SI GROUP INDIA LTD, NAVI MUMBAI V. ASST CIT LTU, MUMBAI

ITA 3425/MUM/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6835 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2003-2004
• Appeal Filed On: 05-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Depreciation; Opportunity of being heard; Initiation of penalty proceedings; Onus to prove; Unabsorbed depreciation
• Section: 115JB; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.3425/M/2015 ASSESSMENT YEAR: 2003-04 M/S. SI GROUP INDIA LTD., (FORMERLY KNOWN AS M/S. SCHENECTADY HERDILLA LTD.), PLOT NO.2/1 T.T.C INDUSTRIAL AREA, THANE BELAPUR ROAD, NAVI MUMBAI 400 703 PAN: AAACH7323L VS. ASSISTANT COMMISSIONER OF INCOME TAX LTU, 29 TH FLOOR, WORLD TRADE CENTRE, CUFFE PARADE, COLABA, MUMBAI - 400005 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : MS. MOKSHA MEHTA, A.R. REVENUE BY : SHRI RAJESH KUMAR YADAV, D.R. DATE OF HEARING : 27.04.2018 DATE OF PRONOUNCEMENT : 29.05.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 23.03.2015 OF THE COMMISSIONE R OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2003-04. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) - LTU ['THE CI T(A)'] ERRED IN UPHOLDING THE ACTION OF THE ASSISTANT COMMISSIONER OF INCOME TAX- LTU, MUMBAI ('THE A.O.') IN LEVYING PENALTY OF RS. 1,09, 08,512/- U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 ('THE ACT') ON THE ALLE GED GROUND THAT THERE WAS CONCEALMENT OF INCOME AND THAT THE APPELLANT HA D FURNISHED INACCURATE PARTICULARS OF INCOME BY MAKING ADJUSTME NT OF UNABSORBED ITA NO.3425/M/2015 M/S. SI GROUP INDIA LTD., (FORMERLY KNOWN AS M/S. SCHENECTADY HERDILLA LTD.) 2 BOOK LOSSES OR UNABSORBED DEPRECIATION WHICHEVER IS LOWER WHILE COMPUTING BOOK PROFITS U/S 11 5JB OF THE ACT. 1.2 THE CIT(A) ERRED IN CONFIRMING THE ACTION OF TH E A.O. ON THE ALLEGED GROUND THAT MERE DISCLOSURE OF THE CLAIM IN THE RETURN/ COMPUTATION OF INCOME DID NOT ABSOLVE THE APPELLANT FROM CONCEALMENT OF INCOME FOR THE REASON OF MAKING A DELIBERATE WRO NG CLAIM OF DEDUCTION WITHOUT ANY COGENT AND SUSTAINABLE REASON. 1.3 THE CIT(A) ERRED IN APPLYING EXPLANATION I TO S ECTION 271(L)(C) OF THE ACT ON THE ALLEGED GROUND THAT THE APPELLANT HA D NOT BEEN ABLE TO PROVE THAT THE SAID EXPLANATION WAS BONAFIDE. 1.4 THE CIT(A) ERRED IN NOT APPRECIATING THE FACT T HAT MERE MAKING OF THE CLAIM, WHICH WAS NOT SUSTAINABLE IN LAW BY ITSE LF WOULD NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING T HE INCOME OF THE APPELLANT INASMUCH AS WHEN IT HAD DISCLOSED ALL THE DETAILS AND MATERIAL FACTS IN THE ACCOUNTS AND IN THE RETURN OF INCOME. 1 .5 THE CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLANT HAD DISCHARGED THE ONUS TO PROVE THAT THERE WAS NO CONCEALMENT OF INCOME AND THAT THE APPELLANT HAD ACTED BONAFIDELY. 1.6 THE APPELLANT PRAYS THAT THE AO BE DIRECTED TO DELETE THE PENALTY OF RS. 1,09,08,512/- LEVIED UNDER SECTION 271(1)(C) OF THE ACT.: 3. THE ASSESSEE HAS ALSO FILED ADDITIONAL GROUNDS O F APPEAL WHICH ARE REPRODUCED AS UNDER: 3.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO ERRED IN CALCULATING 'AMOUNT OF TAX SOUGHT TO HE EV ADED' AT RS.1,09,08,512/- BY APPLYING NORMAL RATES OF TAX (I .E. 36.75%) INSTEAD OF RS. 23,37,539/- BY APPLYING RATE OF TAX AS SPECIFIE D U/S. 115JB OF THE ACT (I.E. 7.875%), FOR THE PURPOSE OF LEVYING PENALTY U /S. 271(1)(C) OF THE ACT. 3.2. THE AO ERRED IN NOT APPRECIATING THE FACT THAT TAX WAS ASSESSED UNDER THE PROVISIONS OF SEC. 115JB OF THE ACT AND NOT UND ER THE NORMAL PROVISIONS OF THE ACT. 3.3. THE APPELLANT PRAYS THAT THE AO BE DIRECTED TO RE-COMPUTE THE PENALTY BY CALCULATING THE AMOUNT OF 'TAX SOUGHT TO BE EVADED' AS PER THE PROVISIONS OF SEC. 11 5J13 OF THE ACT. 4. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE R AISED THE LEGAL AND TECHNICAL ISSUE THAT THE PENALTY PROCEEDI NGS INITIATED BY THE AO WERE INVALID AS SAME WERE INITIATED WITHO UT ITA NO.3425/M/2015 M/S. SI GROUP INDIA LTD., (FORMERLY KNOWN AS M/S. SCHENECTADY HERDILLA LTD.) 3 APPLICATION OF MIND BY THE AO. THE LD. A.R. SUBMITTE D THAT THE AO HAS NOT STRUCK OFF ONE OF THE TWO LIMBS ON W HICH THE PENALTY WAS BEING PROPOSED TO BE LEVIED I.E. FOR CON CEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULA RS OF INCOME. THE LD. A.R. SUBMITTED THAT THE AO HAS INITIATED THE PENALTY IN THE ASSESSMENT ORDER FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME, HOWEVER, IN THE NOTICE DATED 24.12.2008 ISSUED UNDER SECTION 274 READ WITH SECTION 271(1)(C) OF TH E ACT THE AO HAS NOT STRUCK OFF THE IRRELEVANT LIMB OR TICKED THE RELEVANT LIMB ON WHICH THE PENALTY WAS BEING PROPOSED. IN TH E SUBSEQUENT NOTICE ISSUED UNDER SECTION 271(1)(C) DA TED 11.01.2012 AGAIN THE AO HAS NOT SPECIFIED THE ONE OF THE TWO CHARGES AGAINST THE ASSESSEE ON WHICH THE PENALTY W AS PROPOSED TO BE LEVIED. THE LD. A.R. SUBMITTED THAT TH E AO HAS AGAIN ISSUED NOTICE WITHOUT APPLICATION OF MIND AS HE HAS NOT SPECIFIED ONE OF THE TWO CHARGES ON WHICH PENALTY W AS PROPOSED TO BE LEVIED AND THEREFORE THE LD. A.R. PRAYE D BEFORE THE BENCH THAT THE SAID PROCEEDINGS ARE INVALID AND DESERVED TO BE STRUCK DOWN ON THE SOLE GROUND AND SO IS CONS EQUENT ORDER. THE LD. A.R. RELIED ON THE FOLLOWING DECISIO NS IN SUPPORT OF HER ARGUMENT. 1. CIT V. SSA'S EMERALD MEADOWS [2017] 242 TAXMAN 180 - SC; 2. MEHERJEE CASSINATH HOLDINGS PVT. LTD. VS. ACIT [ 2017] (ITA NO. 2555/MUM/20I2) - MUM ITAT; 3. ORBIT ENTERPRISES VS. ITO (2017] (ITA NO.1596-9 7/MUM/2014) - MUM ITAT 4. UTTAM VALUE STEELS LIMITED VS. ACIT [2017] (ITA NO. 3622-3625/M/2016) - MUM ITAT; 5. JEHANGIR HC JEHANGIR [2017] (ITA NO. 1261/MUM/2 011) MUM ITAT; 6. DR. SARITA MILIND DAVARE VS. ACIT [2016] (LTA N O. 2187/MUM/20I4)MUM ITAT; 7. WADHWA ESTATE & DEVELOPERS INDIA PVT. LTD. V. AC IT [2017] (ITA NO. 2158/MUM/2016) - MUM ITAT: 8. CIT V. SAMSON PERINCHERY [2017] (ITA NO. 1154/95 3/1097/1226 OF 2014) - BOM HC ITA NO.3425/M/2015 M/S. SI GROUP INDIA LTD., (FORMERLY KNOWN AS M/S. SCHENECTADY HERDILLA LTD.) 4 9. CIT V. MANJUNATHA COTTON AND GINNING FACTORY [2 013] 359 ITR 565 - KAR HC 10. SAFINA HOTELS PRIVATE LIMITED V. DCIT [2016] 23 7 TAXMAN 702 (KAR HC). 5. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDE R OF AUTHORITIES BELOW AND SUBMITTED THAT THE AO HAS CLE ARLY MENTIONED THE CHARGE IN THE ASSESSMENT ORDER BY STA TING THAT THE PENALTY PROCEEDINGS WERE INITIATED FOR FURNISHI NG OF INACCURATE PARTICULARS OF INCOME. SO FAR AS THE NON STRIKING OFF THE ONE OF THE TWO LIMBS IS CONCERNED, THE LD. D.R. S UBMITTED THAT IT IS NOT NECESSARY TO MARK THE PARTICULAR LIM B OR SPECIFY THE CHARGE ON WHICH THE PENALTY WAS TO BE LEVIED SP ECIALLY WHEN THE CHARGE HAS BEEN SPECIFIED IN THE ASSESSMEN T ORDER AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS. T HE LD. D.R. HEAVILY RELIED, IN SUPPORT OF HIS CONTENTIONS ON TH E DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SM T. KAUSHALYA (1994) 75 TAXMAN 549 (BOMBAY) AND MAHARAJ A GARAGE & CO . LTD. VS. CIT IN ITA NO.21 OF 2008 DATED 22TH AUGUST ,2017 AND PRAYED THAT THE ORDER OF LD. CIT(A) BE UPHELD ACCORDINGLY AS BEING WELL REASONED AND AS PE R LAW. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE IM PUGNED ORDER AND DECISIONS CITED BY BOTH THE PARTIES. AFT ER PERUSAL OF THE RECORD, WE FIND THAT AT THE TIME OF INITIATION O F PENALTY PROCEEDINGS IN THE ASSESSMENT ORDER THE AO STATED T HE SAME TO BE ON ACCOUNT OF FURNISHING OF INACCURATE PARTIC ULARS OF INCOME WHEREAS IN THE NOTICES ISSUED UNDER SECTION 271(1)(C) ON TWO DIFFERENT DATES AS STATED HEREINABOVE, THE AO HAS NOT STRUCK OFF ONE OF THE TWO LIMBS OR SPECIFIED THE SP ECIFIC CHARGE ON WHICH THE PENALTY WAS BEING PROPOSED TO BE LEVIE D. UNDER ITA NO.3425/M/2015 M/S. SI GROUP INDIA LTD., (FORMERLY KNOWN AS M/S. SCHENECTADY HERDILLA LTD.) 5 THE PRESENT CIRCUMSTANCES AND FACTS OF THE CASE, WE ARE OF THE VIEW THAT IT IS OF PARAMOUNT IMPORTANCE AND OF GREA T SIGNIFICANCE THAT THE SPECIFICATION OF CHARGE ON WH ICH PENALTY WAS PROPOSED TO BE LEVIED HAS TO BE MANDATORILY BE STATED ON THE NOTICE FAILING WHICH THE FAILURE GOES TO THE RO OTS OF THE PENALTY PROCEEDINGS. UNDER THESE CIRCUMSTANCES, TH E PENALTY PROCEEDING ITSELF IS RENDERED INVALID AND SO IS THE ORDER PASSED CONSEQUENTLY. THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SSAS EMERALD MEADOWS (SUPRA) WHEREIN IT HAS BEEN HELD THAT THE NOTICE ISSUED UNDER SECTION 274 READ WITH SECTION 271(1)(C) OF THE ACT WAS BAD IN LAW AS IT DID NOT S PECIFY UNDER WHICH LIMB OF SECTION 271(1)(C) PENALTY PROCEEDING HAS BEEN INITIATED I.E. WHETHER FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE HONBLE HIGH COURT HAS RELIED ON THE DECISION OF DIVISION B ENCH OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE O F CIT VS. MANJUNATHA COTTON & GINNING FACTORY (2013) 359 ITR 565. THE HONBLE SUPREME COURT HAS ALSO DISMISSED THE SL P FILED IN THE CASE OF CIT VS. SSAS EMERALD MEADOWS (SUPRA) BY OBSERVING THAT THERE IS NO MERIT IN THE PETITION AN D SLP IS ACCORDINGLY DISMISSED . WHEREAS THE DECISION RELIED UPON BY THE REVENUE IN THE CASE OF CIT VS. SMT. KAUSHALYA (SU PRA) RENDERED ON 14.01.1992 CAN NOT BE OF ANY HELP TO THE REVENUE AS THE HONBLE BOMBAY HIGH COURT ITSELF IN THE CASE OF SHRI SAMSON PERINCHERY IN ITA NO.1154/14 HAS UPHELD THE D ECISION OF THE TRIBUNAL HOLDING THE PENALTY IN SUCH CASES T O BE BAD. THE CASE RELIED UPON BY THE LD DR IN THE CASE OF MA HARAJA ITA NO.3425/M/2015 M/S. SI GROUP INDIA LTD., (FORMERLY KNOWN AS M/S. SCHENECTADY HERDILLA LTD.) 6 GARAGE & CO VS CIT (SUPRA) THE SAME SI NOT APPLICAB LE TO THE PRESENT CASE , AS THE ISSUE ARISING OUT OF THE REFER ENCE APPLICATION FOR CONSIDERATION OF THE HONBLE HIGH C OURT WAS WHETHER WHILE GRANTING PREVIOUS APPROVAL OF INSPECT ING ASSISTANT COMMISSIONER OF INCOME TAX AS PER THE PR OVISIONS OF SECTION 271(1)(III) OF THE ACT WHETHER THE ASSE SSEE WAS REQUIRED TO BE GIVEN OPPORTUNITY OF BEING HEARD WHI CH HAS BEEN CONSIDERED BY THE COORDINATE BENCH IN THE CAS E OF MRS. INDRANI SUNIL PILLAI VS ACIT ITA NO. 1339/MUM/2016 AY 2010- 11 DATED 19.01.2018. IN VIEW OF THE DECISIONS AS DI SCUSSED ABOVE, WE ARE INCLINED TO HOLD THAT IN ABSENCE OF N ON MENTIONING OF THE RELEVANT LIMB OR SPECIFICATION OF ONE OF THE TWO LIMB THE PENALTY PROCEEDINGS ARE BAD AND THE PE NALTY IMPOSED CAN NOT BE SUSTAINED. ACCORDINGLY WE DIRECT THE AO TO DELETE THE PENALTY. 7. SINCE WE HAVE DECIDED THE ISSUE ON TECHNICAL AND LEGAL GROUND , THE OTHER GROUNDS RAISED BY THE ASSESSEE NE ED NOT TO BE ADJUDICATED. 8. THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.05.2018. SD/- SD/- (JOGINDER SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 29.05.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT ITA NO.3425/M/2015 M/S. SI GROUP INDIA LTD., (FORMERLY KNOWN AS M/S. SCHENECTADY HERDILLA LTD.) 7 THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.