OLEANDER FARMS P. LTD, NAVI MUMBAI V. DCIT CC 47, MUMBAI

ITA 5197/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1643 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2004-2005
• Appeal Filed On: 13-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ND GROUNDS RAISED
• Keywords: Principle of natural justice
• Section: 143(3); 27; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 5197/MUM/2014 ASSESSMENT YEAR 2004-05 M/S. OLEANDER FARMS P. LTD. D-73/1, TTC INDUSTRIAL AREA, MIDC ROAD, TURBHE, NAVI MUMBAI- 400 705. VS. THE DCIT,CC - 47, MUMBAI. PAN NO. AAA CO 6556 G APPELLANT ) .. RESPONDENT ) DATE OF HEARING: 23.11.2016 DATE OF PRONOUNCEMENT: 28.11.2 016 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2004-05. IT IS DIRECTED AGAINST THE ORDER OF COM MISSIONER OF INCOME TAX (APPEALS)-38, MUMBAI AND ARISES OUT OF THE ORDER U/ S. 271(1)(C ) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE 1 ST AND 2 ND GROUNDS RAISED BY THE ASSESSEE IN THIS APPEAL ARE THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE PENALTY OF RS. 25,09,949/- LEVIED BY THE ASSESSING OFFICER (AO) U/ S 271(1)(C) OF THE ACT . ALSO THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N CONFIRMING PENALTY ON DISALLOWANCE OF LOSS ON ACCOUNT OF DIMINUTION IN VA LUE OF SHARES OF RS. APPELLANT BY: SHRI. J.P. BAIRAGRA , AR RESPONDENT BY: MS. BEENA SANTOSH , DR ITA NO. 5197/MUM/2014 2 25,60,558/-. THE 3 RD GROUND IS THAT THE LD. CIT(A) HAS ERRED IN LAW AN D ON FACTS IN CONFIRMING PENALTY ON DISALLOWANCE OF LOSS RS. 44,35,817/-, WHICH ACCORDING TO THE AO WAS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. WHILE DOING SO, THE LD CIT(A) FAILED TO A PPRECIATE THAT THE SAID LOSS WAS DECLARED BY THE APPELLANT AS LOSS FROM AGRICUL TURAL ACTIVITIES AND THE SAME WAS EXCLUDED WHILE COMPUTING ITS INCOME. THE 4 TH GROUND IS THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT HOL DING THAT THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER U/S. 271(1)(C) OF T HE ACT WAS BAD IN LAW AS THE ASSESSMENT ORDER, ON THE BASIS OF WHICH THE PEN ALTY NOTICE WAS ISSUED, WAS NOT PASSED IN ACCORDANCE WITH THE PROVISIONS O F THE ACT. 3. IN A NUTSHELL, THE FACTS ARE THAT SEARCH AND SEI ZURE ACTION U/S 132(1) OF THE ACT WAS CARRIED OUT BY THE DEPARTMENT IN THE CASE OF FELMINGO/BERMACO GROUP ON 31/10/2009. THE ASSESSEE S CASE WAS COVERED U/S 153C OF THE ACT. THE ASSESSEE FILED ITS RETURN OF INCOME ON 11/08/2010 IN RESPONSE TO NOTICE U/S 153C OF THE ACT, DECLARIN G NIL INCOME. HOWEVER, IN THE COMPUTATION OF CAPITAL INCOME, THE ASSESSEE CLA IMED AGRICULTURAL LOSS OF RS. 44,35,817/-. THE AO COMPLETED THE ASSESSMENT U/ S 153C R.W.S 143(3) ON 27/12/2011 BY MAKING ADDITION ON ACCOUNT OF DIMI NUTION IN VALUE OF INVESTMENT OF RS. 25,60,558/- AND TREATING THE AGRI CULTURAL INCOME/ RECEIPTS AS INCOME FROM OTHER SOURCES. THEN THE AO IMPOSED A PENALTY OF RS. 25,09,949/- U/S 271(1)(C) VIDE ORDER DATED 28/0 6/2012. THE ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AGAINST THE ABOV E ORDER OF THE AO. THE LD. CIT(A) AGREED WITH THE REASONS STATED BY THE AO AND CONFIRMED THE SAID PENALTY. 4. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMI TS THAT IN THE PENALTY NOTICE ISSUED BY THE AO ALONG WITH THE ASSESSMENT O RDER DATED 27/12/2012, IT CAN BE SEEN THAT THE PENALTY IS INIT IATED IN A PRINTED FORM WHEREIN NEITHER THE WORDS CONCEALED THE PARTICULAR S INCOME OR FURNISHED INACCURATE PARTICULAR OF INCOME IS DELETED. HE FUR THER SUBMITS THAT NOTICE ITA NO. 5197/MUM/2014 3 U/S 274 OF THE ACT SHOULD SPECIFICALLY STATE THE GR OUNDS MENTIONED IN SECTION 271(1)(C), I.E., WHETHER IT IS FOR CONCEALM ENT OF INCOME OR FURNISHING OF INCORRECT PARTICULARS OF INCOME AND SENDING PRIN TED FORM WHERE ALL THE GROUNDS IN SECTION 271 ARE MENTIONED WOULD NOT SATI SFY REQUIREMENT OF LAW. HE STATES THAT THE ASSESSEE SHOULD KNOW THE GR OUNDS WHICH HE HAS TO MEET SPECIFICALLY, OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED AND ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. RELIANCE WAS PLACED BY HIM ON THE DECISION OF THE H ONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY & O THERS 359 ITR 565 AND THE ORDER OF THE TRIBUNAL IN THE CA SE OF SANGHAVI SAVLA COMMODITY BROKERS P. LTD. (ITA NO. 1746/MUM/2011) DATED 22 ND DECEMBER,2015 AND RAMESH PRASAD SAO VS. DCIT ( ITA NO. 997/KOL/2011) DATED 3 RD FEBRUARY,2012. THUS IT IS SUBMITTED BY THE LD. COU NSEL OF THE ASSESSEE THAT THE ORDER PASSED BY THE AO U/S 271(1) (C) IS BAD IN LAW AS THE NOTICE ISSUED U/S 274 R.W.S 271 OF THE ACT DID NOT SPECIFY WHETHER THE PENALTY WAS INITIATED FOR CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS THEREOF. 5. THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A) UPHOLDING THE PENALTY OF RS. 25,09,949/- IMPOSED BY THE AO U/S 27 1(1)(C) OF THE ACT. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE RELEVANT MATERIAL ON RECORD. WE FIND IN THE NOTICE U/S 274 R.W.S.271 DATED 27/12/2011, THE AO HAS MENTIONED HAVE CONCEALED TH E PARTICULARS OF YOUR INCOME ORFURNISHED INACCURATE PARTICULARS OF SUCH INCOME.' THE SAID NOTICE HAS BEEN FILED BY THE LD. COUNSEL OF TH E ASSESSEE IN THE PAPER BOOK WHICH IS AT PAGE 30. IN THE SAID NOTICE ISSUED BY THE AO, IT HAS BEEN MENTIONED AT BOTTOM THAT INAPPROPRIATE WORDS AND PA RAGRAPHS BE DELETED. STILL THE AO HAS NOT DELETED THE INAPPROPRIATE WORD S AND PARAGRAPHS. IT IS NOT SPELT OUT AS TO WHETHER PENALTY PROCEEDINGS ARE SOUGHT TO BE LEVIED FOR ITA NO. 5197/MUM/2014 4 FURNISHING INACCURATE PARTICULARS OF INCOME OR C ONCEALING PARTICULARS OF SUCH INCOME. THUS THERE IS MERIT IN THE CONTENTION S OF THE LD. COUNSEL OF ASSESSEE ON THE ABOVE FACT. 6.1 IN CIT VS . MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) , THE HONBLE KARNATAKA HIGH COURT HELD THAT NOTICE UNDER SECTIO N 274 OF THE ACT SHOULD SPECIFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(L)(C), I.E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCO RRECT PARTICULARS OF INCOME. THE ITAT H BENCH MUMBAI IN THE CASE OF SANGHAVI SAVLA COMMODITY BROKERS (P) LTD. (SUPRA) FOLLOWED THE ABOVE JUDGEMENT AND HELD THE PENALTY NOTICE U/S 274 R.W.S. 271 AND THE PENALTY PROCEEDIN GS AS INVALID. 6.2 IN THE CASE OF CIT V. MANU ENGG. WORKS [1980] 122 ITR 306, THE HONBLE GUJARAT HIGH HAS HELD : '...WE FIND FROM THE ORDER OF THE INSPECTING ASSIST ANT COMMISSIONER, IN THE PENALTY PROCEEDINGS, THAT IS, THE FINAL CONCLUSION AS EXPRESSED IN PARA 4 OF THE ORDER : I AM OF THE OPINION THAT IT WILL HAVE TO BE SAID THAT THE ASSESSEE HAD CONCEALED ITS INCOME AND/OR THAT IT HAD FURNISHED INACCURATE PART ICULARS OF SUCH INCOME. NOW, THE LANGUAGE OF AND/OR MAY BE PROPE R IN ISSUING A NOTICE AS TO PENALTY ORDER OR FRAMING OF CHARGE IN A CRIMINAL CASE OR A QUASI-CRIMINAL CASE, BUT IT WAS INCUMBENT UPON TH E INSPECTING ASSISTANT COMMISSIONER TO COME TO A POSITIVE FINDIN G AS TO WHETHER THERE WAS CONCEALMENT OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF SUCH INCOME HAD BEEN FURN ISHED BY THE ASSESSEE. NO SUCH CLEAR-CUT FINDING WAS REACHED BY THE INSPECTING ASSISTANT COMMISSIONER AND, ON THAT GROUND ALONE, T HE ORDER OF PENALTY PASSED BY THE INSPECTING ASSISTANT COMMISSI ONER WAS LIABLE TO BE STRUCK DOWN.' (P. 310) 6.3 IN NEW SORATHIA ENGG. CO VS. CIT [2006] 155 TAXMAN 513 (GUJ.), IT HAS BEEN HELD BY THE HONBLE GUJARAT HIGH COURT THAT WHERE PENALTY ORDER AND ORDER OF COMMISSIONER (APPEALS) SHOWED THAT NO CLEA R-CUT FINDING HAD BEEN REACHED AS TO WHETHER PENALTY UNDER SECTION 271(1)( C) WAS BEING LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME BY ASSESSEE OR WHETHER ANY INACCURATE ITA NO. 5197/MUM/2014 5 PARTICULARS OF INCOME HAD BEEN FURNISHED, ORDER OF PENALTY COULD NOT BE SUSTAINED. 6.4 IN CIT VS. SMT. KAUSHALYA [1994] 75 TAXMAN 549 (BOM.), THE HONBLE BOMBAY HIGH COURT HAS HELD THAT THE VAGUENESS AND AMBIGUITY IN THE NOTICE HAD ALSO PREJUDICED THE RIGHT OF REASONABLE OPPORTU NITY OF THE ASSESSEE SINCE HE DID NOT KNOW WHAT EXACT CHARGES HE HAD TO FACE. IN THIS BACKGROUND, QUASHING OF THE PENALTY PROCEEDINGS FOR THE ASSESSM ENT YEAR 1967-68 SEEMS TO BE FULLY JUSTIFIED. 7. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, WE H OLD THAT THE NOTICE DATED 27.12.2011 ISSUED BY THE AO U/S 274 R.W.S. 27 1 OF THE ACT FOR THE AY 2004-05 FOR INITIATING PENALTY PROCEEDING U/S 271(1 )(C) OF THE ACT IN THE PRESENT CASE IS INVALID. IN VIEW OF THE ABOVE, THE OTHER GROUNDS OF APPEAL RAISED BY THE ASSESSEE AGAINST THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT REQUIRE NO ADJUDICATION AT THIS STAGE. THE ORDER OF THE LD CIT(A) SUSTAINING THE PENALTY OF RS. 25,09,949/- IMPOSED BY THE AO U/S 27 1(1)(C) OF THE ACT IS THUS SET ASIDE. 8. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/11/2016 SD/- SD/ - (JOGINDER SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED:28/11/2016 ITA NO. 5197/MUM/2014 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI PRAMILA