REKHA BHUPENDRA DALAL, MUMBAI V. DCIT OSD-II CEN RG 7, MUMBAI

ITA 3363/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0259 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 29-05-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 13-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Keywords: Principle of natural justice; Revised return
• Section: 143(3); 54F; 148; 54; 132; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH H, MU MBAI BEFORE SHRI P.K. BANSAL, VICE PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.3363/MUM/2016 (ASSESSMENT YEAR- 2007-08) REKHA BHUPENDRA DALAL BHUPEN CHAMBERS, GROUND FLOOR, DALAL STREET, MUMBAI-400001 PAN: AAUPD0962E VS. THE DCIT, OSD-II, CENTRAL RANGE-7, MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIPUL JOSHI- ADVOCATE REVENUE BY : SHRI M.C. OMI NINGSHEN (DR) DATE OF HEARING : 29.05.2017 DATE OF PRONOUNCEMENT : 29.05.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF THE IN COME-TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF I NCOME TAX (APPEALS)-40 [THE CIT(A)], MUMBAI DATED 23.01.2013 FOR THE ASSESSMENT YEAR 2007-08. THE SOLITARY GROUND OF APPEAL RAISED BY ASSESSEE IS THA T IF LD. CIT(A) ERRED IN CONFIRMING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT IN RESPECT OF EXEMPTION CLAIMED U/S 54 OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR RELEVANT AY ON 31.10.2007 DECLARING TOTAL INCOME OF RS. 1,42.17 0/-. THE ASSESSEE HAS SHOWN TO HAVE EARNED INCOME FROM BUSINESS & PROFESSION AND FROM INCOME FROM OTHER SOURCES. THE ASSESSEE CLAIMED LONG TERM CAPITAL GA IN (LTCG) OF RS. ITA NO.336 3/M/2016- REKHA BHUPENDRA DALAL 2 44,68,390/- AND CLAIMED EXEMPTION U/S 54 OF THE ACT . THE ASSESSMENT WAS COMPLETED ON 17.11.2009 U/S 143(3) OF THE ACT ACCEP TING THE RETURN OF INCOME. SUBSEQUENTLY, A SEARCH U/S 132 OF THE ACT WAS CONDU CTED ON 31.05.2008 IN THE PREMISES OF SHRI VINOD FARIA AND MILAN DALAL. ON THE BASIS OF INCRIMINATING MATERIAL FOUND IN THE SEARCH, THE ASSESSMENT WAS RE OPENED ON 24.11.2010. NO REVISED RETURN WAS FILED IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT. THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147 OF T HE ACT ON 28.12.2011. IN THE RE-OPENING ASSESSMENT THE ASSESSING OFFICER (AO) DI SALLOWED THE EXEMPTION CLAIMED U/S 54F OF THE ACT. THUS, THE CAPITAL GAIN OF RS. 44,68,390/- WAS BROUGHT TO TAX. NO FURTHER APPEAL WAS FILED BY ASSESSEE AGA INST THE QUANTUM ASSESSMENT. THE AO THEREAFTER INITIATED THE PENALTY PROCEEDING U/S 271(1)(C) OF THE ACT. THE NOTICE UNDER SECTION 274RWS271(1) ( C) WAS ISSUED ON 18.12.2011. THE ASSESSEE FILED REPLY TO THE SHOW-CAUSE NOTICE VIDE REPLY DAT ED 21.02.2012. IN THE REPLY, THE ASSESSEE CONTENDED THAT SHE AGREED TO PURCHASE A FL AT IN THE BUILDING WHICH WAS CONSTRUCTED AT BORIVALI AND BUILDER HAS AGREED TO G IVE POSSESSION WITHIN THREE YEARS. IT WAS ONLY ON ACCOUNT OF THE FACT THAT THE BUILDING WAS DELAYED AND THE ASSESSEE DID NOT GET POSSESSION WITHIN TIME, THE FA CTS THAT SHE COULD NOT GET THE POSSESSION OF FLAT, WAS BEYOND HER CONTROL. THE C LAIM OF EXEMPTION WAS MADE ON GENUINE BELIEF. IT WAS FURTHER CONTENDED THAT ASSES SEE DISCLOSED ALL PARTICULAR IN THE RETURN OF INCOME AND THERE WAS NO CONCEALMENT. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY AO LEVIED THE PENALTY @ 100% ON THE TAX SOUGHT TO BE EVADED VIDE ORDER DATED 27.06.2012. ON APPEAL BEFORE THE L D. CIT(A), THE ORDER WAS SUSTAINED. FURTHER, AGGRIEVED BY THE ORDER OF AO, T HIS APPEAL IS FILED BEFORE US. ITA NO.336 3/M/2016- REKHA BHUPENDRA DALAL 3 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASSESSEE ARG UED THAT ASSESSEE SOLD 1/8 TH INTEREST (SHARE) IN THE RESIDENTIAL FLAT NO. 91/92, CHITRAKOOT APARTMENT, ALTAMOUNT ROAD, MUMBAI-26 ON 24.05.2006. THE SALE GAVE RISE T O THE LTCG OF RS. 44,68,380/- TO THE ASSESSEE, THE ASSESSEE CLAIMED U /S 54 IN RESPECT OF CAPITAL GAIN. THE ASSESSEE HAD AGREED TO PURCHASE A FLAT WHICH WA S UNDER CONSTRUCTION AT PLUTO BUILDING NO.2, BORIVALI (W), MUMBAI EXPECTING THAT CONSTRUCTION WOULD BE COMPLETED WITHIN THREE YEARS ON THE BONAFIDE AND GE NUINE BELIEF, THE ASSESSEE CLAIMED EXEMPTION U/S 54 OF THE ACT IN HER RETURN O F INCOME. THE RETURN OF INCOME WAS ACCEPTED AFTER SCRUTINY ASSESSMENT U/S 143(3) O N 17.11.2009. THE CASE OF ASSESSEE WAS RE-OPENED U/S 148 OF THE ACT WHEREIN T HE EXEMPTION WAS DISALLOWED. NO FURTHER APPEAL WAS FILED BY ASSESSEE AS BUILDING WAS NOT COMPLETED WITHIN THREE YEARS OF SALE OF FLAT. AT THE TIME OF MAKING CLAIM, THE ASSESSEE WAS UNDER GENUINE BELIEF THAT CONSTRUCTION OF THE BUILDING WOULD BE C OMPLETED WITHIN THREE YEARS AND THE ASSESSEE WOULD BE ENTITLED TO EXEMPTION U/S 54 OF THE ACT. IT WAS FURTHER ARGUED THAT NO PARTICULAR OF INCOME WAS CONCEALED, ASSESSEE DISCLOSED ALL PARTICULAR IN HER RETURN OF INCOME. THE DISALLOWANCE WAS MADE BY AO, AS THE BUILDING WAS NOT COMPLETED WITHIN THREE YEARS. THE LD AR PRAYED THAT THE ASSESSEE PRAYED THAT NO PENALTY LIE AGAINST THE ASSESSEE AS THE CLAIM OF THE ASSESSEE WAS NOT FOUND TO BE FALSE. IT WAS FURTHER ARGUED THAT THE SIMILAR PENAL TY ORDER WAS PASSED AGAINST ONE OF THE CO-OWNER SMT. VEENA MILAN DALAL ON DISALLOWANCE OF CLAIM U/S 54. THE SAID CO-OWNER ALSO INVESTED THE LTCG IN THE SAME BUILDIN G WHICH WAS UNDER ITA NO.336 3/M/2016- REKHA BHUPENDRA DALAL 4 CONSTRUCTION. THE AO LEVIED THE PENALTY ON SIMILAR FACTS AGAINST SMT. VEENA MILAN DALAL. ON APPEAL BEFORE THE LD. CIT(A), THE PENALTY WAS COMPLETED BY LD. CIT(A)- 40 VIDE ORDER DATED 07.11.2014. HOWEVER, THE SIMILA R ORDER WAS SUSTAINED AGAINST THE ASSESSEE. IN THE ALTERNATIVE ARGUMENT THE LD. AR OF THE ASSESSEE ARGUED THAT WHILE ISSUING NOTICE U/S 274 R.WS. 271(1)(C) OF THE ACT. THE AO NOT SPECIFIED THE SPECIFIC CHARGE WHETHER THE PENALTY IS INITIATED FO R CONCEALMENT OF INCOME OR FILING INACCURATE PARTICULARS. THE LD. AR OF THE ASSESSEE ARGUED THAT NON-STRIKING OF RELEVANT CLAUSE SHOWS A NON-APPLICATION OF MIND BY AO. THE LD. AR OF THE ASSESSEE FURTHER RELIED UPON THE DECISION OF HONBL E BOMBAY HIGH COURT IN CIT V/S HIRALAL DOSHI (383 ITR 19(BOM.), CIT V/S BENNET T COLEMAN & CO. LTD. [2013] 33 TAXMANN.COM 227 (BOM.), DECISION OF HONBLE APEX COURT IN CIT V/S RELIANCE PETROPRODUCTS (P.) LTD. [(2010) 322 ITR 158 (SC)], PRICE WATERHOUSE COOPERS (P.) LTD. V/S. CIT [(2012) 304 ITR 306 (SC)], DIT(IT) V/S. ASIA ATTRACTIVE DIVIDEND STOCK FUND- [2013) 35 TAXMANN.COM 265 (BOM)], CIT V /S. SOMANY EVERGREEN KNITS LTD. [(2013) 352 ITR 592 (BOM)] AND THE DECIS ION OF MUMBAI TRIBUNAL IN MEHERJEE CASSINATH HOLDINGS PVT. LTD. V/S. ACIT IN ITA NO. 2555/MUM/2012 DATED 28.04.2017. ON THE OTHER HAND, LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW. THE LD. DR FOR THE REVENUE FU RTHER ARGUED THAT THE AO LEVIED THE PENALTY ON BOTH LIMBS OF SECTION 271(1)(C) OF T HE ACT. IT WAS FURTHER ARGUED THAT ASSESSEE FURNISHED INACCURATE PARTICULAR OF INCOME AND THUS, CONCEALED THE INCOME. IT WAS FURTHER ARGUED THAT MERE NON-STRIKING OUT TH E RELEVANT CHARGE IN THE NOTICE U/S 274 R.W.S. 271(1)(C) IS NOT FATTER. THE LD. DR FOR THE REVENUE FURTHER ARGUED THAT IT WAS A FIT CLAIM FOR LEVYING THE PENALTY. ITA NO.336 3/M/2016- REKHA BHUPENDRA DALAL 5 4. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE CLAIMED EXEMPTIO N OF CAPITAL GAIN IN THE RETURN OF INCOME FILED ON 31.10.2007. THE CLAIM WAS ACCEPT ED IN THE ASSESSMENT ORDER PASSED U/S 143(3) ON 17.11.2009. THE ASSESSMENT WAS RE-OPENED ON THE BASIS OF SEARCH ACTION CONDUCTED U/S 132 ON 31.05.2008 IN TH E PREMISES OF SHRI VINOD FARIA AND MILAN DALAL AND ITS GROUP IN THE SEARCH, IT WAS NOTICED THAT MILAL DALAL AND SEVEN OTHER HIS FAMILY MEMBERS SOLD A RESIDENTIAL F LAT ON 24.05.2006 FOR SALE CONSIDERATION OF RS. 14.08 CRORE. ACCORDINGLY, LTCG OF 1/8 TH SHARE IN EACH OF THE CO-OWNER/CO-SHARERS AND WAS EARNED IN THE YEAR UNDE R CONSIDERATION, THE AMOUNT OF LTCG COMES TO RS. 43.5 LAKHS IN EACH ASSESSEES SHA RE. THE ASSESSEE CLAIMED EXEMPTION OF HER SHARE. IN CASE OF ASSESSEE, THE AS SESSMENT WAS RE-OPENED AND WAS COMPLETED U/S 144 R.W.S. 147 OF THE ACT (THOUGH THE ASSESSMENT ORDER IS PASSED U/S 143(3) R.W.S. 147). IN THE RE-OPENING ASSESSMENT, T HE EXEMPTION OF LTCG WAS DENIED. WHILE COMPLETING THE ASSESSMENT, THE AO INITIATED T HE PENALTY PROCEEDING IN THE ASSESSMENT ORDER; THE PENALTY WAS INITIATED FOR FURNISHING THE INACCURATE PARTICULAR OF INCOME. THE AO ISSUED NOTICE DATED 18 .12.2011 U/S 274 R.W.S. 271(1)(C) OF THE ACT. THE AO ISSUED A NOTICE ON STA NDARD PERFORMA WITHOUT STRIKING OUT THE RELEVANT CLAUSE. THUS, THE NOTICE REFERS TO BOTH THE LIMBS OF SECTION 271(1)(C) OF THE ACT FOR CONCEALMENT OF PARTICULAR OF INCOME AS WELL AS FURNISHING INACCURATE PARTICULARS OF INCOME, THE NON-STRIKING OF THE IRRELEVANT LIMB OF THE SAID NOTICE DOES NOT CONVEY TO THE ASSESSEE AS TO WHICH OF THE TWO CHARGES, IT HAS TO RESPOND. THE LD. AR OF THE ASSESSEE HAD DEMONSTRATE D THAT NON-STRIKING OF RELEVANT CLAUSE SHOWS A NON-APPLICATION OF MIND BY AO. ITA NO.336 3/M/2016- REKHA BHUPENDRA DALAL 6 5. WE HAVE FURTHER SEEN THAT IN ASSESSEES GROUP CASE, A SIMILAR PENALTY WAS LEVIED IN CASE OF SMT. VEENA MILAN DALAL (PAN: ACBPD4089R). H OWEVER, THE SAME WAS DELETED BY LD. CIT(A) VIDE ORDER DATED 07.11.2014 V IDE APPEAL CIT(A)- 40/DCIT(OSD-II)/390/2013-14 (AS PER PAPER BOOK PAGE NO. 18 TO 31). 6. THE LD. AR OF THE ASSESSEE BESIDES THE OTHER DECISI ON RELIED UPON THE DECISION OF CO-ORDINATE BENCH IN CASE OF MEHERJEE CASSINATH HOL DINGS PVT. LTD. V/S ACIT (SUPRA) WHEREIN THE CO-ORDINATE BENCH AFTER CONSIDE RING THE VARIOUS DECISION AND CONSIDERING THE SIMILAR ARGUMENT AS ARGUED BY LD. D R FOR THE REVENUE PASSED THE FOLLOWING ORDER: 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 FURNISHED INACCURA TE 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 SITUATIONS, NAMELY, FOR CONCEALING THE PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THEREFORE, IT IS OBVIOUS FROM THE PHRASEOLOGY OF SEC. 271(1)(C) OF THE ACT THAT THE I MPOSITION OF PENALTY IS INVITED ONLY WHEN THE CONDITIONS PRESCRIBED U/S 271(1)(C) OF THE ACT EXIST. IT IS ALSO A WELL ACCEPTED PROPOSITION THAT 'CONCEALMENT OF THE PARTICULARS OF INCOME' AND 'FURNISHING OF INACCURATE PARTICULARS OF INCOME' REFERRED TO IN SEC. 271(1)(C ) OF THE ACT DENOTE DIFFERENT CONNOTATIONS. IN FACT, THIS DISTINCTION HAS BEEN AP PRECIATED EVEN AT THE LEVEL OF HON'BLE SUPREME COURT NOT ONLY IN THE CASE OF DILIP N. SHRO FF (SUPRA) BUT ALSO IN THE CASE OF T. ASHOK PAI, 292 ITR 11 (SC). THEREFORE, IF THE TWO E XPRESSIONS, NAMELY 'CONCEALMENT OF THE PARTICULARS OF INCOME' AND 'FURNISHING OF INACC URATE PARTICULARS OF INCOME' HAVE DIFFERENT CONNOTATIONS, IT IS IMPERATIVE FOR THE AS SESSEE 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. I T IS IN THIS BACKGROUND 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 .12.2010 HAS BEEN ISSUED TO THE ASSESSEE- COMPANY. A COPY OF THE SAID NOTICE HAS BE EN PLACED ON RECORD AND THE LEARNED 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) OF THE A CT, NAMELY CONCEALMENT OF THE PARTICULARS OF INCOME AS WELL AS FURNISHING OF INAC CURATE PARTICULARS OF INCOME. QUITE CLEARLY, NON-STRIKING-OFF OF THE IRRELEVANT LIMB IN THE SAID NOTICE DOES NOT CONVEY TO THE ASSESSEE AS TO WHICH OF THE TWO CHARGES IT HAS TO R ESPOND. THE AFORESAID INFIRMITY IN THE NOTICE HAS BEEN SOUGHT TO BE DEMONSTRATED AS A REFL ECTION OF NON-APPLICATION OF MIND BY THE ASSESSING OFFICER, AND IN SUPPORT, REFERENCE HA S BEEN MADE TO THE FOLLOWING SPECIFIC DISCUSSION IN THE ORDER OF HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA):- ITA NO.336 3/M/2016- REKHA BHUPENDRA DALAL 7 '83. IT IS OF SOME SIGNIFICANCE THAT IN THE STANDAR D PROFORMA USED BY THE ASSESSING OFFICER IN ISSUING A NOTICE DESPITE THE F ACT THAT THE 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 OFFICER. IN FA CT, A SIMILAR PROPOSITION WAS ALSO ENUNCIATED BY THE HON'BLE KARNATAKA HIGH COURT IN T HE CASE OF M/S. SSA'S EMERALD MEADOWS (SUPRA) AND AGAINST SUCH A JUDGMENT, THE SP ECIAL LEAVE PETITION FILED BY THE REVENUE HAS SINCE BEEN DISMISSED BY THE HON'BLE SUP REME 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, THE ATTEMPT O F THE LD. CIT-DR TO DEMONSTRATE APPLICATION OF MIND BY THE ASSESSING OFFICER IS NO DEFENCE INASMUCH AS THE HON'BLE SUPREME COURT HAS APPROVED THE FACTUM OF NON-STRIKI NG OFF OF THE IRRELEVANT CLAUSE IN THE NOTICE AS REFLECTIVE OF NON-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 A DVANCED BY THE LD. CIT-DR BASED ON THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. FURTHER, IT IS ALSO NOTICEABLE THAT SUCH PROPOSITION HAS BEEN CONSIDERE D BY (SUPRA) AND THE DECISION OF THE TRIBUNAL HOLDING LEVY OF PENALTY IN SUCH CIRCUMSTAN CES BEING BAD, HAS BEEN APPROVED. 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 CASE 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 THE IMPOSITION OF PE NALTY 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 UP BEFORE OUR COORDINATE BEN CH IN THE CASE OF DR. SARITA MILIND DAVARE (SUPRA). OUR COORDINATE BENCH, AFTER CONSIDE RING THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SMT. KAUSHALYA & O RS., (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 UND ER :- '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 PART OF THE AO AT THE TIME OF ISSUING NOTICE. IN THE CASE OF LAKHDIR LALJI (SUPRA), THE A O ISSUED NOTICE U/S 274 FOR CONCEALMENT OF PARTICULARS OF INCOME BUT LEVIED PEN ALTY FOR FURNISHING INACCURATE ITA NO.336 3/M/2016- REKHA BHUPENDRA DALAL 8 PARTICULARS OF INCOME. THE HON'BLE GUJARAT HIGH COU RT QUASHED THE PENALTY SINCE THE BASIS FOR THE PENALTY PROCEEDINGS DISAPPEARED W HEN IT WAS HELD THAT THERE WAS NO SUPPRESSION OF INCOME. THE HON'BLE KERALA HIGH COUR T HAS STRUCK DOWN THE PENALTY IMPOSED IN THE CASE OF N.N.SUBRAMANIA IYER VS. UNIO N OF INDIA (SUPRA), WHEN THERE IS NO INDICATION IN THE NOTICE FOR WHAT CONTRAVENTI ON THE PETITIONER WAS CALLED UPON TO SHOW CAUSE WHY A PENALTY SHOULD NOT BE IMPOSED. IN THE INSTANT CASE, THE AO DID NOT SPECIFY THE CHARGE FOR WHICH PENALTY PROCEEDING S WERE INITIATED AND FURTHER HE HAS ISSUED A NOTICE MEANT FOR CALLING THE ASSESSEE TO FURNISH THE RETURN OF INCOME. HENCE, IN THE INSTANT CASE, THE ASSESSING OFFICER D ID NOT SPECIFY THE CHARGE FOR WHICH THE PENALTY PROCEEDINGS WERE INITIATED AND ALSO ISS UED 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 A S TO WHAT PURPOSE THE NOTICE WAS ISSUED. THE HON'BLE BOMBAY HIGH COURT HAS DISCUSSED ABOUT NON-APPLICATION OF MIND IN 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 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 T HE ACT ARE REPRODUCED IN THE PROFORMA NOTICE AND THE IRRELEVANT CLAUSE HAS NOT BEEN STRUC K-OFF. QUITE CLEARLY, THE OBSERVATION OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND N ON-STRIKING OFF OF THE IRRELEVANT CLAUSE IN THE NOTICE CLEARLY BRINGS OUT THE DIFFIDE NCE ON THE PART OF ASSESSING OFFICER AND THERE IS NO CLEAR AND CRYSTALLISED CHARGE BEING CON VEYED 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 PRINCIPLES OF NATURAL JUSTICE, AND IN THE PRESENT CASE, CONSIDERING THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESS MENT ORDER ALONGSIDE HIS ACTION OF NON-STRIKING OFF OF THE IRRELEVANT CLAUSE IN THE NO TICE SHOWS THAT THE CHARGE BEING MADE AGAINST THE ASSESSEE QUA SEC. 271(1)(C) OF THE ACT IS NOT FIRM AND, THEREFORE, THE PROCEEDINGS SUFFER FROM NON-COMPLIANCE WITH PRINCIP LES OF NATURAL JUSTICE INASMUCH AS THE ASSESSING OFFICER IS HIMSELF UNSURE AND ASSESSE E IS NOT MADE AWARE AS TO WHICH OF THE TWO LIMBS OF SEC. 271(1)(C) OF THE ACT HE HAS T O RESPOND. ITA NO.336 3/M/2016- REKHA BHUPENDRA DALAL 9 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 THE A CT DATED 10.12.2010 IS UNTENABLE AS IT SUFFERS FROM THE VICE OF NON- APPLICATION OF MIND H AVING REGARD TO THE RATIO OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F DILIP N. SHROFF (SUPRA) AS WELL AS THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN TH E CASE OF SHRI SAMSON PERINCHERY (SUPRA). THUS, ON THIS COUNT ITSELF THE PENALTY IMP OSED U/S 271(1)(C) OF THE ACT IS LIABLE TO BE DELETED. 7. CONSIDERING THE DECISION OF CO-ORDINATE BENCH, WE H OLD THAT THE AO FAILED TO CRYSTALLIZE THE CHARGE ON WHICH THE PENALTY WAS PRO POSED U/S 271(1)(C) OF THE ACT, WHICH HAS TO BE MET OUT BY THE ASSESSEE. CONSIDERIN G THE DECISION OF VARIOUS SUPERIOR COURTS, HON'BLE BOMBAY HIGH COURT IN THE C ASE OF SHRI SAMSON PERINCHERY, ITA NOS. 1154, 953, 1097 & 1126 OF 2014 DATED 5.1.2017, WE DELETE THE PENALTY LEVIED BY AO. AS WE HAVE DELETED THE PE NALTY ON ALTERNATIVE SUBMISSION OF THE ASSESSEE, THUS, THE OTHER SUBMISS IONS MADE BY LD. AR OF THE ASSESSEE HAVE BECOME ACADEMIC. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF MAY 2017. SD/- SD/- (P.K. BANSAL) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 29/05/2017 S.K.PS 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/