Vatti Srinivasa Reddy, Vijayawada` V. Assistant Commissioner of Income Tax, Circle-2(1), Vijayawada

ITA 463/VIZ/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6553 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: misc
• Appeal Filed On: 11-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 133A

Judgement Text

ITA NO.463/VIZAG/2017 VATTI SRINIVASA REDDY, VJA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.463/VIZAG/2017 ( / ASSESSMENT YEAR: 2011-12) VATTI SRINIVASA REDDY VIJAYAWADA ACIT, CIRCLE - 2(1), VIJAYAWADA [PAN NO. ACJPV5769N ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI M.N. MURTHY NAIK, DR / DATE OF HEARING : 23.10.2017 / DATE OF PRONOUNCEMENT : 08.11.2017 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) {CIT(A)}, VIJA YAWADA VIDE ITA NO.375/CIT(A)/VJA/2014-15 DATED 21.3.2017 FOR THE A SSESSMENT YEAR 2011-12. ITA NO.463/VIZAG/2017 VATTI SRINIVASA REDDY, VJA 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL, FILED HIS RETURN OF INCOME FOR A.Y. 2011-12 ADMITTI NG TOTAL INCOME OF ` 19,47,280/-. THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT WAS COMPLETED ON 27.2.2014. ADDITIONS O F ` 10,23,862/- TOWARDS INTEREST ON FD NOT OFFERED TO TAX AND ` 5,50,000/- WERE MADE TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE HAD NOT PREFERRED ANY APPEAL AGAINST THE ASSESSMENT ORDER. SIMULTANEOUSL Y, THE ASSESSING OFFICER ISSUED A NOTICE U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') PROPOSING TO LEVY PENALTY. THE ASSESSEE SUBMITTED THE REPLY STATING THAT ADDITIONS WERE MAD E ON AGREED BASIS AND THERE IS NO CASE FOR PENALTY MERELY BECAUSE OF THE ASSESSEE HAD AGREED FOR ADDITION. THE A.O. NOT BEING CONVINCED WITH THE EXPLANATION PASSED THE PENALTY ORDER DATED 26.8.2014 LEVYING A PENALTY OF ` 5,83,143/- U/S 271(1)(C) OF THE ACT. 3. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) ON 17.9.2014. THE LD. CIT(A) SUSTAINED THE PENALTY TO THE EXTENT OF ADDITION MADE TOWARDS INTEREST ON FIXED DEPOSIT. T HE ORDER OF THE LD. CIT(A) WAS PASSED ON 21.3.2017. AGGRIEVED, THE ASS ESSEE PREFERS TO FILE APPEAL BEFORE THIS TRIBUNAL. APART FROM THE GROUND S ON MERITS, THE ASSESSEES WISHES TO CONTEST THE LEGALITY OF THE NOT ICE ISSUED U/S 271(1)(C) DATED 27.2.2014 WHEREIN THE ASSESSING OFF ICER HAD NOT POINTED ITA NO.463/VIZAG/2017 VATTI SRINIVASA REDDY, VJA 3 OUT THE SPECIFIC OFFENCE UNDER WHICH HE PROPOSED TO LEVY PENALTY U/S 271(1)(C) OF THE ACT WHETHER IT WAS FOR CONCEALMENT OR FOR FURNISHING THE INACCURATE PARTICULARS. ALONG WITH APPEAL MEMO, TH E ASSESSEE FILED GROUNDS ON MERITS FOR IMPOSING PENALTY U/S 271(1)(C ) OF THE ACT. SUBSEQUENTLY, VIDE PETITION DATED 1.8.2017 FILED IN THIS OFFICE ON 14.8.2017, THE ASSESSEE RAISED ADDITIONAL GROUND WI TH REGARD TO THE DEFECT NOTICE WITHOUT MENTIONING WHICH LIMB OF THE OFFENCE I.E. WHETHER FOR FURNISHING INACCURATE PARTICULARS OR FOR CONCEA LMENT OF INCOME, THE NOTICE HAS BEEN ISSUED. THE ADDITIONAL GROUND RAIS ED BY THE ASSESSEE READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, WHETHER THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT I S BAD IN LAW AND HENCE THE SAID NOTICE IS LIABLE TO BE QUASHED AS ILLEGAL AND CONSEQUENTLY THE PENALTY ORDER IS LIABLE FOR CANCELLATION. 4. THE LD. AUTHORISED REPRESENTATIVE (A.R.) FURNISH ED A COPY OF THE NOTICE ISSUED BY THE ASSESSING OFFICER AND ARGUED T HAT THE ASSESSING OFFICER ISSUED NOTICE WITHOUT APPLICATION OF MIND A ND WITHOUT STRIKING IRRELEVANT COLUMNS I.E. WHETHER THE PENALTY WAS INI TIATED FOR FURNISHING INACCURATE PARTICULARS OR CONCEALMENT OF INCOME. T HE LD. A.R. SUBMITTED THAT AS PER THE JUDGEMENT OF HONBLE ANDH RA PRADESH HIGH COURT IN ITA NO.684/VIZAG/2016 IN PRINCIPAL CIT-1, VISAKHAPATNAM VS. SMT. BAISETTY REVATHI, IT IS HELD THAT IT IS NECESS ARY TO MAKE THE ASSESSEE TO KNOW FOR WHICH OFFENCE THE NOTICE HAS B EEN ISSUED. ISSUE ITA NO.463/VIZAG/2017 VATTI SRINIVASA REDDY, VJA 4 OF NOTICE WITHOUT STRIKING OFF THE IRRELEVANT COLUM NS PUT THE ASSESSEE IN A CONFUSED STATE OF AFFAIRS FOR WHICH LIMB OF THE N OTICE THE ASSESSEE REQUIRED TO FURNISH EXPLANATION. THEREFORE, THE LD . A.R. ARGUED THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE GOES TO TH E ROUTE OF THE PENALTY, HENCE REQUESTED FOR ADMISSION OF ADDITIONA L GROUND AND ARGUED THAT DUE TO DEFECT IN THE NOTICE THE PENALTY REQUIR ED TO BE CANCELLED. 4. THE LD. DEPARTMENTAL REPRESENTATIVE (D.R.) OBJEC TED FOR ADMISSION OF ADDITIONAL GROUND AND SUPPORTED THE OR DERS OF THE LOWER AUTHORITIES. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT THERE IS A MERIT IN THE SUBMISSION MADE BY THE LD. A.R. AND ACCORDIN GLY, WE ADMIT THE ADDITIONAL GROUND. THERE IS NO DISPUTE WITH THE FA CT THAT THE A.O. HAD ISSUED NOTICE U/S 271(1)(C) WITHOUT STRIKING OFF TH E IRRELEVANT COLUMN AND PUT THE ASSESSEE IN CONFUSION FOR WHICH OFFENCE THE ASSESSEE REQUIRED TO SUBMIT THE EXPLANATION I.E. WHETHER FOR FURNISHING INACCURATE PARTICULARS OR FOR CONCEALMENT OF INCOME. THE A.O . HAS NOT MENTIONED IN THE ASSESSMENT ORDER ALSO WHETHER THE PENALTY WA S INITIATED FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS. IN THE ASSESSMENT ORDER THE A.O. SIMPLY MADE NOTING THAT INITIATE PENALTY U/S 271(1)(C) OF THE ACT. ITA NO.463/VIZAG/2017 VATTI SRINIVASA REDDY, VJA 5 THE SIMILAR ISSUE HAS COME UP BEFORE US FOR ADJUDI CATION IN ITA NO.388/VIZAG/2015 IN THE CASE OF KONCHADA SREERAM V S. ITO WARD-1(1) AND THIS TRIBUNAL QUASHED THE NOTICE ISSUED U/S 271 (1)(C) OF THE ACT AND CANCELLED THE PENALTY HOLDING THAT THE NOTICE ISSUE D U/S 271(1)(C) OF THE ACT IS INVALID. FOR THE SAKE OF CONVENIENCE, WE EX TRACT THE RELEVANT PARAGRAPH OF THE ORDER OF THIS TRIBUNAL CITED (SUPR A). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. IN THIS CASE, THE ASSESSEE HAS NOT FILED TH E RETURN OF INCOME. THE DEPARTMENT HAS CONDUCTED THE SURVEY U/S 133A AND CO MPLETED THE ASSESSMENT U/S 143(3) ON TOTAL INCOME OF RS.15,43,0 41/- AND INITIATED PENALTY PROCEEDINGS U/S 271(1)(C). THE FACT IS THAT LONG TERM CAPITAL GAINS FOR SALE OF THE PROPERTY HAVE COME TO THE NOTICE OF THE ASSESSING OFFICER BECAUSE OF THE EFFORTS MADE BY THE DEPARTMENT. THE REFORE, THE AO HAS INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) AND ISSUED SHOW CAUSE NOTICE IN THE PRINTED PROFORMA OF PENALTY. THE AO H AS ISSUED THE PENALTY NOTICE WHICH READS AS UNDER : WHEREAS IN THE COURSE OF THE PROCEEDING BEFORE ME FOR THE .ASST. YEAR 2007-08 IT APPEARS TO ME THAT YOU HAVE CONCEALED TH E PARTICULARS OF YOUR SOME OR FURNISHED INACCURATE PARTICULARS OF SUCH IN COME. 6.1. FROM THE NOTICE ISSUED BY THE AO, IT IS OBSERV ED THAT THE ASSESSING OFFICER HAD ISSUED THE NOTICE FOR CONCEALMENT OF IN COME OR FOR FURNISHING OF INACCURATE PARTICULARS. AS PER THE NOTICE, THE ASSESSING OFFICER WAS NOT SURE OF WHICH LIMB OF THE OFFENCE HE SOUGHT THE EXP LANATION FROM THE ASSESSEE, WHETHER IT WAS FOR THE CONCEALMENT OF INC OME OR FOR FURNISHING OF INACCURATE PARTICULARS. AS PER THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT CITED, FOR STARTING THE PENALTY PROCEEDI NGS, THE CONDITION PRECEDENT IS THAT THE ASSESSING OFFICER MUST BE SAT ISFIED THAT A PERSON HAS EITHER CONCEALED THE PARTICULARS OF HIS INCOME OR F URNISHED INACCURATE PARTICULARS OF SUCH INCOME. THE PERSON WHO IS ACCU SED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD BE MADE AWARE OF TH E GROUNDS ON WHICH IMPOSITION OF PENALTY IS PROPOSED AS HE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE THE FULL OPPORTUNITY TO MEET THE CASE OF THE REVENUE SO AS TO SHOW THAT THE CONDITIONS STIPULATE D IN SECTION 271(1)(C) DO NOT EXIST AND THAT HE IS NOT LIABLE TO PAY THE P ENALTY. THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE LAW CITED HELD THAT THE PRACTICE OF THE REVENUE IN SENDING THE PRINTED FORM WHERE ALL THE G ROUNDS MENTIONED IN 271(1)(C) ARE MENTIONED WOULD NOT SATISFY THE REQUI REMENT OF LAW WHEN THE CONSEQUENCE OF THE ASSESSEE NOT REBUTTING THE I NITIAL PRESUMPTION IS ITA NO.463/VIZAG/2017 VATTI SRINIVASA REDDY, VJA 6 SERIOUS IN NATURE AND HAS TO PAY THE PENALTY RANGIN G FROM 100% TO 300% OF THE TAX LIABILITY. AS THE PROVISIONS OF SECTION 271(1)(C) HAVE TO BE STRICTLY CONSTRUED, THE HONBLE HIGH COURT OF KARNA TAKA MANDATED THAT THE NOTICE ISSUED SHOULD BE SET OUT THE GROUNDS WHICH T HE ASSESSEE HAS TO MEET SPECIFICALLY, OTHERWISE THE PRINCIPLES OF NATU RAL JUSTICE WOULD BE OFFENDED AS THE SHOW CAUSE NOTICE WOULD BE VAGUE. ON THE SIMILAR FACTS, HONBLE SUPREME COURT DISMISSED THE SLP IN THE CASE OF SSAS EMERALD MEADOWS (2016) 73 TAXMAN.COM 248(SC). LD.DRS ARGUM ENT THAT THE CASE IS DISTINGUISHABLE ON FACTS IS NOT ACCEPTABLE SINCE THE LD.DR RELIED ON THE PASSING OBSERVATION OF THE HONBLE HIGH COURT O F AP. IN THE ASSESSEES CASE, THE ISSUE IS THE DEFECTIVE NOTICE U/S 271(1)(C) BUT NOT THE PENALTY ORDER. UNLESS THE NOTICE ISSUED U/S 271 (1)(C) IS VALID THE PENALTY ORDER CANNOT BE HELD TO BE VALID. THE ASSE SSING OFFICER DID NOT STRIKE OFF THE IRRELEVANT COLUMN IN THE NOTICE AND MADE KNOWN THE ASSESSEE WHETHER THE PENALTY WAS INITIATED FOR THE CONCEALMENT OF INCOME OR FOR FURNISHING THE INACCURATE PARTICULARS. IN T HE ASSESSMENT ORDER ALSO THE AO SIMPLY RECORDED THAT THE PENALTY PROCEEDINGS U/S 271(1)(C) ARE INITIATED SEPARATELY. NEITHER IN THE ASSESSMENT OR DER NOR IN THE PENALTY NOTICE, THE ASSESSING OFFICER HAS PUT THE ASSESSEE ON NOTICE FOR WHICH OFFENCE, THE PENALTY U/S 271 WAS INITIATED. THERE FORE, THE CASE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE JUR ISDICTIONAL HIGH COURT OF CITED (SUPRA) WHEREIN THE HONBLE HIGH COURT HEL D AS UNDER: ON PRINCIPLE, WHEN PENALTY PROCEEDINGS ARE SOUGHT TO BE INITIATED BY THE REVENUE UNDER SECTION 271(1)(C) OF THE ACT OF 1 961, THE SPECIFIC GROUND WHICH FORMS THE FOUNDATION THEREFORE HAS TO BE SPELT OUT IN CLEAR TERMS OTHERWISE, ON ASSESSEE WOULD NOT HAVE P ROPER OPPORTUNITY TO PUT FORTH HIS DEFENCE. WHEN THE PROC EEDINGS ARE PENAL IN NATURE RESULTING IN IMPOSITION OF PENALTY RANGIN G FROM 100% TO 300% OF THE TAX LIABILITY, THE CHARGE MUST BE UNEQU IVOCAL AND UNAMBIGUOUS. WHEN THE CHARGE IS EITHER CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS T HEREOF, THE REVENUE MUST SPECIFY AS TO WHICH ONE OF THE TWO IS SOUGHT T O BE PRESSED INTO SERVICE AND CANNOT BE PERMITTED TO CLUB BOTH BY INTERJECTING AN 'OR' BETWEEN THE TWO, AS IN THE PRE SENT CASE. THIS AMBIGUITY IN THE SHOW-CAUSE NOTICE IS FURTHER COMPO UNDED PRESENTLY BY THE CONFUSED FINDING OF THE ASSESSING OFFICER THAT HE WAS SATISFIED THAT THE ASSESSEE WAS GUILTY OF BOTH. WE ARE THEREFORE OF THE OPINION THAT THE ORDER UNDE R APPEAL DOES NOT BROOK INTERFERENCE ON ANY GROUND. WE FIND NO QUESTI ON OF LAW, MUCH LESS A SUBSTANTIAL ONE, ARISING FOR CONSIDERATION WARRAN TING ADMISSION OF THIS APPEAL. 6.2. ON THE SIMILAR FACTS, THE COORDINATE BENCH OF ITAT, VISAKHAPATNAM IN ITA NO.229/VIZ/2015 IN THE CASE OF NARAYANA REDD Y ENTERPRISES, FOLLOWING THE ORDER OF THE COORDINATE BENCH IN THE CASE OF SMT. MAKINA ITA NO.463/VIZAG/2017 VATTI SRINIVASA REDDY, VJA 7 ANNAPURNA VS. ITO, VISAKHAPATNAM IN ITA NOS.604 & 6 05/VIZAG/2014 DATED 2.2.2017 HELD THAT NON-STRIKING OF THE IRRELE VANT COLUMN RENDERS THE NOTICE ISSUED U/S 271 AS INVALID. RESPECTFULLY, FO LLOWING THE DECISION OF THE HONBLE AP HIGH COURT CITED SUPRA AND THE DECIS ION OF THIS TRIBUNAL CITED (SUPRA), WE HOLD THAT THE NOTICE ISSUED U/S 2 71 IS INVALID AND CONSEQUENT PENALTY IMPOSED BY THE AO IS CANCELLED. 6. SINCE THE ISSUE ON HAND IS ON SIMILAR FACTS, RES PECTFULLY FOLLOWING THE JUDGEMENT OF HONBLE A.P. HIGH COURT AND THE DE CISION OF THIS TRIBUNAL IN THE CASE CITED (SUPRA), WE HOLD THAT TH E NOTICE ISSUED U/S 271(1)(C) OF THE ACT IS INVALID AND CANCEL THE PENA LTY IMPOSED BY THE ASSESSING OFFICER. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 8 TH NOV17. SD/- SD/- ( . ) ( . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 08.11.2017 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT VATTI SRINIVASA REDDY, D.NO.54-1 9-22/4C, FILM COLONY, JAYAPRAKASH NAGAR, VIJAYAWADA 2. / THE RESPONDENT THE ACIT, CIRCLE-2(1), VIJAYAW ADA 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY //