Shri Sanjay Mittra, New Delhi V. DCIT, New Delhi

ITA 5206/DEL/2016

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 7297 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 03-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: ASHOK KUMAR JAIN
• Keywords: Search and seizure; Salary income; Principle of natural justice; Question of law; Initiation of penalty proceedings
• Section: 153A; 27; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.5206/DEL/2016 ASSESSMENT YEAR : 2009-10 SANJAY MITTRA, G-25, GREEN PARK, NEW DELHI. VS. DCIT, CENTRAL CIRCLE- 26, NEW DELHI. PAN : AAGPM2907G (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHOK KUMAR JAIN, CA DEPARTMENT BY : SHRI S. S. RANA, CIT-DR DATE OF HEARING : 10-09-2018 DATE OF PRONOUNCEMENT : 01-10-2018 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 03.08.2016 OF THE CIT(A)- 29, NEW DELHI RELATING TO ASSESSMENT YEAR 2009-10. 2. GROUNDS RAISED BY THE ASSESSEE READ AS UNDER :- 1. THAT THE ORDER OF LD. CIT(A) CONFIRMING THE ACT ION OF LD. AO IN LEVYING PENALTY U/S 271(1)(C) IS AGAINST THE PROVISIONS OF LAW, FAC TS, CIRCUMSTANCES, PRINCIPLE OF NATURAL JUSTICE AS SUCH DESERVES TO BE QUASHED. 2. THAT LD. CIT(A) HAS ERRED IN LAW IN CONFIRMING P ENALTY U/S 271(1)(C) LEVIED BY LD. AO WHICH IS ARBITRARY AND CONTRARY TO PROVISION S OF LAW AS SHOW CAUSE NOTICE ISSUED BY LD. AO IS GENERAL IN NATURE WITHOUT MENTI ONING SPECIFIC CHARGE FOR IMPOSITION OF PENALTY. 3. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMI NG PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 AMOUNTING TO RS.3,79,637/- LEV IED BY LD. AO WHICH IS ARBITRARY, PERVERSE, WHIMSICAL AND CONTRARY TO FACT S AND PROVISIONS OF LAW AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE AS SUCH ACTION OF LD. CIT(A) NEEDS TO BE UNDONE AND PENALTY OF RS.3,79,637/- LEVIED BY LD. AO DESERVES TO BE DELETED. 4. THAT APPELLANT CRAVES RIGHT TO AMEND, ADD, DELET E OR WITHDRAW ANY OF THE GROUND OF APPEAL EITHER BEFORE OR AT THE TIME OF HE ARING OF THIS APPEAL. 2 ITA NO.5206/DEL/2016 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND DERIVES INCOME FROM SALARY, HOUSE RENT AND INCOME F ROM OTHER SOURCES. HE FILED HIS RETURN OF INCOME ON 30.07.2009 DECLARING TOTAL INCOME OF RS.40,25,560/-. IN THIS CASE, A SEARCH AND SEIZURE OPERATION U/S 132 O F THE I.T. ACT, 1961 WAS CARRIED OUT ON 20.01.2012. IN RESPONSE TO NOTICE U /S 153A, THE ASSESSEE FILED HIS RETURN OF INCOME ON 10.10.2013 DECLARING TOTAL INCO ME OF RS.43,95,120/-. IN THE COMPUTATION OF INCOME FILED ALONG WITH RETURN OF IN COME, THE ASSESSEE HAS SUBMITTED AS UNDER :- THE OTHER INCOME OF RS.1,50,000/- DECLARED UNDER T HE HEAD INCOME FROM OTHER SOURCES IS TO COVER UP ANY ADDITION ON ACCOUNT OF ANY ENTRY IN THE SEIZED MATERIAL SEIZED ON ACCOUNT OF SEARCH. 4. SINCE THE ASSESSEE HIMSELF ADMITTED OF HAVING EA RNED INCOME TO THE TUNE OF RS.1,50,000/- AND HAS DECLARED THE SAME UNDER TH E HEAD INCOME FROM OTHER SOURCES, THE ASSESSING OFFICER HELD THAT THE ASSES SEE IS LIABLE FOR PENALTY U/S 271AAA ON THE UNDISCLOSED INCOME OF RS.1,50,000/-. SIMILARLY, SINCE THE ASSESSEE HAD DECLARED INCOME OF RS.43,95,120/- IN T HE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 153A AS AGAINST THE ORIGINAL INCOME OF RS.40,25,560/-, THE ASSESSING OFFICER HELD THAT THE ASSESSEE WOULD NOT HAVE DISCLOSED THIS ADDITIONAL INCOME OF RS.3,69,560/- HAD THERE BEEN N O SEARCH. HE, THEREFORE, INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) ON THIS AMOUNT. THE ASSESSING OFFICER FURTHER NOTICED THAT A DIARY WAS FOUND DURI NG THE COURSE OF SEARCH WHICH WAS MARKED AS A-4. SINCE THE ASSESSEE COULD NOT RE CONCILE THE ENTRIES FOUND IN 3 ITA NO.5206/DEL/2016 THE DIARY SO SEIZED AND COULD NOT GIVE ANY EXPLANAT ION, THE ASSESSING OFFICER MADE ADDITION OF RS.8,97,350/-. THUS, THE ASSESSIN G OFFICER DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.52,92,470/-. 5. SUBSEQUENTLY, THE ASSESSING OFFICER INITIATED PE NALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT. REJECTING THE VARIOUS E XPLANATIONS GIVEN BY THE ASSESSEE, THE ASSESSING OFFICER LEVIED PENALTY OF R S.4,30,622/- U/S 271(1)(C) BEING THE MINIMUM PENALTY AT THE RATE OF 100% OF TH E TAX SOUGHT TO BE EVADED. 6. IN THE APPEAL, THE LD. CIT(A) CONFIRMED THE PENA LTY SO LEVIED BY THE ASSESSING OFFICER. 7. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 8. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, REFERRED TO THE NOTICE ISSUE U/S 274 R.W.S. 271 DATED 31.03.2017 AND SUBMITTED T HAT THE INAPPROPRIATE WORDS IN THE SAID NOTICE HAVE NOT BEEN STRUCK OFF. THERE FORE, IT IS NOT UNDERSTOOD AS TO UNDER WHICH LIMB OF PROVISIONS OF SECTION 271(1)(C) THE ASSESSING OFFICER HAS LEVIED PENALTY SINCE THE SAID SHOW-CAUSE NOTICE ISS UED U/S 274 DID NOT SPECIFY THE CHARGE AGAINST THE ASSESSEE AS TO WHETHER IT WA S FOR CONCEALING THE PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THEREFORE, THE PENALTY ORDER PASSED U/S 271(1)(C) I N PURSUANCE TO THE SAID NOTICE DESERVES TO BE SET-ASIDE. FOR THE ABOVE PROPOSITIO N, HE RELIED ON THE FOLLOWING DECISIONS :- 4 ITA NO.5206/DEL/2016 I. SSAS EMERALD MEADOWS 242 TAXMAN 180. II. DILIP N SHROFF, 291 ITR 519. III. MANJUNATHA COTTON & GINNING FACTORY, 359 ITR 565. IV. SAMSON PERINCHERY, 392 ITR 4. V. SAHIWAL INVESTMENT & TRADING CO., ITA NO.4913/D EL/2015 DATED 18.07.2018. VI. DR. SARITA MILIN DAVARE, 184 TTJ 9. VII. JEETMAL CHORARIA, 91 TAXMANN.COM 311. VIII. SHRI SACHIN ARORA, ITA NO.118/AGRA/2015 DATE D 19.12.2017. 9. REFERRING TO THE FOLLOWING DECISIONS, HE SUBMITT ED THAT THE SHOW-CAUSE NOTICE U/S 274 IS A MANDATORY NOTICE WITHOUT WHICH THE INITIATION OF PENALTY PROCEEDINGS WOULD BECOME NON-EST IN THE EYE OF THE LAW AND THE CHARGE SHOULD BE SPECIFIC IN SAID NOTICE. IN ABSENCE OF THE SAME , THE NOTICE WILL BE INVALID EVEN IF THERE IS SPECIFIC CHARGE IN ASSESSMENT ORDE R AND PENALTY ORDER PASSED BY THE ASSESSING OFFICER :- I. SHRI SACHIN ARORA, ITA NO.118/AGRA/2015 DATED 19 .12.2017. II. DR. SARITA MILIND DAVARE, 184 TTJ 9. III. PENNZOIL QUAKER STATE INDIA LTD., ITA 7386/MU M/2014 DATED 12.01.2018. IV. KWALITY LTD., ITA NO.150/KOL/2017 DATED 04.04. 2018. 10. HE ACCORDINGLY SUBMITTED THAT THE PENALTY LEVIE D BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) SHOULD BE CANCELLED . 11. THE LD. DR ON THE OTHER HAND STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). REFERRING TO THE DECISION OF THE HONBLE M ADRAS HIGH COURT IN THE CASE OF SUNDARAM FINANCE LTD. VS. CIT REPORTED IN 403 IT R 407, HE SUBMITTED THAT THE HON'BLE HIGH COURT IN THE SAID DECISION HAS HEL D THAT WHERE NOTICE DID NOT SHOW NATURE OF DEFAULT, IT WAS A QUESTION OF FACT. THE ASSESSEE HAD UNDERSTOOD THE PURPORT AND IMPORT OF NOTICE AND HENCE NO PREJU DICE WAS CAUSED TO THE 5 ITA NO.5206/DEL/2016 ASSESSEE. THE HON'BLE HIGH COURT WHILE REFERRING T O THIS DECISION HAS CONSIDERED THE DECISION OF THE HONBLE KARNATAKA HI GH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY REPORTED IN 359 ITR 565. 12. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SMT. KAUSHALYA REPORTED IN 216 ITR 660 H E SUBMITTED THAT THE HON'BLE HIGH COURT IN THE SAID DECISION HAS HELD TH AT MERE MISTAKE IN LANGUAGE USED OR MERE NON-STRIKING OFF OF INACCURATE PORTION CANNOT BY ITSELF INVALIDATE THE NOTICE U/S 274 OF THE I.T. ACT. IT WAS ACCORDI NGLY HELD THAT THE PENALTY ORDERS PASSED BY THE ITO FOR ASSESSMENT YEARS 1968- 69 TO 1969-70 WERE PERFECTLY VALID AND THERE WAS NO JUSTIFICATION FOR QUASHING THE SAME ON GROUND OF ABSENCE OF JURISDICTION. HE ALSO RELIED ON VARI OUS OTHER DECISIONS TO THE PROPOSITION THAT MERE NON-STRIKING OFF OF INAPPROPR IATE WORDS DOES NOT INVALIDATE THE PENALTY PROCEEDINGS. 13. THE LD. COUNSEL FOR THE ASSESSEE, IN HIS REJOIN DER, SUBMITTED THAT IF TWO VIEWS ARE POSSIBLE ON AN ISSUE, THE VIEW WHICH IS F AVOURABLE TO THE ASSESSEE HAS TO BE FOLLOWED. FOR THE ABOVE PROVISION, HE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF VEGETABLE PROD UCTS LIMITED REPORTED IN 88 ITR 192. REFERRING TO FOLLOWING DECISIONS, HE S UBMITTED THAT SECTION 292BB WOULD NOT COME TO THE RESCUE OF THE REVENUE WHEN TH E NOTICE WAS NOT IN SUBSTANCE AND IN CONFORMITY WITH OR ACCORDING TO TH E INTENT OF THE I.T. ACT :- I. SHRI SACHIN ARORA, ITA NO.118/AGRA/2015 DATED 19 .12.2017. II. DR. SARITA MILIND DAVARE, 184 TTJ 9. III. SHRI K. PRAKASH SHETTY, ITA NO.265 TO 267/201 4 DATED 05.06.2014. 6 ITA NO.5206/DEL/2016 14. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE LD. CIT(A) BE SET-ASIDE AND THE PENALTY LEVIED U/S 271(1)(C) BE DELETED. 15. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ONLY ISSUE TO BE DECIDED IN THE GROUNDS OF APPEAL IS REGARDING THE SUSTAINABLE OF PENALTY LEVI ED U/S 271(1)(C) WHEN THE INAPPROPRIATE WORDS IN THE NOTICE ISSUED U/S 274 R. W.S. 271 HAVE NOT BEEN STRUCK OFF. A PERUSAL OF THE NOTICE ISSUED U/S 274 R.W.S. 271 DATED 31.03.2004 SHOWS THAT THE INAPPROPRIATE WORDS IN THE SAID NOTICE HAV E NOT BEEN STRUCK OFF AND IT IS A PRINTED NOTICE. EVEN THE LAST LINE OF THE SAID N OTICE ONLY SPEAKS OF SECTION 271 AND DOES NOT EVEN MENTION OF SECTION 271(1)(C) OF T HE I.T. ACT. WE FIND AN IDENTICAL ISSUE HAD COME UP BEFORE THIS BENCH OF TH E TRIBUNAL IN THE CASE OF SAHIWAL INVESTMENT & TRADING CO. VS. ITO VIDE ITA N O.4913/DEL/2015 FOR ASSESSMENT YEAR 2006-07 ORDER DATED 18.07.2018 TO W HICH BOTH OF US PARTIES. WE FIND THE TRIBUNAL IN THE SAID DECISION WHILE ALL OWING THE ADDITIONAL GROUND FILED BY THE ASSESSEE HAS DECIDED THE ISSUE IN FAVO UR OF THE ASSESSEE BY OBSERVING AS UNDER :- 12. ADDITIONAL GROUND NO. (II) IS RELATING TO ABSE NCE OF SPECIFIC CHARGE POINTING OUT IN THE NOTICE. IT IS PERTINENT TO NOTE HERE THA T THE PENALTY ORDER IS BASED ON FURNISHING OF INACCURATE PARTICULARS BUT THE NOTICE IS NOT SPECIFYING EXACTLY ON WHICH LIMB THE PENALTY U/S 271(1)(C) HAS BEEN INITIATED. FROM THE NOTICE DATED 30.06.2013 PRODUCED BY THE LD. AR DURING THE HEARING, IT CAN B E SEEN THAT THE ASSESSING OFFICER WAS NOT SURE UNDER WHICH LIMB OF PROVISIONS OF SECT ION 271 OF THE INCOME TAX ACT, 1961, THE ASSESSEE IS LIABLE FOR PENALTY. THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN CASE OF M/S SSA' EM ERALD MEADOWS. THE EXTRACT OF 7 ITA NO.5206/DEL/2016 THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN M/S. SSA' EMERALD MEADOWS ARE AS UNDER WHICH WAS CONFIRMED BY THE HON'BLE APEX CO URT: '3. THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY TH E ASSESSEE HOLDING THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTIO N 274 READ WITH SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'T HE ACT') TO BE BAD IN LAW AS IT DID NOT SPECIFY WHICH LIMB OF SECTION 271(1)(C) OF THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED I.E., WHETHER FOR CO NCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. THE TRIBUNAL, WHILE ALLOWING THE APPEAL OF THE ASSESSEE, HAS RELIED ON THE ITA NO. 4913/DEL/2015 DECISION OF THE DIVISION BENCH OF THIS COURT RENDER ED IN THE CASE OF COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON A ND GINNING FACTORY (2013) 359 ITR 565. 4. IN OUR VIEW, SINCE THE MATTER IS COVERED BY JUDG MENT OF THE DIVISION BENCH OF THIS COURT, WE ARE OF THE OPINION, NO SUBS TANTIAL QUESTION OF LAW ARISES IN THIS APPEAL FOR DETERMINATION BY THIS COU RT. THE APPEAL IS ACCORDINGLY DISMISSED.' THUS, ADDITIONAL GROUND NO. (II) OF THE ASSESSEE'S APPEAL IS ALLOWED. SINCE THE INCEPTION OF THE NOTICE ISSUED U/S 271(1)(C) HAS BE COME NULL AND VOID, THERE IS NO NEED TO COMMENT ON MERIT OF THE CASE. THE PENALTY U/S 27 1(1)(C) OF THE ACT IS QUASHED. 16. SINCE IN THE INSTANT CASE ALSO THE INAPPROPRIAT E WORDS IN THE PENALTY NOTICE HAS NOT BEEN STRUCK OFF AND THE NOTICE DOES NOT SPE CIFY AS TO UNDER WHICH LIMB OF THE PROVISIONS, THE PENALTY U/S 271(1)(C) HAS BEEN INITIATED, THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE PENALTY LEVIED U/S 271(1)(C) IS NOT SUSTAINABLE AND HAS TO BE DELETED. ALTHOUGH THE LD. DR HAS REL IED ON VARIOUS DECISIONS TO THE PROPOSITION THAT MERE NON-STRIKING OFF OF THE I NAPPROPRIATE WORDS WILL NOT INVALIDATE THE PENALTY PROCEEDINGS, HOWEVER, ALL TH ESE DECISIONS ARE OF NON- JURISDICTIONAL HIGH COURT DECISIONS. THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL RELIED ON BY THE LD. DR IS PRIOR TO THE DE CISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SSAS EMERALD M EADOWS (SUPRA) WHERE THE SLP FILED BY THE REVENUE HAS BEEN DISMISSED. S INCE THERE IS NO DECISION OF 8 ITA NO.5206/DEL/2016 THE JURISDICTIONAL HIGH COURT ON THIS ISSUE, THEREF ORE, WE FIND MERIT IN THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT I F TWO VIEWS ARE AVAILABLE ON A PARTICULAR ISSUE, THE VIEW WHICH IS FAVOURABLE TO T HE ASSESSEE HAS TO BE FOLLOWED IN THE LIGHT OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF VEGETABLE PRODUCTS LIMITED (SUPRA). WE, THEREFORE, SET-ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO CANCEL T HE PENALTY SO LEVIED. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 01 ST OCTOBER, 2018. SD/- SD/- (SUCHITRA KAMBLE) (R. K. P ANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 01-10-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI