY ON THE EXACT CHARGE ON WHICH PENALTY WAS PROPOSED TO BE LE VIED. IN OUR OPINION IT IS MANDATORY ON THE PART OF THE AO TO S PECIFY SPECIFICALLY THE CHARGE ON WHICH PENALTY IS PROPOSE D TO BE LEVIED AND NON STRIKING OF THE RELEVANT PORTION WOULD GO T O THE ROOT OF THE JURISDICTION OF THE AO TO PASS PENALTY ORDER. T HE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE JUDGEMENTS OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASES OF MANJUNATHA COT TON AND GINNING FACTORY 359 ITR 565 AND M/S. SSA'S EMERALD MEADOWS IN ITA NO. 380 OF 2015 DATED 23.11.2015 WHEREIN THE SLP FILED BEFORE THE HON'BLE SUPREME COURT WAS ALSO DISMISSED . IN THE CASE OF SHRI SAMSON PERINCHERY IN ITA NOS. 1154 OF 2014, 953 OF 2014, 1097 OF 2014 AND 1126 OF 2014 DATED 05.01.201 7 THE HON'BLE BOMBAY HIGH COURT HAS HELD THAT THE ORDER I MPOSING PENALTY UNDER SECTION 271(1)(C) OF THE ACT HAS TO B E MADE ONLY ON THE GROUND ON WHICH PENALTY PROCEEDINGS HAS BEEN INITIATED. IN VIEW OF THE RATIO LAID DOWN IN THESE DECISIONS W E ARE OF THE VIEW THE ORDER OF THE AO UNDER SECTION 274 R.W.S. 2 71(1)(C) IMPOSING PENALTY SUFFERS FROM SERIOUS JURISDICTIONA L DEFECT AND THEREFORE HAS TO BE REVERSED. WE THEREFORE SET ASID E THE ORDER OF THE CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.04.2019. SD/- SD/- ( RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 22.04.2019. * KISHORE, SR. P.S. ITA NO.3241/M/2017 M/S. QUARTET THERMAL ENGG. PVT. LTD. 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.