Eagle Flask Industries Pvt.Ltd, Pune V. Deputy Commissioner of Income tax, Pune

ITA 474/PUN/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7858 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 02-09-2021
• Assessment Year: 2004-2005
• Appeal Filed On: 24-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rectification of order; Reasonable cause
• Section: 271(1)(c); 143(3); 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH, B PUNE VIRTUAL COURT BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER . / ITA NOS.474 & 2000/PUN/2017 / ASSESSMENT YEAR : 2004-05 EAGLE FLASK INDUSTRIES PVT. LTD., 4 TH FLOOR, PARMAR GALLERY, SHIVARKAR ROAD, WANOWARI, PUNE 411 047 PAN : AAACE4197M VS. D CIT, CIRCLE-8, PUNE/ DCIT, CIRCLE -14, PUNE APPELLANT RESPONDENT / ORDER PER R.S.SYAL, VP : THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST T WO SEPARATE ORDERS PASSED BY THE CIT(A)-6, PUNE ON 30-12- 2016 CONFIRMING THE PENALTY OF RS.3.20 CRORE IMPOSED BY THE A SSESSING OFFICER (AO) U/S.271(1)(C) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED THE ACT) IN RELATION TO THE ASSESSMENT YEAR 2004 -05. ITA NO.474/PUN/2017 : 2. THE FIRST GROUND TAKEN BY THE ASSESSEE IS AGAINST THE CONFIRMATION OF PENALTY WHICH WAS LEVIED BY THE AO WITHOUT ANY SPECIFIC CHARGE OF EITHER CONCEALMENT OR FURNISHING OF INA CCURATE PARTICULARS OF INCOME. ASSESSEE BY SHRI M.K. KULKARNI REVENUE BY SHRI T. VIJAYA BHASKAR REDDY DATE OF HEARING 02-09-2021 DATE OF PRONOUNCEMENT 02-09-2021 ITA NOS.474 AND 2000/PUN/2017 EAGLE FLASK INDUSTRIES PVT. LTD., 2 3. WE HAVE HEARD BOTH THE SIDES THROUGH VIRTUAL COURT AND G ONE THROUGH THE RELEVANT MATERIAL ON RECORD. SHORN OF UNNECESS ARY DETAILS, THE PRIMARY ISSUE IS WHETHER THE LEVY OF PENALTY ON ACCOUN T OF WRONG STRIKING OUT OF THE INAPPLICABLE LIMB OF SECTION 271(1)(C) OF THE ACT FROM THE NOTICE ISSUED U/S.274 IS DETRIMENTAL TO THE IMPOSITION O F THE PENALTY. INDUBITABLY, THERE CAN BE A CASE INVOLVING BOTH THE CHARGES, VIZ., SOME OF THE ADDITIONS OR DISALLOWANCE FALLING UNDER THE LI MB OF `CONCEALMENT OF INCOME, WHILE OTHERS UNDER `FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN SUCH A SITUATION, THERE IS NO NEED TO STRIKE OFF ANY OF THE TWO. 4. BEFORE TESTING THE CONTENTION OF THE ASSESSEE UNDER LA W, IT IS SIGNIFICANT TO FIND OUT THE DETAILS OF ADDITIONS/DISALLOWANCE CULMINATING INTO PENALTY FOR DETERMINING, IF THESE FALL UNDER A NY ONE OR BOTH OF THE LIMBS. ON PERUSAL OF THE PENALTY ORDER, IT C AN BE SEEN THAT THE PENALTY HAS BEEN IMPOSED WITH REFERENCE TO DISALLOWAN CE U/S.43B; PROVISIONS MADE FOR UNPAID OCTROI DUTY; EXCESS DEP RECIATION; DISALLOWANCE OF ADVERTISEMENT AND SALES PROMOTION EXPENSES; S UNDRY BALANCES OF DEBTORS AND ADVANCES WRITTEN OFF. IT IS THUS V IVID THAT NONE OF THE ITEMS OF ADDITIONS RELATES TO `CONCEALMENT OF INCO ME AND ALL THE ITEMS FALL UNDER THE CATEGORY OF `FURNISHING OF INACCU RATE PARTICULARS OF INCOME. ITA NOS.474 AND 2000/PUN/2017 EAGLE FLASK INDUSTRIES PVT. LTD., 3 5. A COPY OF NOTICE U/S 274 OF THE ACT DATED 26-12-20 06 HAS BEEN PLACED AT PAGE 28 OF THE PAPER BOOK IN WHICH BOTH THE LIMB S, NAMELY, CONCEALING THE PARTICULARS OF INCOME OR FURNISHING OF INACCUR ATE PARTICULARS OF INCOME ARE PRESENT. IN OTHER WORDS, THERE IS NO STRIKING OUT OF THE IRRELEVANT LIMB OF THE PENALTY. THEREAFTER, THE P ENALTY ORDER CAME TO BE PASSED BY THE AO ON 30-03-2010. IN THE FIRST PARA ITSELF, THE AO AGAIN OBSERVED THAT THE PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T. ACT 1961 VIDE NOTICE DATED 26/12/2 006 WAS SEPARATELY INITIATED FOR CONCEALMENT OF INCOME AND FILING INACCURATE PARTICULARS OF INCOME . THE PENALTY ORDER WAS EVENTUALLY PASSED BY NOTICING THAT THE ASSESSEE HAS COMMITTED THE DEFAULT WITHIN THE MEANING OF SECTION 271(1)(C) OF THE I.T. ACT, 1961, WITHOU T ANY REASONABLE CAUSE. IT IS THUS MANIFEST THAT THE AO NOT ONLY INITIATED THE PENALTY BY MEANS OF NOTICE U/S.274 R.W.S. 271(1)(C) WITHOUT GIVING A SPECIFIC CHARGE BUT ALSO LEVIED THE PENALTY UNDER THE SAME VAGUE COMBINED CHARGE OF BOTH THE LIMBS. 6. RECENTLY, THE FULL BENCH OF HONBLE BOMBAY HIGH COURT IN MOHD. FARHAN A. SHAIKH VS. DY.CIT (2021) 125 TAXMANN.C OM 253 (BOM) HAS CONSIDERED THIS VERY ISSUE. ANSWERING THE QUESTION IN AFFIRMATIVE, THE FULL BENCH HELD THAT A DEFECT IN NOTICE OF NOT STR IKING OUT THE IRRELEVANT WORDS VITIATES THE PENALTY EVEN THOUGH THE AO HAD ITA NOS.474 AND 2000/PUN/2017 EAGLE FLASK INDUSTRIES PVT. LTD., 4 PROPERLY RECORDED THE SATISFACTION FOR IMPOSITION OF PENALTY IN THE ORDER U/S 143(3) OF THE ACT. IN ANOTHER JUDGMENT, THE HON BLE BOMBAY HIGH COURT IN PR.CIT VS. GOLDEN PEACE HOTELS AND RESORTS (P.) LTD. (2021) 124 TAXMANN.COM 248 (BOM) ALSO TOOK SIMILAR VIEW THAT WHERE INAPPLICABLE PORTIONS WERE NOT STRUCK OFF IN THE P ENALTY NOTICE, THE PENALTY WAS VITIATED. THE SLP OF THE DEPARTMENT AGA INST THIS JUDGMENT HAS RECENTLY BEEN DISMISSED BY THE HON'BLE SU PREME COURT IN PR.CIT VS. GOLDEN PEACE HOTELS AND RESORTS (P.) LTD. (2021) 124 TAXMANN.COM 249 (SC). 7. IN VIEW OF THE OVERWHELMING LEGAL POSITION, IT IS CLEAR THAT WHERE THE CHARGE IS NOT PROPERLY SET OUT IN THE NOTICE U/S 274, VIZ. , BOTH THE LIMBS STAND THEREIN WITHOUT STRIKING OFF OF THE INAPPLICABLE LIMB , THE PENALTY ORDER GETS VITIATED. TURNING TO THE FACTS OF THE EXTANT C ASE, WE FIND FROM THE NOTICES U/S 274 OF THE ACT THAT THE AO DID NOT STR IKE OUT THE IRRELEVANT LIMB AND FURTHER COMMITTED THE SAME MISTAKE IN THE PENALTY ORDER AS WELL. RESPECTFULLY FOLLOWING THE FULL BENCH JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT, WE OVERTURN TH E IMPUGNED ORDER ON THIS LEGAL ISSUE AND DIRECT TO DELETE THE P ENALTY. 8. IN THE RESULT, THE APPEAL IS ALLOWED. ITA NOS.474 AND 2000/PUN/2017 EAGLE FLASK INDUSTRIES PVT. LTD., 5 ITA NO.2000/PUN/2017 9. THIS IS AN APPEAL AGAINST THE ORDER PASSED BY THE CIT( A) PURSUANT TO THE RECTIFICATION ORDER U/S.154 OF THE ACT. IN VIEW OF OUR DECISION IN DELETING THE PENALTY IN ITA NO.474/PUN/2017, THE INSTANT APPEA L HAS BEEN RENDERED INFRUCTUOUS. THE SAME IS, THEREFORE, DISMISSED. 10. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02 ND SEPTEMBER, 2021. SD/- SD/- ( S.S. VISWANETHRA RAVI ) (R.S.SYAL) JUDICIAL MEMBER VIC E PRESIDENT PUNE; DATED : 02 ND SEPTEMBER, 2021 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE CIT(A)-6, PUNE 3. THE PR.CIT-5, PUNE 4. 5. DR, ITAT, B BENCH, PUNE / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR P RIVATE SECRETARY , / ITAT, PUNE ITA NOS.474 AND 2000/PUN/2017 EAGLE FLASK INDUSTRIES PVT. LTD., 6 DATE 1. DRAFT DICTATED ON 02-09-2021 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 02-09-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *