ACIT, CIRCLE-4, Nagpur V. M/S. VIGNAHARTA INVESTMENT & FINANCE COMPANY PVT. LTD., Nagpur

ITA 48/NAG/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9228 (ITAT-NAGPUR)
• Duration Of Justice: 4 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 09-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K BARAL
• Assessee Lawyers: K K THAKAR
• Keywords: Principle of natural justice; Revenue expenditure
• Section: 271(1)(c)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 48 /NAG /201 5 / ASSESSMENT YEAR : 20 0 7 - 08 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 4, NAGPUR ....... / APPELLANT / V/S. M/S. VIGNAHARTA INVESTMENT & FINANCE COMPANY PVT. LTD., C.A. ROAD, DESHPANDE LAYOUT, NAGPUR PAN : AAACV5915G / RESPONDENT ASSESSEE BY : S HRI K.K. THAKAR REVENUE BY : SHRI R.K. BARAL / DATE OF HEARING : 2 8 - 03 - 2019 / DATE OF PRONOUNCEMENT : 29 - 03 - 201 9 / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - II, NAGPUR DATED 12 - 11 - 2014 FOR THE ASSESSMENT YEAR 2007 - 08 ASSAILING DELETING OF PENALTY LEVIED U/S. 271(1)(C) O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2 ITA NO . 48/NAG/2015, A.Y. 2007 - 08 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORDS ARE : THE ASSESSEE IS A SHARE BROKER. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER INTER ALIA MADE ADDITION OF RS.98,00,000/ - U/S. 28(VA)(B) OF THE ACT. THE ASSESSING OFFICER ALSO INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) IN RESPECT OF AFORESAID ADDITION. THEREAFTER, THE ASSESSING OFFICER VIDE ORDER DATED 29 - 07 - 201 3 PASSED U/S. 271(1)(C) LEVIED PENALTY OF RS.28,45,624/ - . AGGRIEVED AGAINST THE ORDER LEVYING PENALTY, THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) PLACING RELIANCE OF HONBLE SUPRE ME COURT OF INDIA IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. REPORTED AS 322 ITR 158 AND THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ELECTROLUX KELVINATOR LTD. REPORTED AS 357 ITR 665 DELETED THE PENALTY. HENCE, THE PRESENT APPEAL BY THE REVENUE. 3. SHRI K.K. THAKAR APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL THE ASSESSEE HAD RECEIVED NON COMPETE FEES. THE ASSESSEE CAPITALIZED THE SAME. HOWEVER, THE ASSESSIN G OFFICER HELD THE SAME AS REVENUE RECEIPT AND MADE ADDITION IN THE INCOME RETURNED. P ENALTY U/S. 271(1)(C) WAS ALSO LEVIED ON THE SAID ADDITION. THE LD. AR SUBMITTED THAT HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ELE CTROLUX KELVINATOR LTD. (SUPRA) DELETED LEVY OF PENALTY U/S. 271(1)(C) HOLDING NON COMPETE FEES AS REVENUE EXPENDITURE OR CAPITAL 3 ITA NO . 48/NAG/2015, A.Y. 2007 - 08 EXPENDITURE IS DEBATABLE ISSUE, HENCE, PENALTY COULD HAVE BEEN IMPOSED ON SUCH ADDITION. 3.1 THE LD. AR FURTHER RAISED LEGAL ISSUE THAT THE PENALTY ORDER IS LIABLE TO BE QUASHED ON THE GROUND OF DEFECT IN RECORDING OF PROPER SATISFACTION FOR INITIATING PENALTY PROCEEDINGS. THE LD. AR SUBMITTED THAT IN THE ASSESSMENT ORDER WHILE INITIATING PENALTY THE ASSESSING OFFICER HAS NOT MENTIONED ANY CHARGE U/S. 271( 1)(C) FOR WHICH PENALTY PROCEEDINGS ARE INITIATED. WHEREAS, WHILE PASSING THE ORDER LEVYING PENALTY U/S. 271(1)(C) THE PENALTY IS BEING LEVIED FOR CONCEALMENT. THE LD. AR SUBMITTED THAT IN THE LIGHT OF DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MANJUNATHA COTTON & GINNING FACTORY REPORTED AS 359 ITR 565 THE ASSESSING OFFICER WAS REQUIRED TO SPECIFY THE CHARGE FOR WHICH PENALTY PROCEEDINGS ARE BEING INITIATED. 4. ON THE OTHER HAND SHRI R.K. BARAL REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE ASSESSMENT ORDER AND PRAYED FOR REVERSING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) DELETING THE PENALTY . 5. W E HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDE RS OF AUTHORITIES BELOW. THE ASSESSEE HAS NOT FILED CROSS OBJECTIONS OR FORMAL APPLICATION UNDER RULE 27 OF THE APPELLATE TRIBUNAL RULES, 1963. THE LD. AR HAS RAISED LEGAL GROUND ORALLY POINTING 4 ITA NO . 48/NAG/2015, A.Y. 2007 - 08 DEFECT IN THE MANNER OF RECORDING SATISFACTION FOR INITIATI NG PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. SINCE, THE LEGAL GROUND RAISED BY THE LD. AR GOES TO THE ROOT OF ISSUE THE SAME IS ADMITTED FOR ADJUDICATION. 6. A PERUSAL OF ASSESSMENT ORDER REVEAL THAT THE PENALTY PROCEEDINGS U/S. 271(1)(C) HAVE BEE N INITIATED IN RESPECT OF SINGLE ADDITION I.E. ADDITION MADE ON ACCOUNT OF NON COMPETE FEES BY TREATING THE SAME AS REVENUE RECEIPT. WHILE INITIATING PENALTY PROCEEDINGS THE ASSESSING OFFICER HAS NOT SPECIFIED THE CHARGE U/S. 271(1)(C) I.E. WHETHER THE PENALTY PROCEEDINGS ARE INITIATED FOR CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME , HAS NOT BEEN SPECIFICALLY MENTIONED BY THE ASSESSING OFFICER . THEREAFTER, WHILE LEVYING PENALTY , THE ASSESSING OFFICER LEVIED PENALTY ON THE CH ARGE OF CONCEALMENT OF INCOME. IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MANJUNATHA COTTON & GINNING FACTORY (SUPRA) , THE HONBLE HIGH COURT HELD THAT THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, THE PRINCIPLE OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. 7 . I N VIEW OF THE LAW LAID DOWN BY THE HONBLE HIGH COURT UNLESS THE CHARGE U/S. 271(1)(C) ON WHICH THE ASSESSING OFFICER INTENDS TO LEVY PENA LTY IS CONVEYED TO THE ASSESSEE , T HE PENALTY PROCEEDINGS WOULD FAIL THE TEST OF JUDICIAL SCRUTINY. THUS, IN VIEW OF SETTLED LEGAL POSITION , THE PENALTY ORDER IS LIABLE TO BE QUASHED ON ACCOUNT OF LEGAL DEFICIENCY IN NOT MENTIONING THE 5 ITA NO . 48/NAG/2015, A.Y. 2007 - 08 CHARGE U/S. 271(1)(C ) AT THE TIME OF RECORDING SATISFACTION. WE HOLD AND DIRECT ACCORDINGLY. 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 29 TH DAY OF MARCH, 2019. SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / NAGPUR ; / DATED : 29 TH MARCH, 2019. RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - II, NAGPUR 4. / THE CIT - III/IV, NAGPUR 5. , , , / DR, ITAT, NAGPUR BENCH, NAGPUR . 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, NAGPUR