BHAVYA SHASHANK SHANBHAG, Mumbai V. DCIT CC 1(1), Mumbai

ITA 4630/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1221 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 08-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: THARIAN OOMMEN
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Opportunity of being heard; Principle of natural justice; Set aside
• Section: 271(1)(c); 274; 191; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , B BENCH MUMBAI BEFORE : SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI M.BALAGANESH, A CCOUNTANT M EMBER ITA NO. 4630 /MUM/ 20 19 ( ASSESSMENT YEAR : 2005 - 06 ) & ITA NO. 4631 /MUM/ 2019 ( ASSESSMENT YEAR : 2010 - 11 ) M/S.BHAVYA SHASHANK SHANBHAG 902, PRITHVI EMPEROR 202, NEW PRABHADEVI ROAD PRABHADEVI, MUMBAI 400 025 VS. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1(1) MUMBAI OLD CGO BUILDING, ANNEXE 9 TH FLOOR, ROOM NO.903, M.K.ROAD, MUMBAI PAN/GIR NO. AAH PD2422N (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI DR K. SHIVARAM REVENUE BY SHRI THARIAN OOMMEN DATE OF HEARING 06 / 07 /202 1 DATE OF PRONOUNCEMENT 09 / 07 /202 1 / O R D E R PER M. BALAGANESH (A.M) : THESE APPEAL S IN ITA NO . 4630/MUM/2019 & 4631/MUM/2019 FOR A.Y. 2005 - 06 & 2010 - 11 ARISE OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 47, MUMBAI IN APPEAL NO. CIT(A) - 47/10012/18 - 19, CIT(A) - 47/10014/18 - 19, CIT(A) - 47/10047/18 - 19 & CIT(A) - 47/10019/18 - 19 DATED 30/05/ 2019 (LD. CIT(A) IN SHORT) IN THE MATTER OF IMPOSITION OF ITA NO . 4630/MUM/2019 & 4631/MUM/2019 MS. BHAVYA SHASHANK SHANBHAG 2 PENALTY U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT). 2. THE ONLY EFFECTIVE ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRM ING THE LEVY OF PENALTY U/S.271(1)(C) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSEE FOR BOTH THE ASSESSMENT YEARS VIDE GROUND NO.1(E) HAD RAIS ED THE PRELIMINARY TECHNICAL GROUND THAT IN THE SHOW - CAUSE NOTICE ISSUED BY THE LD. AO U/S.274 R.W.S. 271(1)(C) OF THE ACT , HE HAD NOT STRUCK - OFF THE IRRELEVANT PORTION AND THAT THE LD. AO HAD NOT SPECIFIED THE SPECIFIC OFFENCE COMMITTED BY THE ASSESSEE BY STATING AS TO WHETHER THE ASSESSEE HAS CONCEALED HIS PARTICULARS OF INCOME OR HAD FURNISHED INACCURATE PARTICULARS OF INCOME. 3.1. WE FIND THAT THIS ISSUE IS NO LONGER RES - INTEGRA IN VIEW OF THE F ULL B ENCH DECISION OF THE HONBLE JURISDICTIONAL HIGH COUR T IN THE CASE OF MOHD. FARHAN A SHAIKH VS. DCIT REPORTED IN 434 ITR 1 (BOM) . THE RELEVANT PORTION OF THE SAID ORDER IS REPRODUCED HEREUNDER: - 181 . IT DOES. THE PRIMARY BURDEN LIES ON THE REVENUE. IN THE ASSESSMENT PROCEEDINGS, IT FORMS AN OPINION, PRIMA FACIE OR OTHERWISE, TO LAUNCH PENALTY PROCEEDINGS AGAINST THE ASSESSEE. BUT THAT TRANSLATES INTO ACTION ONLY THROUGH THE STATUTORY NOTICE UNDER SECTION 271(1)(C), READ WITH SECTION 274 OF IT ACT. TRUE, THE ASSESSMENT PROCEEDINGS FORM THE BASIS FOR THE PENA LTY PROCEEDINGS, BUT THEY ARE NOT COMPOSITE PROCEEDINGS TO DRAW STRENGTH FROM EACH OTHER. NOR CAN EACH CURE THE OTHER'S DEFECT. A PENALTY PROCEEDING IS A COROLLARY; NEVERTHELESS, IT MUST STAND ON ITS OWN. THESE PROCEEDINGS CULMINATE UNDER A DIFFERENT STATU TORY SCHEME THAT REMAINS DISTINCT FROM THE ASSESSMENT PROCEEDINGS. THEREFORE, THE ASSESSEE MUST BE INFORMED OF THE GROUNDS OF THE PENALTY PROCEEDINGS ONLY THROUGH STATUTORY NOTICE. AN OMNIBUS NOTICE SUFFERS FROM THE VICE OF VAGUENESS. ITA NO . 4630/MUM/2019 & 4631/MUM/2019 MS. BHAVYA SHASHANK SHANBHAG 3 182 . MORE PARTICULARL Y, A PENAL PROVISION, EVEN WITH CIVIL CONSEQUENCES, MUST BE CONSTRUED STRICTLY. AND AMBIGUITY, IF ANY, MUST BE RESOLVED IN THE AFFECTED ASSESSEE'S FAVOUR. 183 . THEREFORE, WE ANSWER THE FIRST QUESTION TO THE EFFECT THAT GOA DOURADO PROMOTIONS AND OTHER CAS ES HAVE ADOPTED AN APPROACH MORE IN CONSONANCE WITH THE STATUTORY SCHEME. THAT MEANS WE MUST HOLD THAT KAUSHALYA DOES NOT LAY DOWN THE CORRECT PROPOSITION OF LAW. QUESTION NO. 2: HAS KAUSHALYA FAILED TO DISCUSS THE ASPECT OF 'PREJUDICE'? 184 . INDEED, SMT . KAUSHALYA CASE (SUPRA) DID DISCUSS THE ASPECT OF PREJUDICE. AS WE HAVE ALREADY NOTED, KAUSHALYA NOTED THAT THE ASSESSMENT ORDERS ALREADY CONTAINED THE REASONS WHY PENALTY SHOULD BE INITIATED. SO, THE ASSESSEE, STRESSES KAUSHALYA, 'FULLY KNEW IN DETAIL TH E EXACT CHARGE OF THE REVENUE AGAINST HIM'. FOR KAUSHALYA, THE STATUTORY NOTICE SUFFERED FROM NEITHER NON - APPLICATION OF MIND NOR ANY PREJUDICE. ACCORDING TO IT, 'THE SO - CALLED AMBIGUOUS WORDING IN THE NOTICE [HAS NOT] IMPAIRED OR PREJUDICED THE RIGHT OF T HE ASSESSEE TO A REASONABLE OPPORTUNITY OF BEING HEARD'. IT WENT ONTO OBSERVE THAT FOR SUSTAINING THE PLEA OF NATURAL JUSTICE ON THE GROUND OF ABSENCE OF OPPORTUNITY, 'IT HAS TO BE ESTABLISHED THAT PREJUDICE IS CAUSED TO THE CONCERNED PERSON BY THE PROCEDU RE FOLLOWED'. SMT. KAUSHALYA CASE (SUPRA) CLOSES THE DISCUSSION BY OBSERVING THAT THE NOTICE ISSUING 'IS AN ADMINISTRATIVE DEVICE FOR INFORMING THE ASSESSEE ABOUT THE PROPOSAL TO LEVY PENALTY IN ORDER TO ENABLE HIM TO EXPLAIN AS TO WHY IT SHOULD NOT BE DON E'. 185 . NO DOUBT, THERE CAN EXIST A CASE WHERE VAGUENESS AND AMBIGUITY IN THE NOTICE CAN DEMONSTRATE NON - APPLICATION OF MIND BY THE AUTHORITY AND/OR ULTIMATE PREJUDICE TO THE RIGHT OF OPPORTUNITY OF HEARING CONTEMPLATED UNDER SECTION 274. SO ASSERTS SMT . KAUSHALYA CASE (SUPRA) .IN FACT, FOR ONE ASSESSMENT YEAR, IT SET ASIDE THE PENALTY PROCEEDINGS ON THE GROUNDS OF NON - APPLICATION OF MIND AND PREJUDICE. 186 . THAT SAID, REGARDING THE OTHER ASSESSMENT YEAR, IT REASONS THAT THE ASSESSMENT ORDER, CONTAINING THE REASONS OR JUSTIFICATION, AVOIDS PREJUDICE TO THE ASSESSEE. THAT IS WHERE, WE RECKON, THE REASONING SUFFERS. KAUSHALYA'S INSISTENCE THAT THE PREVIOUS PROCEEDINGS SUPPLY JUSTIFICATION AND CURE THE DEFECT IN PENALTY PROCEEDINGS HAS NOT MET OUR ACCEPTANC E. QUESTION NO. 3: WHAT IS THE EFFECT OF THE SUPREME COURT'S DECISION IN DILIP N. SHROFF CASE (SUPRA) ON THE ISSUE OF NON - APPLICATION OF MIND WHEN THE IRRELEVANT PORTIONS OF THE PRINTED NOTICES ARE NOT STRUCK OFF ? 187 IN DILIP N. SHROFF CASE (SUPRA), FO R THE SUPREME COURT, IT IS OF 'SOME SIGNIFICANCE THAT IN THE STANDARD PRO - FORMA USED BY THE ASSESSING OFFICER IN ISSUING A NOTICE DESPITE THE FACT THAT THE SAME POSTULATES THAT INAPPROPRIATE WORDS AND PARAGRAPHS WERE TO BE DELETED, BUT THE SAME HAD NOT BEE N DONE'. THEN, DILIP N. SHROFF CASE (SUPRA), ON FACTS, HAS FELT THAT THE ASSESSING OFFICER ITA NO . 4630/MUM/2019 & 4631/MUM/2019 MS. BHAVYA SHASHANK SHANBHAG 4 HIMSELF WAS NOT SURE WHETHER HE HAD PROCEEDED ON THE BASIS THAT THE ASSESSEE HAD CONCEALED HIS INCOME OR HE HAD FURNISHED INACCURATE PARTICULARS. 188 . WE MAY, IN TH IS CONTEXT, RESPECTFULLY OBSERVE THAT A CONTRAVENTION OF A MANDATORY CONDITION OR REQUIREMENT FOR A COMMUNICATION TO BE VALID COMMUNICATION IS FATAL, WITH NO FURTHER PROOF. THAT SAID, EVEN IF THE NOTICE CONTAINS NO CAVEAT THAT THE INAPPLICABLE PORTION BE D ELETED, IT IS IN THE INTEREST OF FAIRNESS AND JUSTICE THAT THE NOTICE MUST BE PRECISE. IT SHOULD GIVE NO ROOM FOR AMBIGUITY. THEREFORE, DILIP N. SHROFF CASE (SUPRA) DISAPPROVES OF THE ROUTINE, RITUALISTIC PRACTICE OF ISSUING OMNIBUS SHOW - CAUSE NOTICES. THA T PRACTICE CERTAINLY BETRAYS NON - APPLICATION OF MIND. AND, THEREFORE, THE INFRACTION OF A MANDATORY PROCEDURE LEADING TO PENAL CONSEQUENCES ASSUMES OR IMPLIES PREJUDICE. 189 . IN SUDHIR KUMAR SINGH, THE SUPREME COURT HAS ENCAPSULATED THE PRINCIPLES OF PRE JUDICE. ONE OF THE PRINCIPLES IS THAT 'WHERE PROCEDURAL AND/OR SUBSTANTIVE PROVISIONS OF LAW EMBODY THE PRINCIPLES OF NATURAL JUSTICE, THEIR INFRACTION PER SE DOES NOT LEAD TO INVALIDITY OF THE ORDERS PASSED. HERE AGAIN, PREJUDICE MUST BE CAUSED TO THE LIT IGANT, 'EXCEPT IN THE CASE OF A MANDATORY PROVISION OF LAW WHICH IS CONCEIVED NOT ONLY IN INDIVIDUAL INTEREST BUT ALSO IN THE PUBLIC INTEREST'. 190. HERE, SECTION 271(1)(C) IS ONE SUCH PROVISION. WITH CALAMITOUS, ALBEIT COMMERCIAL, CONSEQUENCES, THE PROVI SION IS MANDATORY AND BROOKS NO TRIFLING WITH OR DILUTION. FOR A FURTHER PRECEDENTIAL PROP, WE MAY REFER TO RAJESH KUMAR V. CIT [2007] 27 SCC 181, IN WHICH THE APEX COURT HAS QUOTED WITH APPROVAL ITS EARLIER JUDGMENT IN STATE OF ORISSA V. DR. BINAPANI DEI AIR 1967 SC 1269. ACCORDING TO IT, WHEN BY REASON OF ACTION ON THE PART OF A STATUTORY AUTHORITY, CIVIL OR EVIL CONSEQUENCES ENSUE, PRINCIPLES OF NATURAL JUSTICE MUST BE FOLLOWED. IN SUCH AN EVENT, ALTHOUGH NO EXPRESS PROVISION IS LAID DOWN ON THIS BEHALF, COMPLIANCE WITH PRINCIPLES OF NATURAL JUSTICE WOULD BE IMPLICIT. IF A STATUE CONTRAVENES THE PRINCIPLES OF NATURAL JUSTICE, IT MAY ALSO BE HELD ULTRA VIRES ARTICLE 14 OF THE CONSTITUTION. 191 . AS A RESULT, WE HOLD THAT DILIP N. SHROFF CASE (SUPRA) TREATS OMNIBUS SHOW - CAUSE NOTICES AS BETRAYING NON - APPLICATION OF MIND AND DISAPPROVES OF THE PRACTICE, TO BE PARTICULAR, OF ISSUING NOTICES IN PRINTED FORM WITHOUT DELETING OR STRIKING OFF THE INAPPLICABLE PARTS OF THAT GENERIC NOTICE. 3. 2 . RESPECTFULLY FOLLOW ING THE AFORESAID DECISION, WE HOLD THAT THE PENALTY LEVIED BY THE LD. AO FOR BOTH THE ASSESSMENT YEARS IS HEREBY DIRECTED TO BE DELETED. 3.3 . SINCE THE RELIEF IS GRANTED TO THE ASSESSEE ON THIS ASPECT BY ADJUDICATING THE GROUND NO.1(E) , THE OTHER GROUNDS RAISED BY THE ITA NO . 4630/MUM/2019 & 4631/MUM/2019 MS. BHAVYA SHASHANK SHANBHAG 5 ASSESSEE FOR BOTH THE YEARS ON LEGALITY OF LEVY PENALTY AS WELL AS ON MERITS OF THE CASE ARE NOT ADJUDICATED HEREIN AND THE SAME ARE HEREBY LEFT OPEN. 14. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON 09 / 07 /202 1 BY WAY OF PROPER MENTIONING IN THE NOTICE BOARD. SD/ - ( VIKAS AWASTHY ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 09 / 07 / 2021 KARUNA , SR.PS CO PY 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//