M/s Neena P Sheet , Shivamogga V. Assistant Commissioner of Income TAx Circle-1 , Shivamogga

ITA 38/BANG/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1086 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 05-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V SRINIVASAN
• Keywords: Invalid notice; Principle of natural justice; Initiation of penalty proceedings
• Section: 271(1)(c); 148; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 38 / BANG/201 8 ASSESSMENT YEAR : 2 0 1 2 - 1 3 MS. NEENA P SHETTY, HEGDE HEALTH COMPLEX, 4 TH CROSS, PARK EXTENSION, SHIVAMOGGA 577 201. PAN: ALEPS9843C VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 1, SHIVAMOGGA. APPELLANT RESPONDENT APPELLANT BY : SHRI V. SRINIVASAN, ADVOCATE RESPONDENT BY : SHRI R.N. SIDDAPPAJI, ADDL. CIT (DR) DATE OF HEARING : 04 .0 3 .2019 DATE OF PRONOUNCEMENT : 15 .0 3 .2019 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), DAVANGERE DATED 21.08.2017 FOR ASSESSMENT YEAR 2012- 13. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] IN SO FAR AS IT IS AGAINST THE APPELLANT, IS OPPOSED TO LAW, WEIGHT OF EVIDENCE, NATURAL JUSTICE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. 2. THE APPELLANT DENIES HERSELF LIABLE FOR PENALTY IMPOSED BY THE LEARNED ASSESSING OFFICER UNDER SECTION 271[1][C] OF THE ACT AND CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS], AMOUNTING TO RS. 39,095/ -, ON THE FACTS AND CIRCUMSTANCES OF CASE. 3. THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] FAILED TO APPRECIATE THE FACT THAT THERE WAS NO CONCEALMENT NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME WARRANTING LEVY OF PENALTY UNDER THE ITA NO. 38/BANG/2018 PAGE 2 OF 6 PROVISIONS OF SECTION 271[1][C] OF THE ACT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE DIFFERENCE IN CASH WAS RECONCILED AT THE TIME OF SURVEY AND THERE WAS NO DIFFERENCE OF CASH, MERELY BECAUSE THE APPELLANT HAD AGREED DURING THE COURSE OF SURVEY DOES NOT AMOUNT TO CONCEALMENT OF INCOME, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE PENALTY PROCEEDINGS ARE INDEPENDENT WITH THAT OF THE ASSESSMENT PROCEEDINGS AND OUGHT TO HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AS REGARD TO THE MERITS OF THE MATTER, AND ALSO IT IS SETTLED POSITION OF LAW THAT CONSENT CANNOT CONFER JURISDICTION WHEN THE LAW AND FACTS OF THE CASE SHOW THAT THERE WAS NO CASE FOR COMING TO THE CONCLUSION THAT ANY INCOME HAS TO BE TAXED, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. THE LEARNED ASSESSING OFFICER FAILED TO APPRECIATE THE FACT THE APPELLANT HAD PROVIDED ALL THE DETAILS AND CO-OPERATED IN THE ASSESSMENT PROCEEDINGS VOLUNTARILY AND IN GOOD FAITH UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELETE OR SUBSTITUTE ANY OF THE GROUNDS URGED ABOVE. 8. IN THE VIEW OF THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF THE HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED AND APPROPRIATE RELIEF MAY BE GRANTED IN THE INTEREST OF JUSTICE AND EQUITY. 3. THE ASSESSEE HAS ALSO FILED SEVERAL ADDITIONAL GROUNDS WHICH ARE AS UNDER. 1. THE ORDER OF PENALTY PASSED BY THE LEARNED ASSESSING OFFICER UNDER SECTION 271[1][C] OF THE INCOME-TAX ACT, 1961 IS WITHOUT ASSUMPTION OF PROPER JURISDICTION AS THE MANDATORY CONDITIONS FOR INVOKING THE PROVISIONS OF SECTION 271[1][C] OF THE ACT HAS NOT BEEN COMPLIED WITH UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE LEVY OF PENALTY UNDER SECTION 271[1][C] OF THE ACT IS NOT AUTOMATIC AND THE LEARNED ASSESSING OFFICER OUGHT TO HAVE EXERCISED HIS DISCRETION BEFORE LEVYING PENALTY, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE ORDER OF PENALTY IS BAD IN LAW FOR THE REASON THAT THE NOTICE FOR INITIATION OF PENALTY AS TO WHETHER IT IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME IS NOT DISCERNABLE FROM THE NOTICE ISSUED UNDER SECTION 274 R.W.S. 271[1][C] OF THE ACT AND CONSEQUENTLY THE ORDER OF PENALTY PASSED UNDER SECTION 271[1][C] OF THE ACT ON AN INVALID NOTICE DO NOT HAVE ANY LEGS TO STAND AND THE PENALTY ITA NO. 38/BANG/2018 PAGE 3 OF 6 LEVIED UNDER SECTION 271[1][C] OF THE ACT DESERVES TO BE DELETED, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE LEARNED COMMISSIONER OF INCOME-TAX [APPEALS] FAILED TO APPRECIATE THAT NO SATISFACTION HAS BEEN RECORDED BY THE LEARNED ASSESSING OFFICER IN THE ORDER OF ASSESSMENT PASSED UNDER SECTION 143[3] OF THE ACT AND CONSEQUENTLY IN THE ABSENCE OF SATISFACTION RECORDED FOR THE INITIATION OF PENALTY PROCEEDINGS THE ENTIRE PENALTY PROCEEDINGS IS BAD IN LAW AND VOID-AB-INTO UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. WITHOUT PREJUDICE THE ORDER OF PENALTY PASSED BY THE LEARNED ASSESSING OFFICER UNDER SECTION 271 [1][C] OF THE ACT IS BAD IN LAW SINCE THE LEARNED ASSESSING OFFICER IN THE IMPUGNED ORDER OF PENALTY HAS IMPOSED FOR CONCEALMENT OF INCOME, WHEREAS IN THE ORDER OF ASSESSMENT THE LEARNED ASSESSING OFFICER HAS INITIATED THE PENALTY PROCEEDINGS FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONSEQUENTLY THE ORDER OF PENALTY PASSED BY THE LEARNED ASSESSING OFFICER IS WITHOUT ARRIVING AT PROPER SATISFACTION AND NON-APPLICATION OF MIND AND CONSEQUENTLY, THE IMPUGNED ORDER OF PENALTY PASSED BY THE LEARNED ASSESSING OFFICER UNDER SECTION 271 [1][C] OF THE ACT, IS BAD IN LAW AND DESERVES TO BE CANCELLED, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. WITHOUT PREJUDICE TO THE ABOVE THOUGH NOT CONCEDING, THE PENALTY LEVIED IS HIGHLY EXCESSIVE AND LIABLE TO REDUCED SUBSTANTIALLY. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELETE OR SUBSTITUTE ANY OF THE GROUNDS URGED ABOVE. 8. IN THE VIEW OF THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF THE HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED AND APPROPRIATE RELIEF MAY BE GRANTED IN THE INTEREST OF JUSTICE AND EQUITY. 4. IN COURSE OF HEARING OF THIS APPEAL, THE LD. AR OF ASSESSEE SUBMITTED COPY OF THE NOTICE ISSUED BY THE AO U/S. 274 R.W.S. 271(1)(C) OF IT ACT ON 31.12.2014 AND HE POINTED OUT THAT THIS NOTICE IS DEFECTIVE AND IN THIS NOTICE, THE AO HAS NOT SPECIFIED THE ALLEGATION AS TO WHETHER IT IS FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. HE SUBMITTED THAT UNDER THESE FACTS, THE PENALTY ORDER IS NOT SUSTAINABLE AND IN SUPPORT OF HIS CONTENTION, HE SUBMITTED COPY OF TRIBUNAL ORDER RENDERED IN THE CASE OF SHRI SUNIL KUMAR AGARWAL VS. ITO IN ITA NO. 2197/BANG/2016 DATED 15.06.2018. HE SUBMITTED THAT UNDER SIMILAR FACTS, THE TRIBUNAL HAS HELD IN THIS CASE THAT THE PENALTY ORDER PASSED BY AO IS INVALID AND IN THIS CASE, THE TRIBUNAL HAS FOLLOWED THE ITA NO. 38/BANG/2018 PAGE 4 OF 6 BINDING JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY AS REPORTED IN (2013) 359 ITR 565. AS AGAINST THIS, THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. HE PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS. A) CIT VS. SRI DURGA ENTERPRISES, [2014] 44 TAXMANN.COM 442 (KARNATAKA) B) SKY LIGHT HOSPITALITY LLP VS. ACIT, [2018] 92 TAXMANN.COM 93 (SC) C) SHRI MAHESH M. GANDHI VS. ACIT IN ITA NO. 2976/MUM/2016 DATED 27.02.2017. 5. HE SUBMITTED A COPY OF ALL THESE THREE JUDICIAL PRONOUNCEMENTS. AT THIS JUNCTURE, IT WAS POINTED OUT BY THE BENCH THAT THE JUDGEMENT OF HONBLE APEX COURT CITED BY LD. DR OF REVENUE IS IN RESPECT OF SECTION 148 R.W.S. 292B AND NOT IN RESPECT OF PENALTY NOTICE U/S. 274 R.W.S. 271(1)(C) OF IT ACT. IN REPLY, IT WAS SUBMITTED BY LD. DR OF REVENUE THAT SECTION 292B TAKES CARE OF ANY DEFECT IN THE NOTICE AND THEREFORE, EVEN IF THERE IS ANY DEFECT IN THE PENALTY NOTICE THAT IS ALSO TAKEN CARE BY SECTION 292B AND HENCE, THESE JUDGEMENTS ARE APPLICABLE IN THE PRESENT CASE ALSO. HE ALSO SUBMITTED THAT TRIBUNAL ORDER RENDERED IN THE CASE OF SHRI MAHESH M. GANDHI VS. ACIT (SUPRA) IS IN RESPECT OF PENALTY U/S. 271(1)(C) OF IT ACT. HE ALSO SUBMITTED THAT THE JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) IS AN OLD JUDGEMENT WHEREAS THE JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. SRI DURGA ENTERPRISES (SUPRA) IS DATED 11.02.2014 WHICH IS A LATER JUDGEMENT. 6. IN THE REJOINDER, THE LD. AR OF ASSESSEE SUBMITTED A COPY OF THE LATER JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. SSAS EMERALD MEADOWS IN ITA NO. 389 OF 2015 DATED 23.11.2015 AND ALSO SUBMITTED COPY OF JUDGEMENT OF HONBLE APEX COURT IN THE SAME CASE DATED 05.08.2016 AND POINTED OUT THAT AS PER THIS JUDGEMENT OF HONBLE APEX COURT, SLP FILED BY THE REVENUE HAS BEEN DISMISSED. ITA NO. 38/BANG/2018 PAGE 5 OF 6 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT AS PER THE COPY OF NOTICE ISSUED BY THE AO U/S. 274 R.W.S. 271(1)(C) OF IT ACT, THIS IS THE ALLEGATION OF THE AO THAT THE ASSESSEE HAVE CONCEALED PARTICULARS OF INCOME AND / FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. WE ALSO FIND THAT AS PER THE ASSESSMENT ORDER, THERE IS NO MENTION AS TO WHETHER THE ASSESSEE IS GUILTY OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN ASSESSMENT ORDER, THIS MUCH IS ONLY STATED THAT PENALTY U/S. 271(1)(C) IS INITIATED SEPARATELY FOR FURNISHING INACCURATE. AS PER THE PENALTY ORDER DATED 22.06.2015, THIS IS THE FINDING OF AO ON PAGE NO. 4 OF THE ORDER THAT THERE IS WILLFUL CONCEALMENT ON THE PART OF THE ASSESSEE. HENCE, IT IS SEEN THAT IN THE ASSESSMENT ORDER, THE AO IS ALLEGING THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. IN THE PENALTY NOTICE, THE AO IS NOT SPECIFYING AS TO WHETHER THE ASSESSEE IS GUILTY OF CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME AND IN THE PENALTY ORDER, THE AO IS LEVYING PENALTY ON THE BASIS OF THIS FINDING THAT ASSESSEE IS GUILTY OF CONCEALMENT OF INCOME. UNDER THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT THE BINDING JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) IS SQUARELY APPLICABLE AND RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT IN THE PRESENT CASE, THE PENALTY ORDER IS NOT VALID. IN ADDITION TO THESE JUDGEMENTS NOTED ABOVE, THE LD. DR OF REVENUE ALSO RELIED UPON THE TRIBUNAL ORDER RENDERED IN THE CASE OF JAYSONS INFRASTRUCTURE INDIA P. LTD. VS. ITO IN ITA NO. 997/BANG/2015 DATED 09.06.2017. HE SUBMITTED A COPY OF THIS TRIBUNAL ORDER. HE ALSO POINTED OUT THAT IN THIS CASE, THE TRIBUNAL HAS NOTED IN PARA 2 OF THIS TRIBUNAL ORDER THAT PENALTY PROCEEDINGS U/S. 271(1)(C) ARE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. BECAUSE OF THIS CATEGORICAL FINDING OF AO IN THE ASSESSMENT ORDER, IT WAS HELD BY TRIBUNAL IN THAT CASE THAT UNDER THESE FACTS, THE PENALTY IN THAT CASE WAS CONFIRMED BUT IN THE PRESENT CASE, IT IS SEEN THAT IN THE ASSESSMENT ORDER, THE AO IS ALLEGING ABOUT FURNISHING OF INACCURATE PARTICULARS OF INCOME, IN THE PENALTY NOTICE, THE ALLEGATIONS ARE VAGUE AND IN THE PENALTY ORDER, THE PENALTY IS BEING IMPOSED FOR THE CONCEALMENT OF INCOME AND HENCE, IN OUR CONSIDERED OPINION, THIS TRIBUNAL ORDER IS NOT APPLICABLE IN THE PRESENT CASE. ITA NO. 38/BANG/2018 PAGE 6 OF 6 8. REGARDING THE JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. SRI DURGA ENTERPRISES (SUPRA) AND THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF SKY LIGHT HOSPITALITY LLP VS. ACIT (SUPRA), WE FIND THAT IN THESE TWO CASES, THE ISSUE IN DISPUTE IS NOT REGARDING PENALTY U/S. 271(1)(C) OF IT ACT AND HENCE, THESE TWO JUDGEMENTS ARE NOT APPLICABLE IN THE PRESENT CASE. DISCUSSION ABOUT TRIBUNAL ORDER CITED BY LD. DR OF REVENUE RENDERED BY MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SHRI MAHESH M. GANDHI VS. ACIT (SUPRA) IS NOT REQUIRED BECAUSE WHEN WE ARE FOLLOWING THE BINDING JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT, ANY TRIBUNAL ORDER IS NOT RELEVANT. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (PAVAN KUMAR GADALE) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 15 TH MARCH, 2019. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.