Rajendra Kumar and Company, Kanpur V. Deputy Commissioner of Income Tax- 2, Kanpur

ITA 584/LKW/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9904 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 13-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Question of law; Assessment record
• Section: 271(1)(c); 143(3); 201; 274; 64

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI. A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA NO. 584/LKW/2018 ASSESSMENT YEAR: 2014 - 15 RAJENDRA KUMAR & COMPANY 74/276, HALSY ROAD KANPUR V. T HE DY. CIT - 2 KANPUR T AN /PAN : AACFR6463Q (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI SWARAN SINGH, FCA RESPONDENT BY: SHRI AJAY KUMAR, D.R. DATE OF HEARING: 16 0 9 201 9 DATE OF PRONOUNCEMENT: 20 0 9 201 9 O R D E R PER A. D. JAIN, V.P.: THIS IS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2014-15, AGAINST THE ORDER OF THE LD. CIT(A)-I, KANPUR, DATED 13/6/2018, TAKING THE FOLLOWING GROUNDS: 1. THAT THE IMPUGNED PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, IS ILLEGAL AND UNSUSTAINABLE IN LAW AS THE LD. A.O. HAS NOT MENTIONED SPECIFIC CHARGE IN THE STATUTORY NOTICE ISSUED UNDER SECTION 274 READ WITH SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 2. THAT THE LD. C.I.T. (APPEALS)-I KANPUR HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, EVEN WHEN THE LD. A.O HAS NOT MENTIONED THE SPECIFIC CHARGE IN THE STATUTORY NOTICE ISSUED U/S 274 R/W SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 3. THAT THE IMPUGNED PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, IS ILLEGAL AND ITA NO.584/LKW/2018 PAGE 2 OF 7 UNSUSTAINABLE IN LAW AS THE LD. A.O. HAS NOT RECORDED SATISFACTION IN TERMS OF SECTION 271(1)(C) READ WITH SECTION 271(1B) OF THE INCOME TAX ACT, 1961. 4. THAT THE LD. C.I.T. (APPEALS)-I KANPUR HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, EVEN WHEN AS THE LD. A.O. HAS NOT RECORDED SATISFACTION IN TERMS OF SECTION 271(1)(C) READ WITH SECTION 271(1B) OF THE INCOME TAX ACT, 1961. 5. THAT THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 IS VOID AB-INITIO SINCE NO ORDER WAS PASSED UNDER SECTION 127 OF THE INCOME TAX ACT, 1961 TRANSFERRING THE CASE FROM I.T.O.-2(3), KANPUR TO DCIT-II, KANPUR, THEREFORE THE IMPUGNED PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, IS UNSUSTAINABLE IN LAW. 6. THAT THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 IS VOID AB-INITIO SINCE THE CASE WAS SELECTED FOR SCRUTINY BY I.T.O.-2(3), KANPUR IN CONTRAVENTION TO C.B.D.T. CIRCULAR AND CONSEQUENT ORDER OF CCIT, KANPUR, THEREFORE THE IMPUGNED PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, IS UNSUSTAINABLE IN LAW. 7. THAT THE LD. C.I.T. (APPEALS)-I KANPUR HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE PENALTY WHEN THE LD. A.O. WAS NOT SURE ON WHICH LIMB OF CHARGE HE LEVIED PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961, THEREFORE, THE PENALTY LEVIED DESERVES TO BE DELETED. 8. THAT THE LD. C.I.T. (APPEALS)-I KANPUR HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE PENALTY LEVIED BY THE A.O. AMOUNTING TO RS.4,15,000/- ON ACCOUNT OF DISALLOWANCE OF EXPENSES OF RS.13,37,539/- DEBITED BY THE APPELLANT IN PROFIT & LOSS ACCOUNT EVEN WHEN ALL PARTICULARS WERE FURNISHED BY APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 9. THAT THE LD. C.I.T. (APPEALS)-I KANPUR HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE PENALTY LEVIED BY THE A.O. IS ARBITRARY, ITA NO.584/LKW/2018 PAGE 3 OF 7 UNWARRANTED, UNJUSTIFIED AND UNSUSTAINABLE IN LAW AND ON FACTS THEREFORE, DESERVES TO BE DELETED. 10. THAT THE ORDER OF THE LD. C.I.T.(APPEALS)-I, KANPUR SUSTAINING THE IMPUGNED PENALTY ORDER PASSED BY THE A.O. IS CONTRARY TO THE PRINCIPLES OF NATURAL JUSTICE AND EQUITY AS IT IS PASSED IN AN EX- PARTE MANNER WITHOUT EVEN EXAMINING THE ASSESSMENT RECORDS. 11. THAT THE LD. C.I.T. (APPEALS)-I KANPUR HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE IMPUGNED PENALTY ORDER WHICH WAS PASSED BY THE LD. A.O. WAS WITHOUT FIRST ASSUMING LAWFUL JURISDICTION, HENCE THE PENALTY PROCEEDINGS ARE VOID-AB-INITIO AND THE IMPUGNED PENALTY ORDER DESERVES TO BE QUASHED. 12. THAT ANY OTHER RELIEF OR RELIEFS AS YOUR HONOUR MAY DEEM FIT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, BE GRANTED. 2. THE GRIEVANCE OF THE ASSESSEE IS AGAINST IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE I.T. ACT, WHICH HAS BEEN CONFIRMED BY THE LEARNED CIT(A). 3. AT THE TIME OF HEARING BEFORE US, THE LD. A.R. OF THE ASSESSEE INVITED OUR ATTENTION TO THE SHOW CAUSE NOTICE DATED 19/12/2016 FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IT WAS SUBMITTED THAT FROM A PERUSAL OF THIS NOTICE, IT IS CRYSTAL CLEAR THAT THE CHARGE, FOR WHICH THE PENALTY IS PROPOSED TO BE LEVIED UNDER SECTION 271(1)(C) OF THE ACT, IS NOT SPECIFIC, AS TO WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE LD. A.R. OF THE ASSESSEE VEHEMENTLY ARGUED THAT IT IS A SETTLED POSITION OF LAW THAT IF THE NOTICE UNDER SECTION 274 IS NOT SPECIFIC ABOUT THE CHARGE OR LIMB UNDER WHICH PENALTY IS BEING LEVIED UNDER SECTION 271(1)(C) OF THE ACT, ANY PENALTY LEVIED ON THE BASIS OF SUCH A NOTICE IS BAD IN LAW AND IT IS LIABLE TO BE CANCELLED. ITA NO.584/LKW/2018 PAGE 4 OF 7 4. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 5. HEARD. THE SHOW-CAUSE NOTICE IN QUESTION IS AS FOLLOWS: ITA NO.584/LKW/2018 PAGE 5 OF 7 6. FROM A PERUSAL OF THIS NOTICE, IT IS CRYSTAL CLEAR THAT THE CHARGE FOR WHICH PENALTY IS PROPOSED TO BE LEVIED UNDER SECTION 271(1)(C) OF THE ACT, WHETHER FOR CONCEALMENT OF INCOME, OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME, IS NOT SPECIFIC. THE LAW MANDATES THAT THE AUTHORITY, WHO IS PROPOSING TO IMPOSE PENALTY, SHALL BE CERTAIN AS TO THE BASIS ON WHICH THE PENALTY IS BEING LEVIED AND THE NOTICE MUST REFLECT THAT SPECIFIC REASON, SO THAT THE ASSESSEE, TO WHOM SUCH NOTICE IS GIVEN, CAN PREPARE HIMSELF REGARDING THE DEFENCE, WHICH HE WOULD LIKE TO TAKE TO SUPPORT HIS CASE. THIS IS EVEN ENSHRINED IN THE PRINCIPLES OF NATURAL JUSTICE AND AS HAS BEEN UPHELD BY HON'BLE APEX COURT AND OTHER HIGH COURTS. 7. IN CIT VS. SSAS EMERALD MEADOWS, [2016] 73 TAXMANN.COM 248, THE HON'BLE APEX COURT LOOKED INTO THE FACTS BEFORE THEM THAT TRIBUNAL RELYING ON THE DECISION OF DIVISION BENCH OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT AND ANOTHER VS. MANJUNATH COTTON & GINNING FACTORY (SUPRA) ALLOWED THE APPEAL OF THE ASSESSEE HOLDING THAT NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 274 READ WITH SECTION 271(1)(C) OF THE ACT WAS BAD IN LAW, AS IT DID NOT SPECIFY UNDER WHICH LIMB OF SECTION 271(1)(C) OF THE ACT, PENALTY PROCEEDINGS HAS BEEN INITIATED, I.E., WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. WHEN THE MATTER TRAVELLED UPTO THE HIGH COURT, IT SUPPORTED THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT AND ANOTHER VS. MANJUNATH COTTON & GINNING FACTORY (SUPRA) AND DECIDED THAT THERE WAS, THEREFORE, NO SUBSTANTIAL QUESTION OF LAW TO BE DECIDED. THEREAFTER, AN SLP WAS FILED BEFORE THE HON'BLE APEX COURT AND THE APEX COURT DISMISSED THE SLP OF THE REVENUE FINDING NO MERIT THEREIN AND CONFIRMING THE ISSUE IN FAVOUR OF THE ASSESSEE. ITA NO.584/LKW/2018 PAGE 6 OF 7 8. IN CIT AND ANOTHER VS. MANJUNATH COTTON & GINNING FACTORY, [2013] 359 ITR 565 (KARN.), IT HAS BEEN HELD BY THE HON'BLE HIGH COURT THAT NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(C) OF THE ACT SHOULD SPECIFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C) OF THE ACT, I.E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. SENDING PRINTED FORM, WHERE ALL THE GROUNDS MENTIONED WOULD NOT SATISFY THE REQUIREMENT OF LAW. THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, THE PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. PENALTY PROCEEDINGS ARE DISTINCT FROM ASSESSMENT PROCEEDINGS, THOUGH IT EMANATES FROM THE ASSESSMENT PROCEEDINGS; STILL IT IS SEPARATE AND INDEPENDENT PROCEEDINGS ALL TOGETHER. 9. IN MEHERJEE CASSINATH HOLDINGS PVT. LTD VS. ACIT (ITAT MUMBAI), ITA NO. 2555/MUM/2012, ORDER DATED 28/04/2017, THE OBSERVATION OF THE BENCH WAS THAT PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT ARE 'QUASI-CRIMINAL' PROCEEDINGS AND OUGHT TO COMPLY WITH THE PRINCIPLES OF NATURAL JUSTICE. THE NON-STRIKING OF THE IRRELEVANT PORTION IN THE SHOW-CAUSE NOTICE MEANS THAT THE ASSESSING OFFICER IS NOT FIRM ABOUT THE CHARGE AGAINST THE ASSESSEE AND THE ASSESSEE IS NOT MADE AWARE AS TO WHICH OF THE TWO LIMBS OF SECTION 271(1)(C) HE HAS TO RESPOND. 10. IN CHANDRA PRAKASH BUBNA VS. INCOME TAX OFFICER, WARD 27(3), KOLKATA, (ITAT KOLKATA BENCH) [2015] 64 TAXMANN.COM 155, IT WAS HELD THAT WHEN THE ASSESSING OFFICER LEVIED PENALTY WITHOUT BRINGING OUT ANY SPECIFIC CHARGE FOR WHICH PENALTY HAD BEEN IMPOSED, PENALTY WAS LIABLE TO BE DELETED. 11. THE SETTLED LEGAL POSITION ON THE ISSUE, AS ENSHRINED IN THE AFORESAID CASES, IS APPARENT AND WE ARRIVE AT THE CONSIDERED VIEW THAT ITA NO.584/LKW/2018 PAGE 7 OF 7 THE SHOW CAUSE NOTICE, WHICH HAS NOT SPECIFIED THE CHARGE AND LIMB UNDER WHICH THE PENALTY IS PROPOSED TO BE LEVIED, IS VOID AB INITIO AND THE CONSEQUENT PENALTY IMPOSED ON THE BASIS OF SUCH NOTICE IS, THEREFORE, ILLEGAL AND BAD IN LAW AND LIABLE TO BE DELETED. WE, THEREFORE, DIRECT DELETION OF THE PENALTY. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/09/2019. SD/ - SD/ - [ T. S. KAPOOR ] [ A. D. JAIN ] ACCOUNTANT MEMBER VICE PRESIDENT DATED:20/09/2019 JJ:1609 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSISTANT REGISTRAR