M/s. Konarak Logistics Pvt. Ltd., Jajpur V. ACIT, Circle- 1(1), Cuttack

ITA 58/CTK/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1543 (ITAT-CUTTACK)
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 21-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P R MOHANTY
• Keywords: Principle of natural justice; Question of law; Initiation of penalty proceedings
• Section: 271(1)(c); 274; 73; 68

Judgement Text

P A G E 1 | 8 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO . 58 /CTK/20 20 ASSESSMENT YEAR: 2010 - 2011 KANAK LOGISTICS (P) LTD., JARAKA INDUSTRIAL ESTATE, J ARAKA, JAJPUR. VS. ACIT, CIRCLE - 1(1), CUTTACK PAN/GIR NO. AADCK 6181 A (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI P.R.MOHANTY , AR REVENUE BY : SHRI SUBHENDU D U TTA, DR DATE OF HEARING : 10 / 1 2 / 20 20 DATE OF PRONOUNCEMENT : 14 / 1 2 /20 20 O R D E R PER C.M.GARG,JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A), SAMBALPUR DATED 15.11.2019 FOR THE ASSESSMENT YEAR 2010 - 2011 . 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS THAT THE LD CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE LEVY OF PENALTY OF RS.5,00,000/ - UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 3. FACTS RISE TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ARE TH AT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD INTRODUCED SHARE CAPITAL OF RS.6,00,000/ - AND ITA NO.58/CTK/2020 ASSESSMENT YEAR : 2010 - 2011 P A G E 2 | 8 SINCE THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF SHARE CAPITAL, THE ASSESSING OFFICER MADE THE ADDITION U/S. 68 OF THE ACT. THEREFORE, THE AO INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) BY ISSUING NOTICE U/S.274 ON 21.3.2013 ON THE GROUND OF CONCEALMENT OF PARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME. DURING THE PENALTY PROCEEDINGS, THE ASSESSEE DID NOT APPEAR AND OFFER ANY EXPLANATION. THEREFORE, THE AO LEVIED PENALTY OF RS.5,00,000/ - . 4. BEFORE THE LD CIT(A), THE ASSESSEE SUBMITTED THAT THE NOTICE ISSUED FOR LEVY OF PENALTY DOES NOT INDICATE WHETHER THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME AND THAT MERE DISALLOWANCE OF CLAIM CANNOT LEAD TO L EVY OF PENALTY. THE LD CIT(A) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE LEVY OF PENALTY. HENCE, THE ASSESSEE HAS FILED APPEAL BEFORE THE TRIBUNAL. 5. AT THE OUTSET, LD AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT IN TH E PENALTY ORDER, THE ASSESSING OFFICER HAS IMPOSED PENALTY OF RS. 5,00,000/ - AFTER INITIATING PENALTY PROCEEDINGS U/S.271(1)(C) FOR CONCEALMENT OF INCOME AND FOR FURNISHING INACCURATE PARTICULARS OF INCOME IN RESPECT OF THE ADDITION MADE AMOUNTING TO RS .6,0 0,000 / - TOWARDS INTRODUCTION OF SHARE CAPITAL. LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN NOTICE U/S 274 R.W.S. 271 , THE INAPPROPRIATE WORDS IN THE SAID NOTICE HAVE NOT BEEN STRUCK OFF. FOR THIS, HE REFERRED TO THE NOTICE UNDER SECTION 274 R.W.S 271(1) (C) OF THE INCOME TAX ACT, DATED 21.3.2013, WHEREIN, THE AO ITA NO.58/CTK/2020 ASSESSMENT YEAR : 2010 - 2011 P A G E 3 | 8 HAS STATED THAT THE ASSESSEE HAVE CONCEALED THE PARTICULARS OF INCOME AND FURNISHED INACCURATE PARTICULARS OF SUCH INCOME . THEREFORE, IT IS NOT UNDERSTOOD AS TO UNDER WHICH LIMB OF PROVISIONS OF SECTION 271(1)(C) OF THE ACT, THE ASSESSING OFFICER HAS LEVIED PENALTY. SINCE THE SAID SHOW CAUSE NOTICE ISSUED U/S 274 DID NOT SPECIFY THE CHARGE AGAINST THE ASSESSEE AS TO WHETHER IT WAS FOR CONCEALING THE PARTICULARS OF INCOME OR FOR FURNISHING INACCURA TE PARTICULARS OF INCOME, THEREFORE, THE PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE ACT IN PURSUANCE TO THE SAID NOTICE IS BAD IN LAW. HE REFERRED TO THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY REPORTED IN 359 ITR 565, WHICH DECISION HAS BEEN UPHELD BY THE HONBLE APEX COURT IN CASE OF CIT VS. SSAS EMERALD MEADOWS (2016) 73 TAXMAN.COM 248 (SC). HE ALSO SUBMITTED THAT MERE DISALLOWANCE OF CLAIM CANNOT LEAD TO LEVY OF PENALTY. THEREFORE, IT WAS HIS CONTENTION THAT THE PENALTY ORDER DESERVES TO BE QUASHED. 6. REPLYING TO ABOVE, LD SR DR SUPPORTED THE PENALTY ORDER AS WELL AS FIRST APPELLATE ORDER. HE SUBMITTED THAT AS REGARDS THE NOTICE WHICH DOES NOT INDICATE WHETHER THE ASSESSEE HAS CONCEALED PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS, HONBLE MADRAS HIGH COUR T IN THE CASE OF SUNDARAM FINANCE LTD VS ACIT, 403 ITR 407 (MAD) HAS OBSERVED THAT THE ASSESSEE HAS UNDERSTOOD PURPORT AND IMPORT OF THE NOTICE THEN NO PREJUDICE IS CAUSED BY KEEPING BOTH THE LIMBS OF SECTION 271(1)(C) OF THE ACT AND ITA NO.58/CTK/2020 ASSESSMENT YEAR : 2010 - 2011 P A G E 4 | 8 HONBLE MADRAS HIGH CO URT HAS CONSIDERED THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATH COTTON AND GINNING FACTORY (SUPRA) AND HONBLE SUPREME COURT IN THE CASE OF SSAS EMERALD MEDOWS (SUPRA) RELIED BY LD COUNSEL FOR THE ASSESSEE. HENCE, IT WAS HIS PRAY ER THAT THE PENALTY ORDER BE UPHELD. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD OF THE CASE AS WELL AS THE DECISIONS RELIED UPON BY LD REPRESENTATIVES OF BOTH PARTIES. IN THIS CASE, THE ASSESSING OFFICER HAS IMPOSED PENALTY OF RS. 5,00,0 00/ - AFTER INITIATING PENALTY PROCEEDINGS U/S.271(1)(C) FOR CONCEALMENT OF INCOME AND FOR FURNISHING INACCURATE PARTICULARS OF INCOME IN RESPECT OF THE ADDITION MADE AMOUNTING TO RS .6,00,000 / - TOWARDS INTRODUCTION OF SHARE CAPITAL. THE MAIN CONTENTION OF LD A.R. OF THE ASSESSEE IS THAT THE ASSESSING OFFICER WAS NOT CLEAR UNDER WHICH LIMBS OF PROVISIONS, THE AO WILL IMPOSE THE PENALTY BECAUSE IN THE SHOW CAUSE NOTICE ISSUED U/S.174 OF THE ACT, THE AO DID NOT SPECIFY THE CHARGE AGAINST THE ASSESSEE AS TO WHE THER IT WAS FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME, THEREFORE, IN VIEW OF THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATH COTTON & GINNING FACTORY (SUPRA) AND ALSO THE DECISION OF H ONBLE SUPREME COURT IN THE CASE OF SSAS EMERALD MEADOWS (SUPRA), THE PENALTY IMPOSED IS NOT EXIGIBLE. HOWEVER, THE CONTENTION OF LD D.R. IS THAT HONBLE MADRAS HIGH COURT IN THE CASE OF SUNDARAM FINANCE LTD (SUPRA) THE DECISION IN THE ITA NO.58/CTK/2020 ASSESSMENT YEAR : 2010 - 2011 P A G E 5 | 8 MAN J UNATH COTTON & GINNING FACTORY (SUPRA) AND ALSO SSAS EMERALD (SUPRA) HAS BEEN CONSIDERED AND ON THE SAME FACTS, THE PENALTY - IMPOSED U/S.271(1)(C) IS LEVIABLE. 8 . IN THIS FACT SITUATION WE SHALL REFER TO THE DECISIONS RELIED UPON BY THE LD. AR. 9 . IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA) , THE HONBLE KARNATAKA HIGH COURT HAS HELD AS FOLLOWS : - 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CASES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFENCES. BUT 5 DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING HIM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROUNDS MENTIONED IN SECTION 2 71(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. AF TER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE P ENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED ITA NO.58/CTK/2020 ASSESSMENT YEAR : 2010 - 2011 P A G E 6 | 8 AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO TH E IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. 10 . IN SSAS EMERALD MEADOWS , (2016) 73 TAXMAN.COM 241(KAR) , THE HONBLE KARNATAKA HIGH COURT CONSIDERED THE QUESTION OF LAW AS TO, - WHETHER, OMISSION IF ASSESSING OFFICER TO EXPLICITLY MENTION THAT PENALTY PROCEEDINGS ARE BEING INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OR THAT FOR CONCEALMENT OF INCOME M AKES THE PENALTY ORDER LIABLE FOR CANCELLATION EVEN WHEN IT HAS BEEN PROVED BEYOND REASONABLE DOUBT THAT THE ASSESSEE HAD CONCEALED INCOME IN THE FACTS AND CIRCUMSTANCES OF THE CASE? 11. HONB L E HIGH COURT ANSWERED THE SAME IN FAVOUR OF THE ASSESSEE OBSE RVING THAT: THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY THE ASSESSEE HOLDING THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 274 READ WITH SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) TO BE BAD IN LAW AS IT DID NOT SPECIF Y WHICH LIMB OF SECTION 271(1)(C) OF THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED I.E., WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE TRIBUNAL, WHILE ALLOWING THE APPEAL OF THE ASSESSEE, HAS RELIED ON THE DECISION OF THE DIVISION BENCH OF THIS COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME TAX - VS - MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565. IN OUR VIEW, SINCE THE MATTER IS COVERED BY JUDGMENT OF THE DIVISION BENCH OF THIS COURT, WE ARE OF THE OPINION, NO SUBSTANTIAL QUESTION OF LAW ARISES IN THIS APPEAL FOR DETERMINATION BY THIS COURT. THE APPEAL IS ACCORDINGLY DISMISSED. 1 2 . THE SPECIAL LEAVE PETITION FILED BY THE REVENUE CHALLENGING THE AFORESAID JUDGEMENT OF THE HIGH CO URT WAS DISMISSED BY THE HONBLE SUPREME COURT HOLDING: ITA NO.58/CTK/2020 ASSESSMENT YEAR : 2010 - 2011 P A G E 7 | 8 WE DO NOT FIND ANY MERIT IN THIS PETITION. THE SPECIAL LEAVE PETITION IS, ACCORDINGLY, DISMISSED. 13. LD D.R. RELIED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF SUNDARAM FINANCE LTD (SUPRA), WHEREIN, THE ISSUE REGARDING DEFECT IN THE PENALTY NOTICE WAS NOT RAISED BY THE ASSESSEE BEFORE THE AO, OR LD CIT(A) OR BEFORE THE TRIBUNAL AND THIS QUESTION WAS RAISED AT THE TIME OF HEARING BEFORE THE HONBLE MADRAS HIGH COURT AFTER 10 YEARS WHEN THE APPEALS ARE LISTED FOR FINAL HEARING AND, THEREFORE, IN THESE FACTS, HONBLE HIGH COURT HELD THAT EVEN ASSUMING THAT THERE WAS DEFECT IN THE NOTICE, IT HAD CAUSED NO PREJUDICE TO THE ASSESSEE AND THE ASSESSEE CLEARLY UNDERSTOOD WHAT WAS THE PURPO RT AND IMPORT OF NOTICE ISSUED UNDER SECTION 274 R.W.S 271 OF THE ACT. 14. BEFORE US, THE ASSESSEE SEEKS TO CONTEND THAT THE NOTICE ISSUED UNDER SECTION 274 R/W. SECTION 271 OF THE ACT IS VITIATED SINCE IT DID NOT SPECIFICALLY STATE THE GROUNDS MENTIONED I N SECTION 271(L)(C) OF THE AC T. THEREFORE, IT IS CLEAR THAT FOR THE AO TO ASSUME JURISDICTION U/S 271(1)(C), PROPER NOTICE IS NECESSARY AND THE DEFECT IN NOTICE U/S 274 OF THE ACT VITIATES THE ASSUMPTION OF JURISDICTION BY THE LEARNED ASSESSING OFFICER TO LEVY ANY PENALTY. IN THIS CASE, FACTS STATED SUPRA, CLEARLY ESTABLISH THAT THE NOTICE ISSUED UNDER SECTION 274 READ WITH 271 OF THE ACT IS DEFECTIVE AND, THEREFORE, WE FIND IT DIFFICULT TO HOLD THAT THE LEARNED AO RIGHTLY ASSUMED ITA NO.58/CTK/2020 ASSESSMENT YEAR : 2010 - 2011 P A G E 8 | 8 JURISDICTION TO PASS THE O RDER LEVYING THE PENALTY. IN VIEW OF ABOVE, WE DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY LEVIED U/S.271(1)(C). 15. IN THE RESULT, AP PEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 14 /1 2 /20 20 . S D/ - SD/ - (LAXMI PRASAD SAHU) ( CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER CUTTACK; DATED 14 / 1 2 /20 20 B.K.PARIDA, SPS (OS) COPY OF THE ORDER FORWARDED TO : BY ORDER SR . PVT. S ECRETARY ITAT, CUTTACK 1. THE APPELLANT: KANAK LOGISTICS (P) LTD., JARAKA INDUSTRIAL ESTATE, JARAKA, JAJPUR. 2. THE RESPONDENT. ACIT, CIRCLE 1(1), CUTTACK 3. THE CIT(A) - , CUTTACK 4. PR.CIT , CUTTACK. 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//