ALLWYN D VAZ, MUMBAI V. ITO WD 26(2)(1), MUMBAI

ITA 600/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3921 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 29-01-2015
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR SINGH
• Assessee Lawyers: V D PARMAR
• Keywords: Salary income; Principle of natural justice; Initiation of penalty proceedings

Judgement Text

, . . , IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA , A CCOUNTANT MEMBER ./ ITA NO . 600 /MUM /20 1 5 ( / ASSESSMENT YEAR : 20 10 - 20 11 ) SHRI ALLW YN D . VAZ, 103, 10 RAAG COMPLEX, OPPOSITE ROYAL CHALLENGE RESTAURANT, NR. DINDOSHI DEPOT, GOREGAON (EAST), MUMBAI - 400063 VS. ITO WD - 26(2)(1), MUMBAI ./ ./ PAN/GIR NO. : A A IPV 3139 K ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI V.D.PARMAR /REVENUE BY : SHRI PRADEEP KUMAR SINGH / DATE OF HEARING : 08 / 0 8 /2016 / DATE OF PRONOUNCEMENT 08/08 /201 6 / O R D E R TH IS IS AN APPEAL FIL ED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) FOR ASSESSMENT YEAR 2010 - 2011, IN THE MATTER OF IMPOSITION OF PENALTY U/S.271(1)(C) OF THE I.T.ACT, AMOUNTING TO RS.3,26,151/ - . 2. I HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ASSESSEE IS A TECHNICAL PER SON NOT AWARE OF INCOME TAX LAWS. DURING THE YEAR UNDER CONSIDERATION, HE HAD CHANGED EMPLOYMENT FROM RELIANCE COMMUNICATION LTD. TO TIKONA DIGITAL NETWORKS PVT.LTD. AND HAD SUBMITTED DETAILS OF EARLIER SALARY TO THE NEW EMPLOYER, WHO FAILED TO CONSIDER IT IN FORM - 16 ISSUED TO HIM. THE RETURN WAS FILED BASED ON THE TDS CERTIFICATE ISSUED BY THE SECOND EMPLOYER, BASED ON THE ADVICE OF HIS CHARTERED ACCOUNTANT, WHO DID NOT INFORM HIM ABOUT THESE MISTAKES. DURING ASSESSMENT PROCEEDINGS, REVISED COMPUTATION OF INCOME WAS FILED ITA NO. 600 /2015 2 BEFORE THE ASSESSING OFFICER. IT WAS ALSO CLAIMED THAT THE ASSESSEE IS AN HONEST INCOME TAX PAYER FOR THE LAST 15 YEARS AND FULL TDS HAS BEEN DEDUCTED ON THE SALARY INCOME RECEIVED. THE ASSESSEE WAS UNDER A BONAFIDE IMPRESSION SINCE TDS H AS BEEN DEDUCTED , NO ADDITIONAL TAX WAS PAYABLE AND ASSESSEES CHARTERED ACCOUNTANT ALSO DID NOT ADVICE HIM CORRECTLY. BASED ON CERTAIN CASE LAWS CITED, IT WAS CLAIMED THAT THE PENALTY LEVIED SHOULD BE DELETED. 3. IT IS CLEAR FROM THE ABOVE THAT ALL THE FACTS WERE AVAILABLE BEFORE THE AO AND ASSESSEE HIMSELF HAS ACCEPTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS REGARDING SALARY INCOME SO RECEIVED. FOR THE ADDITION OF SALARY SO MADE, NO APPEAL WAS FILED. UNDER THESE CIRCUMSTANCES, I DO NOT FIND ANY MERIT FOR THE IMPOSITION OF PENALTY. 4. I ALSO FOUND THAT THE ASSESSEE HAD INTIMATED THE SALARY RECEIVED FROM EARLIER EMPLOYER TO THE NEW EMPLOYER AND THE NEW EMPLOYER FAILED TO INCORPORATE THAT IN THE TDS FORM - 16. 5. IT WAS ALSO ARGUED BY LD. AR THAT HONBLE DELH I HIGH COURT IN THE CASE OF VIRGO MARKETING (P) LTD., 171 TAXMAN 156 , HELD THAT WHERE FROM A READING OF ASSESSMENT ORDER, WHICH WAS NOT CLEAR AS TO WHY THE ASSESSING OFFICER CHOSE TO INITIATE PENALTY PROCEEDINGS AGAINST THE ASSESSEE AND UNDER WHICH PART OF THE SECTION 271(1)(C), PENALTY WAS IMPOSED, UNDER SUCH CIRCUMSTANCES, PENALTY SO IMPOSED WAS NOT SUSTAINABLE. ITA NO. 600 /2015 3 6. SIMILAR VIEW HAS BEEN TAKEN BY THE COORDINATE BENCH IN THE CASE OF SANGHAVI SAVLA COMMODITY BROKERS PVT. LTD., ITA NO.1746/MUM/2011, DATED 22 - 12 - 2015, WHEREIN IT WAS HELD AS UNDER : - 'THE ORDER OF PENALTY PASSED UNDER SECTION 271(1)(C) OF THE ACT IS BAD IN LAW AS THE NOTICE ISSUED UNDER SECTION 274 READ WITH SECTION 271 OF THE ACT IS NOT DISCERNABLE AS TO WHETHER THE PENALTY PROCEEDINGS IS INIT IATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE AND THEREFORE, THE IMPUGNED ORDER PASSED DESERVES TO BE CANCELLED.' 7. THE HONBLE HIGH COURT OF KARNATAKA I N ITS ORDER IN THE CASE OF M/S MANJUNATAH COTTON & GINNING FACTORY IN ITA NO. 2546 OF 2005 DATED 13.12.2012, RELIED ON BY THE ASSESSEE, HAS HELD THAT SUCH A NOTICE, AS HAS ALSO BEEN ISSUED IN THE CASE ON HAND, IS INVALID AND THE CONSEQUENTIAL PENALTY PROCE EDINGS ARE ALSO NOT VALID. THE RELEVANT PORTION OF THEIR LORDSHIPS JUDGEMENT AT PARAS 59 TO 62 THEREOF ARE EXTRACTED HEREUNDER FOR REFERENCE: - '59. AS THE PROVISION STANDS, THE PENALTY PROCEEDINGS CAN BE INITIATED ON VARIOUS GROUND SET THEREIN. IF THE ORD ER PASSED BY THE AUTHORITY CATEGORICALLY RECORDS A FINDING REGARDING THE EXISTENCE OF ANY SAID GROUNDS MENTIONED THEREIN AND THEN PENALTY PROCEEDINGS IS INITIATED, IN THE NOTICE TO BE ISSUED UNDER SECTIO N 274 , THEY COULD CONVENIENTLY REFER TO THE SAID ORDER WHICH CONTAINS THE SATISFACTION OF THE AUTHORITY WHICH HAS PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORDER AND IF IT IS A CASE OF RELYING ON DE EMING PROVISION CONTAINED IN EXPLANATION - 1 OR IN EXPLANATION - 1(B), THEN THOUGH PENALTY PROCEEDINGS ARE IN THE NATURE OF CIVIL LIABILITY, IN FACT, IT IS PENAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PENALTY ON HIM AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CON TEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF THE DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1)(C) DO NOT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY . THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED FARM WHERE ALL THE GROUND ITA NO. 600 /2015 4 MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASSESSEE NOT REBUTTIN G THE INITIAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 100% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HAVE TO BE HELD TO BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTI ON 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED IF THE SHOW CAUSE NOTICE IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. 60. CLAUSE (C) DEAL S 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 BU T IN SUCH CASES THE INITIATION OF THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFENCES. BUT 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 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDI NGS 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. AFTER, 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 PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOU GH 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 T O THE INFORMATION, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS N OT SUSTAINABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE ACT TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOME UNDER CLA USE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF INCOME ARE DIFFERENT. THUS THE ASSESSING OFFICER WHILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT WHETHER IS IT A CASE OF CONCEALMENT OF INCOME OR IS IT A CASE OF FURNISHING OF INACCURATE PA RTICULARS. ITA NO. 600 /2015 5 THE APEX COURT IN THE CASE OF ASHOK PAI REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS, THE GUJARAT HIGH COURT IN THE CASE OF MANU ENGINEERING RE PORTED IN 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO MARKETING REPORTED IN 171 TAXMAN 156, HAS HELD THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NOT SUSTAINABLE. THOM, W HEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE STANDARD PROFORMA WITHOUT STRIKING OF THE ITA NO.1746/MU M/2011 SANGHAVI SAVLA COMMODITY BROKERS P. LTD. RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON - APPLICATION OF MIND.' THE CONCLUSION DRAWN THEREIN BY THEIR LORDSHIPS AT PARA 63 THEREOF AND PARTICULARLY AT P) TO S) THEREOF ARE AS UNDER: - '63 ......... ............................ A) ..................................... P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECIFICALLY STATE THE GROUND MENTIONED IN SECTION 271(1)(C), I.E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORRECT P ARTICULARS OF INCOME. Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUST ICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. S) TAKING UP OF PENALTY PROCEEDINGS ON THE LIMB AND FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW.' 8. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY ME RIT FOR THE IMPOSITION OF PENALTY U/S.271(1)(C) OF THE ACT. 9 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 08 /0 8 / 201 6 . SD/ - ( R.C.SHARMA ) / ACCOUNTANT MEMBER MUMBAI ; DATED 08 /0 8 /201 6 . . /PKM , . / PS ITA NO. 600 /2015 6 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//