CHANDULAL P. SHAH ( HUF), MUMBAI V. ACIT 20(1), MUMBAI

ITA 5656/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9212 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 17-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL LD
• Assessee Lawyers: PARESH SHAPARIA LD
• Keywords: Principle of natural justice
• Section: 143(3)

Judgement Text

ITA NO.5656/M/2015 CHANDULAL P.SHAH (HUF) ASSESSMENT YEAR-2007-08 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.5656/MUM/2015 ( / ASSESSMENT YEAR: 2007-08) CHANDULAL P.SHAH (HUF) EASTERN CHEMICALS, 6TH FLOOR 601-B, MORYA LANDMARK-II OSHIWARA LINK ROAD OPP. INFINITY MALL ANDHERI (WEST), MUMBAI-400 053 / VS. ASSISTANT COMMISSIONER O F INCOME TAX-20(1) MUMBAI 400 020 ! ./ ./PAN/GIR NO. AABHC-3234-M ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) A SSESSEE BY : PARESH SHAPARIA, LD. AR RE VENUE BY : RAJAT MITTAL, LD. DR / DATE OF HEARING : 27/09/2017 / DATE OF PRONOUNCEMENT : 04 /10/2017 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. BY WAY OF INSTANT APPEAL, THE ASSESSEE HAS CONTE STED CONFIRMATION OF LEVY OF PENALTY U/S 271(1)(C) FOR RS.6,98,797/- BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-36 [CIT(A)], MUMBAI APPEAL NO. CIT(A)-31/IT- ITA NO.5656/M/2015 CHANDULAL P.SHAH (HUF) ASSESSMENT YEAR-2007-08 2 44/ACIT 20(1)/13-14 DATED 19/10/2015. THE IMPUGNED PENALTY WAS LEVIED BY LD. ASSISTANT COMMISSIONER OF INCOME TAX-20(1), MUM BAI [AO], VIDE ORDER DATED 28/03/2013. IN THE ORIGINAL GROUNDS, THE ASSESSEE HAS CONTESTED THE PENALTY ON MERITS. HOWEVER, THE A SSESSEE, VIDE LETTER DATED 27/09/2017, HAS RAISED ADDITIONAL GROUNDS OF APPEAL WHICH CONTEST IMPOSITION OF PENALTY ON LEGAL GROUNDS. SINCE, THE SAME ARE LEGAL GROUNDS AND GOES TO THE ROOT OF THE MATTER AND ALSO DO NOT REQUIRE APPRECIATION OF NEW FACTS, THE SAME ARE TAKEN ON RE CORD AND DEALT WITH AT THE OUTSET. 2.1 FACTS LEADING TO THE IMPOSITION OF THE PENALTY ARE THAT THE ASSESSEE BEING RESIDENT HUF WAS ASSESSED FOR IMPUGNED AY U/S 143(3) ON 29/12/2009 AT RS.75,06,430/- AS AGAINST RETURNED IN COME OF RS.50,68,238/- E-FILED BY THE ASSESSEE ON 29/10/2007. THE ASSESSEE, INTER-ALIA, SUFFERED ADDITIONS / DISALLOWANCES ON ACCOUNT OF RETAINER-SHIP PAYMENT, COMMISSION PAYMENT AND ADVANCES WRITTEN OF F AGGREGATING IN ALL TO RS.23,29,324/- AGAINST WHICH THE PENALTY PRO CEEDINGS WERE INITIATED IN THE QUANTUM ASSESSMENT ORDER. THE QUAN TUM ADDITIONS HAVE SINCE BEEN CONFIRMED, FIRST BY LD. FIRST APPELLATE AUTHORITY AND THEREAFTER BY THIS TRIBUNAL. 2.2 IN THE MEANWHILE, THE PENALTY PROCEEDINGS WERE INITIATED AND THE FINALLY THE ASSESSEE HAS BEEN SADDLED WITH PENALTY OF RS.6,98,797/- VIDE LD. AO ORDER DATED 28/03/2013 WHERE THE ASSESSEE CO NTENDED THAT MERE DISALLOWANCE DONE NOT ATTRACT PENALTY. HOWEVER NOT CONVINCED, LD. AO IMPOSED THE IMPUGNED PENALTY WHICH WAS FURTHER C ONTESTED WITHOUT ANY SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER D ATED 19/10/2015. THE LD. CIT(A) CONFIRMED THE PENALTY BY FINDING THA T THE ASSESSEE COULD ITA NO.5656/M/2015 CHANDULAL P.SHAH (HUF) ASSESSMENT YEAR-2007-08 3 NOT FURNISH ANY SATISFACTORY EXPLANATION AGAINST TH E QUANTUM ADDITION OR COULD NOT SUBSTANTIATE THE EXPLANATION GIVEN. AGGRI EVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. THE LD. COUNSEL FOR ASSESSEE [AR], FIRST OF ALL, CONTESTED THE PENALTY PROCEEDINGS ON LEGAL GROUNDS BY DRAWING OUR ATTENTION TO LACK OF SATISFACTION BY LD. AO QUA INITIATION OF PENALTY IN THE QUANTUM ASSESSMENT ORDER. THE LD. AR FURTHER DREW OUR ATTEN TION TO SHOW-CAUSE NOTICE U/S 274 READ WITH SECTION 271 DATED 29/12/2009 AND CONTENDED THAT THE APPROPRIATE CLAUSE & LIMB HAS NOT BEEN TICKED-OFF IN THE NOTICE AND THEREFORE, THE SAME REFLECTS NON-APPLICATION OF MIND ON THE PART OF AO AND THE AO HIMSELF WAS NOT SURE ABOUT THE LIMB / EXACT CHARGE FOR WHICH THE ASSESSEE WAS BEING PENALIZED. THEREFORE, THE PENALTY ORDER STOOD VITIATED ON LEGAL GROUNDS AND HENCE, NEED TO BE QUASHED. RELIANCE HAS BEEN PLACED ON VARIOUS JUDICIAL PRONOU NCEMENTS FOR THIS CONTENTION. 4. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON SECTION 271(1B) TO CONTEND THAT MERE DIRECTION F OR INITIATION OF PENALTY IN THE ASSESSMENT ORDER CONSTITUTE DEEMED SATISFACT ION OF THE LD. AO AND SINCE THESE DIRECTIONS WERE ALREADY GIVEN IN TH E PRESENT CASE, THE PENALTY PROCEEDINGS WERE VALID IN ALL RESPECT AND T HEREFORE, THE SAME NEED TO BE CONFIRMED PARTICULARLY WHEN QUANTUM ASSE SSMENT HAS ALREADY BEEN UPHELD BY THE TRIBUNAL. 5. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD. A PERUSAL OF THE QUANTUM ASSES SMENT ORDER REVEALS THAT THE ASSESSEE HAS SUFFERED ADDITIONS OF VARIED NATURE AS DISCUSSED BY LD. AO FROM PARA-3 TO PARA-7 . HOWEVER, THE PENALTY HAS NOWHERE ITA NO.5656/M/2015 CHANDULAL P.SHAH (HUF) ASSESSMENT YEAR-2007-08 4 BEEN INITIATED BY LD. AO AGAINST THESE ADDITIONS. O NLY IN THE LAST PARA-9 , THE LD. AO HAS STATED THAT ISSUE NOTICE U/S. 271(1)(C) OF THE I.T.ACT, 1961. FURTHER, A PERUSAL OF SHOW-CAUSE NOTICE DATED 29/12/2009 ISSUED U/S. 274 READ WITH SECTION 271 REVEALS THAT THE APPROPRIATE CHARGE HAS NOT BEEN TICKED-OFF AND FURTHER, THE RELEVANT LIMB I.E. HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME HAVE NOT BEEN MARKED BY LD. AO . FINALLY, A PERUSAL OF PENALTY ORDER REVEALS THAT PENALTY HAS BEEN LEVIED BY LD. A O BY OBSERVING THAT UNDER THESE CIRCUMSTANCES, IT IS THEREFORE HELD TH AT THE ASSESSEE HAS DELIBERATELY AND CONSCIOUSLY ATTEMPTED TO CONCEALED ITS INCOME BY WAY OF FURNISHING INACCURATE PARTICULARS OF INCOME WITH IN THE MEANING OF SECTION 271(1)(C) OF THE I T ACT 1961. 6. UPON COMBINED READING OF AFORESAID FACTS, WE FIN D STRENGTH IN THE LEGAL GROUNDS RAISED BY LD. AR BECAUSE OF FEW REASO NS. FIRST OF ALL, PENALTY PROCEEDINGS ARE NOWHERE INITIATED BY LD. AO IN THE QUANTUM ASSESSMENT ORDER AND THE SAME CONTAINS A MERE DIREC TION TO ISSUE APPROPRIATE NOTICE WHICH IS A PROCEDURAL REQUIREMEN T AND THEREFORE SECTION 271(IB) COULD NOT HELP REVENUE IN ANY MANNE R. SECONDLY, IT IS WELL SETTLED LEGAL POSITION THAT FURNISHING OF INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME CARRY DIFFERENT CONNOTATIONS AND CONSTITUTE TWO DIFFERENT LIMBS. THE SAME ALSO BECO MES CLEAR FROM THE LANGUAGE OF SHOW-CAUSE NOTICE WHICH STATES THAT THE ASSESSEE HAS 'CONCEALED THE PARTICULARS OF INCOME' OR FURNISHED INACCURATE PARTICULARS OF INCOME. FINALLY, THE PENALTY HAS BEEN LEVIED FOR DELIBERAT E CONCEALMENT OF INCOME BY WAY OF FURNISHING OF INACC URATE PARTICULARS OF INCOME. THESE FACTS REVEAL INCONSISTENT THINKING ON THE PART OF LD. AO. ITA NO.5656/M/2015 CHANDULAL P.SHAH (HUF) ASSESSMENT YEAR-2007-08 5 UNDISPUTEDLY, THE AO WAS REQUIRED TO SPECIFY THE EX ACT CHARGE FOR WHICH THE ASSESSEE WAS BEING PENALIZED WHICH HE HAS FAILE D TO DO SO AND THE SAME HAS RESULTED INTO TAKING AWAY ASSESSEES VALUA BLE RIGHT OF CONTESTING THE SAME AND THEREBY VIOLATES THE PRINCI PLES OF NATURAL JUSTICE. 7. OUR VIEW IS FORTIFIED BY THE JUDGMENT OF HONBLE SUPREME COURT RENDERED IN DILIP N.SHROFF VS. JCIT (291 ITR 519) WHEREIN THE HONBLE COURT HAS OBSERVED THAT THE CONCEALMENT OF INCOME A ND FURNISHING OF INACCURATE PARTICULARS OF INCOME ARE DIFFERENT. THE HONBLE COURT FURTHER HELD THAT NON-STRIKING OFF OF THE RELEVANT PORTIONS OF STANDARD SHOW-CAUSE NOTICE REFLECTS NON-APPLICATION OF MIND BY AO AND H ENCE VITIATES THE PENALTY. WE ALSO FIND THAT THE RATIO OF THIS CASE W AS VERY MUCH RELEVANT AND VALID DESPITE THE JUDGMENT OF APEX COURT IN THE CASE OF CIT VS. DHARMENDRA TEXTILE PROCESSOR ( 306 ITR 277) IN VIEW OF ANOTHER JUDGMENT OF SUPREME COURT IN CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. [322 ITR 158] WHEREIN IT WAS OBSERVED THAT REASONING GIVEN IN THE CASE OF DILIP N.SHROFF COULD NOT BE FAULTED EXCEPT TO THE EXTENT OF OBSERV ATIONS REGARDING NECESSITY OF MENS-REA FOR THE PURPOSE OF SECTION 271(1)(C). 8. SIMILAR VIEW HAS BEEN TAKEN BY HONBLE KARNATAKA HIGH COURT IN CIT VS. MANJUNATHA COTTON & GINNING FACTORY [2013 3 59 ITR 565] WHICH WAS LATER FOLLOWED BY THE SAME COURT IN CIT VS. SSAS EMERALD MEADOWS [ITA NO. 380 OF 2015 23/11/2015] AGAINST WHICH SPECIAL LEAVE PETITION [SLP] FILED BY THE REVENUE BEFORE AP EX COURT IN CC NO.11485/2016 ORDER DATED 05/08/2016 WAS DISMISSED BY THE HONBLE COURT, FINDING NO MERITS IN THE CASE. FURTHER, HON BLE BOMBAY HIGH COURT HAS FOLLOWED THE RATIO OF SAME JUDGMENT IN CIT VS. SHRI SAMSON PERINCHERY [ITA NO. 1154 OF 2014 ORDER DATED 05/01/ 2017] AND FURTHER ITA NO.5656/M/2015 CHANDULAL P.SHAH (HUF) ASSESSMENT YEAR-2007-08 6 TRIBUNAL, IN CATENA OF JUDGMENT AND MORE PARTICULAR LY IN WADHWA ESTATE & DEVELOPERS VS. ACIT [ITA N0. 2158/MUM/2016 DATED 24/02/2017] & JEHANGIR HC JEHANGIR VS. ACIT [ITA NO. 1261/MUM/201 1 17/05/2017] HAS TAKEN THE SAME VIEW FOLLOWING THE AFORESAID JUD GMENTS. 9. FURTHER, IN THE CASE OF CIT VS. SMT. KAUSHALYA [216 ITR 660 14/01/1992], THE HONBLE JURISDICTIONAL HIGH COURT HAS OBSERVED THAT THE NOTICE ISSUED UNDER SECTION 274 MUST REVEAL APPLICA TION OF MIND BY THE ASSESSING OFFICER AND THE ASSESSEE MUST BE AWARE OF THE EXACT CHARGE ON WHICH HE HAD TO FILE HIS EXPLANATION. IT WAS FUR THER OBSERVED THAT VAGUENESS AND AMBIGUITY IN THE NOTICE DEPRIVES THE ASSESSEE OF REASONABLE OPPORTUNITY TO CONTEST THE SAME. 10. FINALLY, VIEWED IN THE LIGHT OF PRINCIPLES LAID DOWN IN THE JUDICIAL PRECEDENTS DISCUSSED HEREINABOVE, WE ARE INCLINED T O CONCLUDE THAT THE PENALTY PROCEEDINGS STOOD VITIATED FOR WANT OF PRIN CIPLES OF NATURAL JUSTICE AND HENCE LIABLE TO BE QUASHED. ACCORDINGLY, WE DEL ETE THE SAME. 11. SINCE, WE HAVE DELETED THE PENALTY ON LEGAL GRO UNDS, THE DECISION THEREOF ON MERITS REMAIN MERELY ACADEMIC IN NATURE AND THEREFORE, WE DO NOT FIND THE NECESSITY OF DELVING INTO THE SAME ANY FURTHER. 12. RESULTANTLY, THE ASSESSEES APPEAL STANDS ALLOW ED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH OCTOBER, 2017. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 04 .10.2017 SR.PS:- THIRUMALESH ITA NO.5656/M/2015 CHANDULAL P.SHAH (HUF) ASSESSMENT YEAR-2007-08 7 / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. $- , - , / DR, ITAT, MUMBAI 6. ./ / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI