DANI SHARES & STOCK P.LTD, MUMBAI V. ITO 4(1)(1), MUMBAI

ITA 3487/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2763 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 24-02-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 17-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Additional evidence
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH D, MUMBAI BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.3487/MUM/2012 FOR ASSESSMENT YEAR: 2002-03 M/S DANI SHARES & STOCK PVT. LTD. 12, ORICON HOUSE, 14, K. DUBASH MARG, KALA GHODA, FORT, MUMBAI 400001 PAN: AABCG1670N VS. ITO WARD-4(1)(1), AAYAKAR BHAVAN, MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJAY R. PAR IKH (AR) REVENUE BY : SHRI CAPT. PRASAD S . ARYA (DR) DATE OF HEARING : 05.07.2016 DATE OF PRONOUNCEMENT : 13.07.2016 O R D E R PER PAWAN SINGH, JM: 1. THIS APPEAL FILED BY ASSESSEE AGAINST THE ORDER OF CIT (A)-8, MUMBAI DATED 01.03.2012 FOR AY 2002 -03. THE ASSESSEE IS AGGRIEV ED BY THE ORDER OF CONFIRMING THE PENALTY ORDER U/S. 271(1) (C) OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED ITS RETURN OF INCOME FOR RELEVANT AY ON 31.10.2002. THE ASSESSMENT WAS COMPL ETED U/S 143(3) OF THE ACT ON 15.02.2005. WHILE FRAMING ASSESSMENT ORDER T HE ASSESSING OFFICER (AO) MADE AS MANY AS 12 ADDITIONS/DISALLOWANCES. AGGRIEV ED BY THE ORDER OF AO ON THE QUANTUM ASSESSMENT THE ASSESSEE FILED APPEAL BE FORE CIT (A), WHEREIN HIS APPEAL WAS PARTLY ALLOWED. THE ASSESSEE FURTHER FIL ED SECOND APPEAL BEFORE TRIBUNAL. AFTER RECEIPT OF ORDER OF FIRST APPEAL FR OM CIT (A), THE AO ISSUED A NOTICE U/S 271 R.W.S. 274 OF THE ACT, VIDE NOTICE D ATED 12.02.2008. NOTICE OF INITIATION OF PENALTY WAS CONTESTED BY THE ASSESSEE BY FILING REPLY VIDE REPLY DATED 25.02.2008. THE REPLY OF ASSESSEE WAS NOT ACC EPTED BY AO. THE AO LEVIED THE PENALTY OF RS.8,37,360/- VIDE ORDER DATE D 27/03/2008. AGGRIEVED BY 2 ITA NO.3487/M/2012, M/S DANI SHARES & STOCK PVT. LT D. THE ORDER OF LEVY OF PENALTY THE ASSESSEE FILED APP EAL BEFORE THE CIT (A), WHEREIN CIT (A) DELETED THE PENALTY EXCEPT WITH REG ARD TO THE DISALLOWANCE OF MEDICAL EXPANSES OF RS,12,78,000/- AND CLAIM OF DO NATION OF RS.16,042/- FURTHER AGGRIEVED BY THE ORDER OF CIT (A) THE ASSES SEE FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD AUTHORISED REPRESENTATIVE (AR) OF ASS ESSEE AND DEPARTMENTAL REPRESENTATIVE (DR) FOR REVENUE AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. AR OF THE ASSESSEE ARGUED THAT AO HAS NOT SPECIFIED ON WHICH ADDITIONS/ DISALLOWANCE THE PENALTY WAS INITIATED IN THE ASSES SMENT ORDER. THE NOTICE ISSUED TO THE ASSESSEE U/S 271(1) (C) R.W.S. 274 OF THE AC T, ALSO DOES NOT SPECIFY UNDER WHICH CHARGE THE PENALTY IS BEING INITIATED. THE CO NCLUSION OF CONCEALMENT OF INCOME WAS OPINED FIRST TIME ONLY IN THE ORDER OF P ENALTY U/S 271(1) (C) OF THE ACT. IN THE QUANTUM APPEAL BEFORE TRIBUNAL THE ASSE SSEE FILED ADDITIONAL EVIDENCE WHICH WAS ACCEPTED, AND THE MATTER WAS RES TORED TO THE FILE OF CIT(A) WITH THE DIRECTION TO DECIDE THE APPEAL AFTER ADMIT TING THE ADDITIONAL EVIDENCES. THE LD. CIT(A) GRANTED SUBSTANTIAL RELIEF TO THE A SSESSEE AND DELETED MOST THE ADDITIONS, HOWEVER THE DISALLOWANCE OF DONATION WAS CONFINED TO RS.600/-, DISALLOWANCE OF FOREIGN WAS CONFINED TO 10% AND SU STAINED THE ADDITION OF MEDICAL EXPENSES. THE ASSESSEE FURTHER FILE APPEAL TO THE TRIBUNAL IN ITA NO. 2435/M/2012, BUT THE SAME WAS DISMISSED VIDE ORDER DATED03/12/2015. LD. AR FOR ASSESSEE FURTHER ARGUED THAT MERE DISALLOWANCE OF CLAIM WILL NOT ATTRACT THE INITIATION OF PENALTY WHEN THE ASSESSEE DISCLOSED A LL THE PARTICULARS IN THE RETURN OF INCOME AND RELIED ON THE DECISIONS OF BOMBAY HIG H COURT IN CIT VS. SM CONSTRUCTION IN ITA NO. 412OF 2013 DATED 03.03.2015 , DIT VS ADMN. OF ESTATE OF LATE E F DINSHAW (2013) TAXMANN.COM 95(BO M), DECISION OF ITAT MUMBAI IN BANNETT COLEMEN &CO LTD VS ACIT 144 ITD 4 59 AND KARNATAKA HIGH COURT IN CIT VS MANJUNATHA COTTON AND GINNING FACTORY 369 ITR565(KARN) DR FOR THE REVENUE STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW AND ARGUED THAT NOTICE WAS NOT CHALLENGED EIT HER BEFORE AO OR CIT(A), MOREOVER, THERE WAS A MULTIPLE REASONS FOR INITIATI NG THE PENALTY ON NUMBER OF ADDITIONS IN THE ASSESSMENT ORDER. IN THE REJOINDE R LD AR FOR ASSESSEE ARGUED 3 ITA NO.3487/M/2012, M/S DANI SHARES & STOCK PVT. LT D. THAT ASSESSEE OBJECTED BEFORE THE CIT(A) AND FILED AND WRITTEN OBJECTION BEFORE THE CIT(A) VIDE LETTER DATED 09.02.2011 (PAGE 36 & 37 OF PB). 4. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE NOTICED THAT ADDITION ON ACCOUNT OF DISALLOWANCE OF DONATION WAS CONFINED TO RS. 600/- BY LD. CIT( A ) IN ITS ORDER DATED 11/02/2012. NOW ONLY DISPUTED ADDITION REMAINS NOW IS WITH REGARDS TO THE DISALLOWANCE OF MEDICAL EXPENSES OF RS. 12,78,000/- INCURRED ON THE FATHER OF THE DIRECTOR OF THE ASSESSEE COMPANY. WE HAVE PERUS ED THE COPY OF THE NOTICE U/S 274 RWS 271(1)(C) ( PAGE 64 OF THE P/B) WHEREI N THE RELEVANT COLUMN IS LEFT BLANK BY AO. IN THE ASSESSMENT ORDER THE AO HAS NOT SPECIFIED ON WHICH ADDITION/ DISALLOWANCE THE PENALTY IN INITIATED, EI THER FOR CONCEALMENT OR FOR FILING INACCURATE PARTICULARS OF INCOME. THE BOMBAY HIGH COURT IN SM CONSTRUCTION (SUPRA) HE LD THAT: THE FACT THAT THE EXPLANATION OF ASSESSEE IS NOT AC CEPTED IN THE QUANTUM PROCEEDING WOULD NOT IPSO FACTO VISITS. THE ASSESSE E WAS PENALTY IN THE ABSENCE OF THE CLAIM BEEN HELD TO BE NOT BONAFIDES. FURTHER, THE COORDINATE BENCH OF THIS TRIBUNAL IN B ENNETT, COLEMAN & CO. LTD (SUPRA) IT WAS HELD: IN THE ABSENCE OF ANY OTHER CONTRARY MATERIAL OR D ISTINGUISHING FEATURE BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THE CLAIM OF DEDUCTION MADE BY THE ASSESSEE WAS NOT BONAFIDE OR WAS BOGUS, THERE IS NO CONCEALMENT ON THE PART OF ASSESSEE WHICH MAY CALL FOR LEVY OF PENALTY UNDER S ECTION 271(1)(C) AND ACCORDINGLY THE PENALTY IMPOSED BY AO AND SUSTAINED BY COMMISSIONER (APPEALS) IS DELETED THE HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565 (KARNATAKA) HELD AS UNDER: AS THE PROVISION STANDS, THE PENALTY PROCEEDINGS C AN BE INITIATED ON VARIOUS GROUNDS SET OUT THEREIN. IF THE ORDER PASSE D BY THE AUTHORITY CATEGORICALLY RECORDS A FINDING REGARDING THE EXIST ENCE OF ANY SAID GROUNDS MENTIONED THEREIN AND THEN PENALTY PROCEEDI NGS IS INITIATED, IN THE NOTICE TO BE ISSUED UNDER SECTION 274, THEY COULD C ONVENIENTLY REFER TO THE SAID ORDER WHICH CONTAINS THE SATISFACTION OF THE A UTHORITY WHICH HAS PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORDER AND IF IT IS A CASE O F RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION 1 OR IN EXPLANAT ION 1(B), THEN THOUGH PENALTY PROCEEDINGS ARE IN THE NATURE OF CIVIL LIAB ILITY, IN FACT, IT IS PENAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS 4 ITA NO.3487/M/2012, M/S DANI SHARES & STOCK PVT. LT D. MENTIONED IN SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PENALTY ON HIM AS SECTIO N 274 MAKES IT CLEAR THAT THE ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCE EDINGS AND SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF THE DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1) (C) DO NOT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTME NT SENDING A PRINTED FORM WHERE ALL THE GROUNDS MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY THE REQUIREMENT OF LAW WHEN THE CONSEQU ENCES OF THE ASSESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 100 PERCENT TO 300 PERCENT OF THE TAX LIABILITY. AS THE SAID PROVISIONS HAVE TO BE HELD TO BE STRICTLY CONSTRUED , NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, THE PRINCIPLE OF NATURAL JUSTICE IS OFFE NDED IF THE SHOW-CAUSE NOTICE IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. 5. IN VIEW OF THE ABOVE FACTUAL AND LEGAL DISCUSSION, NARRATED ABOVE WE DO NOT CONCUR WITH THE DECISIONS OF AUTHORITY BELOW. THE C LAUSE (C) OF SECTION 271(1)(C) DEALS WITH THE TWO SPECIFIC ACTIONS I.E. CONCEALMENT OF PARTICULARS AND/ OR FURNISHING OF INACCURATE PARTICULARS. WE MA Y NOTE THAT IN SOME OF CASE BOTH THE ACTIONS ARE ATTRACTED AND IN SOME CAS E THERE MAY OVERLAPPING OF BOTH OFFENCES BUT IN SUCH CASE THE INITIATION OF PENALTY MUST BE FOR BOTH THE ACTIONS. HOWEVER, WHILE INITIATING THE PENALTY PROCEEDING FOR ONE ACTION AND FINDING THE ASSESSEE GUILTY OF ANOTHER ACTION C ANNOT BE SUSTAINED IN LAW. WE MAY FURTHER POINT OUT THAT SITUATION OF EXISTENC E OF GROUNDS MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA-NON FOR INITIATION OF THE PENALTY PROCEEDING, THE PENALTY PROCEEDING SHOULD BE CONFIN ED ONLY TO THOSE GROUNDS WHICH HAS BEEN SPECIFICALLY NOTIFIED TO THE ASSESSEE TO HAVE THE OPPORTUNITY TO MAKE THOSE GROUND SO THAT ASSESSEE M AY SUBSTANTIATE HIS CLAIM. 6. NO DOUBT, THE AO IS EMPOWERED UNDER THE STATUTE TO INITIATE THE PENALTY PROCEEDING, ONCE HE IS SATISFIED DURING THE COURSE OF PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURAT E PARTICULARS OF TOTAL INCOME. HOWEVER, IN OUR CONSIDERED OPINION, IT IS N OT OPEN TO THE AUTHORITIES AT THE TIME OF IMPOSING THE PENALTY NOT TO OPINE TH EIR OPINION ABOUT THE CHARGE OF PENALTY. THUS, THE AO WHILE ISSUING NOTIC E HAS TO COME TO A CLEAR CONCLUSION THAT WHETHER IT IS A CASE OF CONCEALMENT OF INCOME OR IT IS A CASE 5 ITA NO.3487/M/2012, M/S DANI SHARES & STOCK PVT. LT D. OF FURNISHING INACCURATE PARTICULARS. MOREOVER MERE DISALLOWANCE OF ANY CLAIM THE ASSESSMENT ORDER WOULD NOT ATTRACT PENALT Y, WHEN THE ASSESSEE HAS PAID TAX ON SUCH ADDITION AND THE INTEREST THEREON IN ABSENCE OF ANY MATERIAL ON RECORD TO SHOW THAT CONCEALMENT OF INCOME WAS MA DE WITH MALAFIDE INTENTION AND THE ASSESSEE HAS NOT OFFERED AN EXPLA NATION OR THE EXPLANATION OFFERED BY ASSESSEE FOUND TO BE FALSE. IN VIEW OF T HE ABOVE DISCUSSION, THE ASSESSEES APPEAL IS ALLOWED, NO ORDER AS TO COST. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JULY 2016. SD/- SD/- (B. R. BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 13/07/2016 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/