The Malegaon Merchants Co-op. Bank Ltd., Nashik V. Assistant Commissioner of Income-tax,

ITA 471/PUN/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6940 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 18-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Assessee Lawyers: SHIRUDE
• Keywords: Invalid notice
• Section: 143(3)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.471/PUN/2016 / ASSESSMENT YEAR : 2011-12 THE MALEGAON MERCHANTS CO - OP BANK LTD., 379, SOMWAR WARD, MALEGAON DIST., NASHIK 423203. PAN : AAAAT2790D. . / APPELLANT V/S ASST.COMMISSIONER OF INCOME TAX, CIRCLE 3, MALEGAON. . / RESPONDENT ASSESSEE BY : SHRI M.R. SHIRUDE. REVENUE BY : SHRI MUKESH JHA. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A)-1, NASHIK DT. 06.01.2016 FOR THE ASSESSMENT YEAR 2011-12. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- 2.1 ASSESSEE IS A CO-OPERATIVE BANK WHO FILED ITS RETURN OF INCOME FOR A.Y. 2011-12 ON 27.09.2011 DECLARING TOTAL INCOME AT RS.2,19,54,048/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER / DATE OF HEARING : 12.12.2017 / DATE OF PRONOUNCEMENT: 20.12.2017 2 ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DT.11.12.2013 AND THE TOTAL TAXABLE INCOME WAS DETERMINED AT RS.2,67 ,38,270/- BY MAKING DISALLOWANCE OF RS.4,97,255/- ON ACCOUNT OF EXCESS A UDIT FEE PROVISION AND RS.42,86,964/- ON ACCOUNT OF EXCESS PROVIS ION OF SPECIAL RESERVE UNDER SEC.36(1)(VIII) OF THE ACT. ON DISALLOW ANCE OF EXCESS AUDIT FEE PROVISION AND SPECIAL RESERVE UNDER SEC .36(1)(VIII) OF THE ACT, AO VIDE ORDER DT.24.06.2014 LEVIED PENALTY OF RS. 14,78,324/- U/S 271(1)(C) OF THE ACT ON ACCOUNT OF CONCEALING PARTICULARS OF INCOME BY FURNISHING INACCURATE PARTICULARS OF INCOME. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.06.01.2016 (IN APPEAL NO.NSK/CIT(A)-1/405/2014-1 5) DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE O RDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAIS ED THE FOLLOWING EFFECTIVE GROUND : IN THE FACTS AND CIRCUMSTANCES AND POSITION OF LAW LEARNED CIT APPEALS-I, NASHIK ERRED IN CONFIRMING THE PENALTY L EVIED U/S 271(1)(C) AT RS.14,78,324/-. 3. THEREAFTER, ASSESSEE VIDE LETTER DATED 02.11.2017 RAISE D THE FOLLOWING ADDITIONAL GROUNDS : 1. EXACT CHARGE ON THE BASIS OF WHICH THE PENALTY PROCEEDINGS HAVE BEEN INITIATED U/S 274 R.W.S. 271(1)(C) VIDE NOTICE DATED 11/12/2013 IS NOT STATED IN THE NOTICE AND HENCE THE NOTICE ISSUE D U/S 274 R.W.S. 271(1)(C) IS BAD IN LAW AND CONSEQUENTLY PENALTY LE VIED ON THE BASIS OF SUCH INVALID NOTICE IS BAD IN LAW. 2. THE AO HAS NOT RECORDED PROPER AND CLEAR SATISF ACTION IN THE ASSESSMENT ORDER FOR INITIATING PENALTY PROCEEDINGS BOTH IN RESPECT OF DISALLOWANCE OF PROVISION FOR AUDIT FEES AND DISALL OWANCE U/S 36(1)(VIII) AS PENALTY PROCEEDINGS ARE INITIATED FOR CONCEALING THE INCOME AND FILING INACCURATE PARTICULARS OF INCOME (VIDE PARA NO.6.1 AND 7.6 OF ASSESSMENT ORDER), WHEREAS PENALTY IS LEVIED FOR FU RNISHING INACCURATE PARTICULARS OF INCOME (VIDE PARA NO.5 OF PENALTY OR DER) AND WHILE ISSUING NOTICE U/S.274 R.W.S. 271(1)(C), THE A.O. HAS MENTI ONED BOTH THE LIMBS I.E., CONCEALING THE PARTICULARS OF INCOME OR FURNI SHING INACCURATE PARTICULARS OF INCOME. 3 4. WITH RESPECT TO RAISING OF ADDITIONAL GROUNDS, IT IS SUBM ITTED THAT THE ADDITIONAL GROUNDS RAISED INVOLVE A POINT OF LAW FOR WHIC H NECESSARY FACTS ARE ON RECORD AND THEREFORE THE SAME BE ADMITTED FOR ADJUDICATION. 5. WITH RESPECT TO THE ADDITIONAL GROUNDS RAISED, WE FIND T HAT THE ASSESSEE HAS RAISED THE ISSUE OF VALIDITY OF PENALTY PROCEE DINGS. SINCE THE ISSUE BEING A LEGAL ISSUE, THE ADDITIONAL GROUNDS RAISED ARE ADMITTED FOR HEARING. 6. BEFORE US, AT THE OUTSET, LD.A.R. SUBMITTED THAT THE SOLITARY ISSUE IS WITH RESPECT TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 7. BEFORE US, LD.A.R SUBMITTED THAT WHILE FRAMING THE ASSESSM ENT U/S 143(3) OF THE ACT, AO HAD MADE ADDITION OF RS.4,97,255/- ON ACCOUNT OF EXCESS PROVISION AGAINST AUDIT FEE PAYABLE AND RS.42,86,964/- ON ACCOUNT OF EXCESS PROVISION OF SPECIAL RES ERVE U/S 36(1)(VIII) OF THE ACT TOTALING TO RS.47,84,219/- AND DETERMIN ED THE TOTAL TAXABLE INCOME AT RS.2,67,38,270/- AS AGAINST THE INCOME OF RS.2,19,54,048/- DECLARED BY THE ASSESSEE. ON DISALLOWANC E OF AUDIT FEE PROVISION AND SPECIAL RESERVE U/S 36(1)(VIII) OF THE ACT, A O LEVIED PENALTY OF RS.14,78,324/- U/S 271(1)(C) OF THE ACT. HE SUBM ITTED THAT WHILE PASSING THE ASSESSMENT ORDER, AO HAS NOT RECORDED ANY SATISFACTION FOR LEVY OF PENALTY BUT WHILE PASSING THE PENALTY ORDER U/S 271(1)(C) OF THE ACT, THE AO HAS LEVIED PENALTY FOR CONCEALMEN T OF INCOME AS WELL AS FOR FURNISHING INACCURATE PARTICULARS OF INCO ME. HE, RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN TH E CASE OF CIT VS. SAMSON PERINCHERY (ITA NO.1154 OF 2014 ORDER DT.0 5.01.2017), 4 SUBMITTED THAT WHEN INITIATION OF PENALTY IS FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND PENALTY WAS LEVIED ON CONCEALMENT OF INCOME, THEN IN THE ABSENCE OF PROPER SHOW CAUSE NOTICE TO ASSESSEE, PENALTY U/S 271(1)(C) CANNOT BE LEVIED. HE THEREFORE SUBMIT TED THAT PENALTY LEVIED BY AO BE DELETED. LD.D.R. ON THE OTHER HAN D, SUPPORTED THE ORDER OF LOWER AUTHORITIES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPEC T TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. IN THE PRESENT CASE, PEN ALTY HAS BEEN LEVIED ON THE DISALLOWANCE OF AUDIT FEE AND SPECIAL RESERV E U/S 36(1)(VIII) OF THE ACT. THE PERUSAL OF ASSESSMENT ORDER PASS ED U/S 143(3) OF THE ACT REVEALS THAT AO HAD INITIATED PENALTY PRO CEEDING BUT NO SATISFACTION WAS RECORDED. THEREAFTER IN THE PENALTY O RDER PASSED U/S 271(1)(C) OF THE ACT, AO HELD THAT ASSESSEE HAD CONCE ALED PARTICULARS OF INCOME BY FURNISHING INACCURATE PARTICULARS OF INCOME U/S 271(1)(C) OF THE ACT. IT IS A SETTLED LAW THAT WHILE LE VYING PENALTY FOR CONCEALMENT, THE AO HAS TO RECORD SATISFACTION AND TH EREAFTER COME TO A FINDING IN RESPECT OF ONE OF THE LIMBS, WHICH IS SPECIFIED UNDER SECTION 271(1)(C) OF THE ACT. THE FIRST STEP IS TO RECORD SA TISFACTION WHILE COMPLETING THE ASSESSMENT AS TO WHETHER THE ASSES SEE HAD CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THEREAFTER, NOTICE U/S 274 READ WITH SECTION 271(1)(C) OF THE ACT IS TO BE ISSUED TO THE ASSESSEE. THE ASSESSING OFFICER THEREAFT ER HAS TO LEVY PENALTY UNDER SECTION 271(1)(C) OF THE ACT FOR NON-SATISFACTIO N OF EITHER OF THE LIMBS. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER HAS TO COME TO A FINDING AS TO WHETHER THE ASSESSEE HA S CONCEALED ITS 5 INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE H ONBLE BOMBAY HIGH COURT IN CIT VS. SHRI SAMSON PERINCHERY IN IT A NO.1154 OF 2014 WITH OTHER ITA NOS.953 OF 2014, 1097 OF 2014 AND 1226 OF 2014, VIDE JUDGMENT DATED 05.01.2017 HELD THAT WHERE INITIA TION OF PENALTY IS ONE LIMB AND THE LEVY OF PENALTY IS ON OTHER LIM B, THEN IN THE ABSENCE OF PROPER SHOW CAUSE NOTICE TO THE ASSESSEE, T HERE IS NO MERIT IN LEVY OF PENALTY. 9. IN THE PRESENT CASE, AS NOTED HEREINABOVE, IT IS SEEN THAT THE AO HAS NOT RECORDED ANY SATISFACTION AND FURTHER LEVIED PENA LTY ON BOTH THE LIMBS I.E., FOR CONCEALMENT OF INCOME AND FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. CONSIDERING THE AFORESAID FACTS IN THE LIGHT OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN TH E CASE OF SAMSON PERINCHERY (SUPRA), WE ARE OF THE VIEW THAT IN THE PRESENT CASE THE BASIC CONDITION FOR LEVY OF PENALTY HAS NOT BEEN FULFILLED A ND THAT THE PENALTY ORDER SUFFERS FROM NON-EXERCISING OF JURISDICT ION POWER OF AO AND THEREFORE PENALTY ORDER CANNOT BE UPHELD. WE A CCORDINGLY SET ASIDE THE PENALTY ORDER PASSED BY AO. THUS, THE GROUND OF ASSESSEE IS ALLOWED. 10. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 20 TH DAY OF DECEMBER, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 20 TH DECEMBER, 2017. YAMINI 6 #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-1, NASHIK. PR.CIT, NASHIK. '#$ %%&',) &', / DR, ITAT, B PUNE; $+,-/ GUARD FILE. / BY ORDER // TRUE COPY // ./0%1&2 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.