Shri K. C. Varghese, RAJKOT-GUJARAT V. The Asstt. Commr. Income Tax, Gandhidham Circle, GANDHIDHAM

ITA 41/RJT/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6663 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 29-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Keywords: Principle of natural justice; Initiation of penalty proceedings
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE SHRI S.V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI K. NAR A SIMHA CHARY , MEMBER ITA NO. 41 / RJT /201 5 ASS T. YEAR : 2008 - 09 SHRI K.C. VARGHESE KALPESH S. DOSHI & CO. CHARTERED ACCOUNTANTS 411, COSMO COMPLEX, MAHILA COLLEGE CIRCLE, RAJKOT 360 001. PAN : AAQPV4561R (APPELLANT) VS ACIT, GANDHIDHAM CIRCLE GANDHIDHAM (RESPONDENT) APPELLANT BY : SHRI KALPESH DOSHI, C.A RESPONDENT BY : SHRI AVINASH KUMAR, DR DATE OF HEARING : 2 1 /0 3 /201 7 DATE OF PRONOUNCEMENT : 22 /0 3 /201 7 O R D E R PER K. NAR A SIMHA CHARY, MEMBER, JM : THIS IS AN APPEAL CHALLENGING ORDER DATED 15.12.2014 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 3, RAJKOT (FOR SHORT HEREINAFTER REFERRED TO AS LD. CIT(A) ). 2. THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM REMUNERATION, FROM FIRM, INTEREST INCOME AND DURING THE RELEVANT YEAR, INCOME FROM HOUSE PROPERTY. THE ASSESSEE FILED RETURN OF INCOME ON 14.11.2008 FOR THE ASSESSMENT YEAR 2008 - 09 DECLARIN G A TOTAL INCOME OF RS.46,43,450/ - 2 ITA NO. 41/RJT/2015 SHRI K.C. VARGHESE WHEREAS THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT HEREINAFTER REFERRED TO AS THE ACT) WAS COMPLETED ON 22.10.2010 DETERMINING THE TOTAL INCOME AT RS.53,43,450/ - . SUBSEQUENTLY, THE PENALTY PROCEED INGS U/S 271(1)(C) OF THE ACT WERE INITIATED WITH THE ISSUANCE OF NOTICE U/S 274 R.W.S. 271(1)(C) OF THE ACT AND ENDED UP WITH LEVY OF PENALTY OF RS. 2,37,930/ - BY WAY OF ORDER DATED 1.11.2013. ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) BY WAY OF THE IMPUGNED ORDER CONFIRMED THE LEVY OF PENALTY AND DISMISSED THE APPEAL. AGGRIEVED BY THE IMPUGNED ORDER, ASSESSEE IS BEFORE US IN THIS APPEAL CHALLENGING THE VALIDITY OF THE PROCEEDINGS U/S 271(1)( C) OF THE ACT ON THE GROUND THAT THE NOTICE ISSUED IN THIS MATTER DOES NOT SPECIFY UNDER WHICH LIMB OF SEC. 271(1)(C) OF THE ACT, EITHER CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, THE PENALTY IS ATTRACTED. 3. I T IS THE ARGUMENT OF THE LD. AR THAT IN THE PENALTY ORDER THE ASSESSING OFFICER OBSERVED THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS PER THE DISCUSSION ABOVE, IT IS ESTABLISHED THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME/FURNI SHED 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) . 3 ITA NO. 41/RJT/2015 SHRI K.C. VARGHESE 4. PER CONTRA , IT IS THE ARGUM ENT OF THE LD. DR THAT THE ASSESSMENT ORDER VIDE PARAGRAPH 4 CLEARLY SHOWS THAT THE ASSESSING OFFICER HAS RECORDED HIS SATISFACTION THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME , AS SUCH PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATE D. HE ALSO SUBMITTED THAT IN THE NOTICE DATED 22.10.2010 ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT, SUCH PORTION INDICATING THE FURNISHING OF INACCURATE PARTICULARS WAS THE CHARGE PROPOSED TO BE LEVIED , WAS MARKED WITH TICKS . BASING ON THIS, HE ARGUED T HAT WHEN IT IS CLEARLY AND UNAMBIGUOUSLY STATED IN THE ASSESSMENT ORDER AS WELL AS IN THE NO TICE THAT THE PROCEEDINGS ARE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME, ASSESSEE CANNOT HAVE THE BENEFIT OF THE JUDGMENTS RELIED UPON BY HIM. HE F URTHER SUBMITTED THAT IN THE PENALTY ORDER, WHAT IS STATED IS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING 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 & GIN NING FACTORY, 359 ITR 565 (KAR) . VIDE PARAGRAPH 60, THE HONBLE 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 T HE 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 G ROUNDS 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, PENALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSED ON LY 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. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDIN GS 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 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 REFERENCE 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 PASSED, WAS NOT SUSTAINABLE. THIS WAS FOLLOWED BY THE HONBLE 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 HONBLE 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 T HE 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 5 ITA NO. 41/RJT/2015 SHRI K.C. VARGHESE HIM GUILTY OF EITHER ONE OR OTHER CANNOT BE SUSTAINED IN LAW . IN THIS CASE ALSO THE ASSESSMENT ORDER READS THAT PENALTY PROCEEDINGS WERE INITIATE D 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, SUC H A COURSE IS BAD IN LAW AND 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 2 N D MARCH, 2017. SD/ - SD/ - ( S.V. MEHROTRA ) ACCOUNTANT MEMBER ( K. NAR A SIMHA CHARY ) JUDICIAL MEMBER MUMBAI, DATE : 2 2 N D 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