Haridas Bhondiram Katkar, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-4, RAJKOT-GUJARAT

ITA 368/RJT/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6636 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 05-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Initiation of penalty proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE SHRI S.V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY , MEMBER ITA NO. 368 / RJT /201 5 ASS T. YEAR : 200 7 - 0 8 HARIDAS DHONDIRAM KATKAR C/O. D.R. ADHIA, OM SHRI PADMALAYA , BESIDE TRIKAMRAIJI HAWELI, OPP. HOTEL IMPERIAL PALACE, 16 JAGNATH PLOT, DR. YAGNIK ROAD, RAJKOT (APPELLANT) PAN : AHBPK5625P VS ITO, WARD - 4, SURENDRANAGAR (RESPONDENT) APPELLANT BY : WRITTEN SUBMISSION RESPONDENT BY : MS. USHA SHROTE, DR DATE OF HEARING : 2 4 /0 3 /201 7 DATE OF PRONOUNCEMENT : 24 /0 3 /201 7 O R D E R PER K. NAR A SIMHA CHARY, MEMBER, JM : THIS APPEAL IS FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 25.5.2015 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 7, AHMEDABAD (FOR SHORT HEREINAFTER REFERRED TO AS LD. CIT(A) ) IN APPEAL NO. CIT(A) - 7/122/15 - 16. 2. THE QUESTION INVOLVED IN THIS MATTER IS IN RESPECT OF PENALTY LEVIED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT HEREINAFTER REFERRED TO AS THE AC T ). THE ASSESSEE HAS VEHEMENTLY QUESTIONED THE LEGALITY 2 ITA NO. 368/RJT/2015 HARIDAS DHONDIRAM KATKAR AND CORRECTNESS OF THE NOTICE ISSUED IN THIS REGARD U/S 274 R.W.S. 271( 1)(C) OF THE ACT. 3. IT IS THE ARGUMENT OF THE LD. AR THAT IN THE PENALTY ORDER THE ASSESSING OFFICER OBSERVED THAT IN VIEW O F THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS PER THE DISCUSSION ABOVE, IT IS ESTABLISHED THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME/FURNISHED INACCURATE PARTICULARS OF INCOME AND THIS IS, THEREFORE A FIT CASE FOR LEVY OF PENALTY U/S. 271(1)( C) OF THE ACT . . LD. COUNSEL PLACES RELIANCE ON SEVERAL DECISIONS INCLUDING THE DECISIONS OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS JYOTI LTD., [2013] 34 TAXMANN.COM 65 (GUJARAT), CIT VS WHITEFORD INDIA LTD., [2013] 38 TAXMANN.COM 15 (GUJARAT) , NEW SORATHIA ENGG. CO. VS CIT, [2006] 155 TAXMAN 513 (GUJ.) AND CIT VS MANU ENGINEERING WORKS, 122 ITR 306 (GUJARAT) . 4. PER CONTRA, IT IS THE ARGUMENT OF THE LD. DR THAT THE ASSESSMENT ORDER VIDE PARAGRAPH 4 CLEARLY SHOWS THAT THE ASSESSING OFFICER HA S RECORDED HIS SATISFACTION THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME, AS SUCH PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED. HE ALSO SUBMITTED THAT IN THE NOTICE DATED 22.10.2010 ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT, SUC H PORTION INDICATING THE FURNISHING OF INACCURATE PARTICULARS WAS THE CHARGE PROPOSED TO BE LEVIED, WAS MARKED WITH TICKS. BASING ON THIS, HE ARGUED THAT WHEN IT IS CLEARLY AND UNAMBIGUOUSLY STATED IN THE ASSESSMENT ORDER AS WELL AS IN THE NOTICE THAT THE PROCEEDINGS ARE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME, ASSESSEE CANNOT HAVE THE BENEFIT OF THE JUDGMENTS RELIED UPON BY HIM. HE FURTHER SUBMITTED THAT IN THE PENALTY ORDER, WHAT IS 3 ITA NO. 368/RJT/2015 HARIDAS DHONDIRAM KATKAR STATED IS CONCEALMENT OF PARTICULARS OF INCOME OR FURNI SHING OF INACCURATE PARTICULARS OF INCOME AND BOTH THE PARAMETERS FALL IN THE SAME CATEGORY, AS SUCH THERE WAS NO CHARGE FOR ONE LIMB AND PENALTY FOR OTHER LIMB. HE PRAYED TO DISMISS THE APPEAL. 5. WE HAVE CAREFULLY PERUSED THE MATERIAL PAPERS ON RECORD IN THE LIGHT OF THE STATEMENTS MADE ON BEHALF OF THE ASSESSEE INCLUDING THE JUDGMENT RELIED UPON BY HIM IN THE CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY, 359 ITR 565 (KAR) . VIDE PARAGRAPH 60, THE HON BLE KARNATAKA HIGH COURT HAS HELD AS FOLLOWS : - 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CASES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING HIM GUILTY FOR EITHER THE ONE OR THE OTHER 4 ITA NO. 41/RJT/2015 SHRI K.C. VARGHESE CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROUNDS MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PEN ALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERW ISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE 4 ITA NO. 368/RJT/2015 HARIDAS DHONDIRAM KATKAR GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REF ERENCE TO THE INFORMATION, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSE D, WAS NOT SUSTAINABLE. THIS WAS FOLLOWED BY THE HON BLE KARNATAKA HIGH COURT IN THE DECISION IN THE CASE OF CIT VS M/S. MAGANUR BUILDERS IN ITA NO. 616/2015 DATED 28.7.2016 . THE HON BLE JURISDICTIONAL HIGH COURT CONSIDERED THIS ISSUE IN THE CASE OF JYOTI LTD. (SUPRA), WHITEFORD INDIA LTD. (SUPRA), NEW SORATHIA ENGG. CO. (SUPRA) AND MANU ENGINEERING WORKS (SUPRA) . FINDING OF THE ASSESSING OFFICER AS EXTRACTED IN PARA 6 OF JYOTI LTD. (SUPRA) IS SIMILAR TO THE ORDER IN THIS CASE, AND IT IS AS FOLLOWS : - IN VIEW OF THE ABOVE FACTS, IT IS CLEAR THAT THE ASSESSEE CONCEALED INCOME/FURNISHED INACCURATE PARTICULARS OF INCOME. I, THEREFORE, CONSIDER IT A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) . 6. ON A CAREFUL READING OF THE DECISIONS RELIED UPON BY THE ASSESSEE, IT IS, THEREFORE, CLEAR THAT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING HIM GUILTY OF EITHER ONE OR OTHER CANNOT BE SUSTAINED IN LAW. IN THIS CASE ALSO THE ASSESSMENT O RDER READS THAT PENALTY PROCEEDINGS WERE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME, WHEREAS THE PENALTY ORDER SHOWS THAT THE ASSESSEE WAS GUILTY OF CONCEALMENT OF PARTICULARS OF INCOME/FURNISHING INACCURATE PARTICULARS OF INCOME. ACCORDING TO THE BINDING PRECEDENTS REFERRED TO ABOVE, SUCH A COURSE IS BAD IN LAW AND 5 ITA NO. 368/RJT/2015 HARIDAS DHONDIRAM KATKAR CANNOT BE SUSTAINED. WE, THEREFORE, PROCEED TO QUASH THE PENALTY PROCEEDINGS AS THEY CANNOT BE SUSTAINED UNDER LAW. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 4 T H MARCH, 2017. SD/ - SD/ - ( S.V. MEHROTRA ) ACCOUNTANT MEMBER ( K. NARASIMHA CHARY ) JUDICIAL MEMBER RAJKOT , DATE : 2 4 T H MARCH , 201 7 *SSL* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, RAJKOT 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, RAJKOT