KIRIT NIHALCHAND CHAUHAN ( NON RESIDENT ), MUMBAI V. ITO (IT) 1(1), MUMBAI

ITA 6079/MUM/2014

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0895 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 30-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Double taxation relief; Opportunity of being heard; Principle of natural justice
• Section: 271(1)(c); 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI SANDEEP GOSAIN (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6079/MUM/2014 ASSESSMENT YEAR: 2010 - 11 SHRI KIRIT NIHALCHAND CHAUHAN (NON RESIDENT) 4 SHREEPATHI ARCADE AUGUST KRANTI MARG, NANA CHOWK MUMBAI - 400026. VS. THE INCOME - TAX OFFICER (INTERNATIONAL TAXATION) - 1(1) SCINDIA HOUSE, GROUND FLOOR BALLARD ESTATE MUMBAI - 400038. PAN NO. ACUPC7758H APPELLANT RESPONDENT ASSESSEE BY : MR. SUNIL HIRAWAT, AR REVENUE BY : MR. MANOJ KUMAR SINGH, DR DATE OF HEARING : 28/08/2018 DATE OF PRONOUNCEMENT : 19/11/2018 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2010 - 11. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 1 0 [IN SHORT CIT(A)], MUMBAI AND ARISES OUT OF THE PENALTY LEVIED U/S 271(1)(C) OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROU NDS OF APPEAL READ AS UNDER: 1. ON FACTS AND IN LAW, THE LEARNED CIT(A) HAD ERRED IN CONFIRMING THE PENALTY ON THE INTEREST RECEIVED OF RS.6,88,376/ - FROM STANDARD CHARTERED BANK E VEN THOUGH NO PENALTY U/S.271(1) (C) WAS INITIATED ON THE SAID INTEREST IN THE ORD ER PASSED U/S, 143(3) OF THE ACT. UNDER THE FACTS SHRI KIRIT NIHALCHAND ITA NO. 6079/MUM/2014 2 AND CIRCUMSTANCES OF THE MATTER HE OUGHT NOT TO HAVE CONFIRMED THE PENALTY ON INTEREST OF RS.6 , 83 ,376/ - . 2. WITHOUT PREJUDICE TO GROUND OF APPEAL NO .1 ABOVE, THE LEARNED CIT(A) HAD ERR ED IN CONFIRMING THE PENALTY U/S . 271(1 ) (C) ON INTEREST RECEIVED OF RS.6,88, 376/ - FROM STANDARD CHARTERED BANK WITHOUT APPRECIATING THE F ACT THAT THE AMO UN T OF TAX SOUGHT TO BE EVADED ON INTEREST O F RS.6,88, 376/ - COMES TO RS. NIL. UNDER THE FACTS AN D CIRCUMSTANCES OF THE MATTER, HE OUGHT NOT TO HAVE CONFIRMED THE PENALTY ON INTEREST OF RS.6,88, 376/ - . 3. ON FACTS AND IN LAW, THE LEARNED CIT(A) HAD ERRED IN C ONFIRMING THE PENALTY OF RS.2,27,257 / - L EVIED BY TH E ASSESSING OFFICER. UNDER THE F ACTS AND C IRCUMSTANCES OF THE MATTER, HE OUGHT NOT TO HAVE CONFIRMED THE SAID PENALTY OF RS.2,27,257/ - . 4. WITHOUT PREJUDICE TO G ROUND OF APPEAL NO.3 ABOVE, THE LEARNED CI T ( A ) HAVE FAILED TO APPRECIA TE THAT MINIMUM PENALTY U/S,271( 1 )( C ) ON THE SHORT TERM CAPITAL GAIN OF RS.1,41,629/ - COMES TO RS.21,882/ - . 3. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2010 - 11 ON 26.07.2010 DECLARING TOTAL INCOME AT RS.14,12,678/ - . IN THE STATEME NT OF TOTAL INCOME, THE ASSESSEE HA S SHOWN INTEREST ON FDR AND SAVINGS BANK ACCOUNT AMOUNTING TO RS.14,12,678/ - ON WHICH TAX PAYABLE @ 12.5% COMES TO RS.1,76,585/ - . FURTHER, THE ASSESSEE HA S CLAIMED SHORT TERM CAPITAL GAIN (STCG) ON SALE OF SHARES AS NOT T AXABLE BY MENTIONING IT ON NOTE - 5 OF THE SAID STATEMENT OF TOTAL INCOME. THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT BY THE ASSESSING OFFICER (AO) . DURING THE COURSE OF SCRUTINY PROCEEDINGS, THE ASSESSEE CAME TO KNOW THAT A SUM OF RS.6, 88,376/ - BEING THE AMOUNT OF INTEREST ON FDR WITH STANDARD CHARTERED BANK HAS REMAINED TO BE INCLUDED IN THE TOTAL INCOME. TDS OF RS.86,047/ - SHRI KIRIT NIHALCHAND ITA NO. 6079/MUM/2014 3 WHICH WAS CALCULATED AS PER DTAA PROVISIONS @ 12.5% WAS ALSO NOT CLAIMED IN THE ORIGINAL RETURN OF INCOME. THE AS SESSEE ALSO NOTICED THAT THE DTAA WITH UAE HAS ALSO UNDER GONE CHANGE AND AS PER THE NEW ARTICLE - 13, CAPITAL GAIN ON SALE OF SHARES WHICH WAS HITHERTO EXEMPT BECAME TAXABLE. ACCORDINGLY, ON 27.11.2012, THE ASSESSEE FILED A REVISED COMPUTATION OF INCOME BEF ORE THE AO, WHEREIN RS.6,88,376/ - BEING INTEREST FROM FD WAS SHOWN UNDER THE HEAD INCOME FROM OTHER SOURCES AND STCG OF RS.1,41,629/ - WAS OFFERED FOR TAXATION. IN THE REVISED COMPUTATION, THE ASSESSEE HAD ALSO TAKEN CREDIT OF TDS OF RS.86,047/ - DEDUCTED BY STANDARD CHARTERED BANK ON INTEREST. THE AO PASSED AN ORDER U/S 143(3) ON 12.03.2013 WHEREIN RS.6,88,376/ - BEING FDR INTEREST FROM STANDARD CHARTERED BANK WAS BROUGHT TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES AND CREDIT OF TDS AMOUNTING TO RS. 86,047/ - WAS ALSO GIVEN. FURTHER STCG OF RS. 1,41,629/ - WAS BROUGHT TO TAX. THEREAFTER, THE AO LEVIED PENALTY U/S 271(1)(C) ON BANK INTEREST OF RS.6,88,376/ - AND INCOME FROM CAPITAL GAIN OF RS.1,41,629/ - . THE AO THUS IMPOSED A MINIMUM PENALTY OF RS.2,34,5 87/ - . 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) CONFIRMED THE PENALTY LEVIED BY THE AO ON THE GROUND THAT (I) AS THE APPELLANT EARNED INTEREST INCOME ON A SUBSTANTIAL FIXED DEPOSIT AND IT WAS WA RRANTED ON THE PART OF THE APPELLANT THAT THE SAID INTEREST INCOME SHOULD HAVE BEEN DISCLOSED IN THE RETURN OF INCOME, BUT WITHOUT ANY SUBSTANTIAL REASON, THE SHRI KIRIT NIHALCHAND ITA NO. 6079/MUM/2014 4 APPELLANT HAS NOT INCLUDED THE SAID INTEREST INCOME IN THE PART OF ITS TOTAL INCOME, (II) EVEN TH E CLAIM OF EXEMPTION MADE IN RELATION TO THE SHORT TERM CAPITAL GAINS WAS ALSO COMPLETELY INCORRECT AND UNJUSTIFIED FOR WHICH THE APPELLANT COULD NOT SUBSTANTIATE ANY PLAUSIBLE EXPLANATION. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FILES A PAPER BOOK (P/B) CONTAINING (I) STATEMENT OF T OTAL I NCOME FOR THE AY 2010 - 11, (II) LETTER DATED 11.09.2012 ALONG WITH R EVISED S TATEMENT OF T OTAL I NCOME, (III) ASSESSMENT ORDER PASSED U/S 143(3), (IV) INCOME - TAX C OMPUTATION FORM, (V) RECTIFICATION LETTER DATED 29.03.2013, (VI) WRITTEN SUBMISSIONS BEFORE LEARNED CIT(A) VIDE PAPER BOOK DATED 29.01.2014 AND (VII) FURTHER SUBMISSIONS BEFORE LEARNED CIT(A ) VIDE LETTER DATED 31.01.2014. 5.1 RELIANCE IS PLACED BY THE LD. COUNSEL ON THE ORDER OF THE TRIBUNAL IN KANBAY SOFTWARE INDIA (P) LTD. V. DCIT (2009) 119 ITD 153 (PUNE - TRIB), THE DECISION IN CIT V. BENNETT COLEMAN & CO. LTD . [ITA (LOD) NO. 2117 OF 2012] AND PRICE WATER COOPERS PVT. LTD. V. CIT 348 ITR 306 (SC). 6. ON THE OTHER HAND, THE LD. DR SUBMITS THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF TAXABLE INCOME WITH REGARD TO BANK INTEREST OF RS.6,88,376/ - FROM STANDARD CHARTERED BANK AND STCG OF RS.1,41,629/ - ON SALE OF SHARES. THEREFORE, THE LD. DR SUBMI TS THAT THE ORDER PASSED BY THE LD. CIT(A) CONFIRMING THE MINIMUM PENALTY OF RS.2,34,587/ - LEVIED BY THE AO BE UPHELD. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. SHRI KIRIT NIHALCHAND ITA NO. 6079/MUM/2014 5 WE DISCUSS HERE THE CASE LAWS RELIED ON BY THE LD. COUNSEL OF THE ASSESSEE. IN KANBAY SOFTWARE INDIA (P ) LTD . (SUPRA), IT IS HELD THAT : CIVIL LIABILITY OF PENALTY UNDER S. 271(1)(C) CANNOT BE CONSTRUED TO MEAN THAT A PENALTY IS AN AUTOMATIC CONSEQUENCE OF AN ADDITION BEING MADE TO THE INCOME OF THE ASSESSEE; BEFORE ANY PENALTY UNDER S. 271(1)(C) CAN BE IMPOSED, EACH CASE WILL HAVE TO BE EXAMINED IN THE LIGHT OF SCHEME OF THINGS ENVISAGED BY S. 271(1)(C) READ ALONG WITH EXPLANATIONS THERETO; REJECTION OF ASS ESSEES BONA FIDE CLAIM UNDER S. 10A DID NOT ATTRACT PENALTY UNDER S. 271(1)(C) AS NEITHER THERE WAS ANY CONCEALMENT NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME NOR THE DEEMING FICTION IN EXPLN. 1 WAS ATTRACTED. IN BENNETT COLEMAN & CO. LTD. (SUP RA) , THERE WERE TWO ISSUES. D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO GIVE DETAILS OF INTEREST ON TAX FREE BONDS. WHILE PREPARING THE SAID DETAILS, IT WAS NOTICED THAT 6% GOVERNMENT OF INDIA INDEX BONDS PURCHASED DURING THE YE AR HAD INADVERTENTLY BEING CATEGORIZED AS TAX - FREE BONDS AND THEREFORE, INTEREST OF RS.75,00,000/ - EARNED ON SUCH BONDS HAD ALSO INADVERTENTLY ESCAPED TAX. THE AO LEVIED PENALTY U/S 271(1)(C). THE CIT(A) UPHELD THE ORDER OF THE AO. ON FURTHER APPEAL, THE T RIBUNAL RECORDS A FINDINGS OF FACT THAT BY INADVERTENT MISTAKE , INTEREST @ 6% ON THE GOVERNMENT OF INDIA INDEX BONDS WAS SHOWN AS TAX - FREE BONDS. THE TRIBUNAL CONCLUDED THAT THERE WAS NO DESIRE ON THE PART OF THE RESPONDENT - ASSESSEE TO HIDE OR CONCEAL THE INCOME SO AS TO AVOID PAYMENT OF TAX ON INTEREST FROM THE BONDS. IN THAT VIEW OF THE MATTER, THE TRIBUNAL DELETED THE PENALTY IMPOSED UPON THE RESPONDENT - ASSESSEE U/S 271(1)(C) OF THE ACT. THE HONBLE HIGH COURT CONFIRMED THE ORDER OF THE TRIBUNAL ON THE B ASIS OF THE FACT THAT THERE WAS AN INADVERTENT MISTAKE ON THE PART OF THE ASSESSEE SHRI KIRIT NIHALCHAND ITA NO. 6079/MUM/2014 6 IN INCLUDING THE INTEREST RECEIVED OF 6% OF THE GOVERNMENT OF INDIA INDEX BONDS AS INTEREST RECEIVED ON TAX - FREE BONDS. THE OTHER ISSUE IN THE ABOVE CASE - LAW IS THAT THE RESPONDENT - ASSESSEE HAD CLAIMED PREMIUM ON REDEMPTION OF DEBENTURES AS INCOME FROM CAPITAL GAINS. THE AO HELD THAT THE REDEMPTION OF DEBENTURES IS REVENUE RECEIPT ASSESSABLE TO TAX UNDER THE HEAD INCOME FRO M OTHER SOURCES. THE CIT(A) CONFIRMED THE ORDER OF THE AO. THE RESPONDENT - ASSESSEE DID NOT FILE ANY FURTHER APPEAL ON THE QUANTUM PROCEEDINGS. THEREAFTER, THE AO LEVIED PENALTY U/S 271(1)(C) OF THE ACT ON THE RESPONDENT - ASSESSEE. THE CIT(A) ALSO CONFIRMED THE LEVY OF PENALTY UPON THE RESPONDENT - ASSESSEE. ON FURTHER APPEAL, THE TRIBUNAL HELD THAT THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE RESPONDENT - ASSESSEE HAD DISCLOSED THAT THE AMOUNT RECEIVED AS PREMIUM ON REDEMPTION OF DEBENTURES IN ITS COMPUT ATION OF INCOME. FURTHER, THE TRIBUNAL RECORDS THAT IT IS NOT THE CASE OF THE DEPARTMENT THAT THE RESPONDENT - ASSESSEE HAD CONCEALED ANY PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME BY STATING INCORRECT FACTS. THE AO CONSIDERED THE SA ID PREMIUM RECEIVED ON REDEMPTION OF DEBENTURES TO BE TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES, WHILE THE RESPONDENT - ASSESSEE CONSIDERED THE SAME TO BE TAXABLE UNDER THE HEAD CAPITAL GAINS. IN VIEW OF THE FACT THAT THERE IS ONLY A CHANGE OF HEAD OF INCOME AND IN THE ABSENCE OF ANY FACTS THAT THE CLAIM OF THE ASSESSEE WAS NOT BONAFIDE, THE TRIBUNAL DELETED THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT. THE HONBLE HIGH COURT OBSERVED THAT THE REVENUE HAS NOT BEEN ABLE TO POINT OUT THAT THE FINDING OF THE TRIBUNAL IS PERVERSE. IN THESE CIRCUMSTANCES THE APPEAL FILED BY THE REVENUE WAS DISMISSED BY THE HONBLE HIGH COURT. SHRI KIRIT NIHALCHAND ITA NO. 6079/MUM/2014 7 IN PRICE WATER HOUSE COOPER (SUPRA), THE ASSESSEE FILED A RETURN OF INCOME TOGETHER WITH THE TAX AUDIT REPORT. IN THE TAX AUDIT REPO RT, IT WAS DISCLOSED THAT AN AMOUNT OF RS.23,00,000/ - TOWARDS PROVISION FOR GRATUITY WAS NOT ALLOWABLE U/S 40A(7). HOWEVER, IN THE COMPUTATION OF INCOME, THE SAID AMOUNT WAS NOT DISALLOWED. THE AO ALSO OVERLOOKED THE ITEM AND OMITTED TO MAKE A DISALLOWANCE . SUBSEQUENTLY, HE REOPENED THE ASSESSMENT U/S 147, DISALLOWED THE EXPENDITURE AND LEVIED PENALTY U/S 271(1)(C). THE ASSESSEE EXPLAINED THAT THE OMISSION TO MAKE A DISALLOWANCE HAD OCCURRED BECAUSE IT HAD A SEPARATE ACCOUNTS DEPARTMENT AND THERE WAS SOME CONFUSION AND THAT THE RETURN WAS PREPARED BY A NON - CA AND WAS SIGNED BY A DIRECTOR WHO PROCEEDED ON THE BASIS THAT THE RETURN WAS CORRECTLY DRAWN UP. THE CIT(A), TRIBUNAL AND HIGH COURT AFFIRMED THE LEVY OF PENALTY ON THE GROUND THAT SINCE THE ASSESSEE W AS A WELL - KNOWN AND REPUTED CHARTERED ACCOUNTANT FIRM AND A TAX CONSULTANT, IT WAS NOT EXPECTED TO MAKE SUCH A MISTAKE AND THAT THERE HAD BEEN A FAILURE TO DISCHARGE THE STRICT LIABILITY TO FURNISH TRUE AND CORRECT PARTICULARS OF INCOME. ON APPEAL BY THE A SSESSEE, THE HONBLE SUPREME COURT HELD REVERSING ALL THE LOWER AUTHORITIES THAT : NOTWITHSTANDING THE FACT THAT THE ASSESSEE IS UNDOUBTEDLY A REPUTED FIRM AND HAS GREAT EXPERTISE AVAILABLE WITH IT, IT IS POSSIBLE THAT EVEN THE ASSESSEE COULD MAKE A SILLY MISTAKE . THE FACT THAT THE TAX AUDIT REPORT WAS FILED ALONG WITH THE RETURN AND THAT IT UNEQUIVOCALLY STATED THAT THE PROVISION FOR PAYMENT WAS NOT ALLOWABLE U/S 40A(7) INDICATES THAT THE ASSESSEE MADE A COMPUTATION ERROR IN ITS RETURN OF INCOME. A PART FROM THE ASSESSEE, EVEN THE AO WHO FRAMED THE ORIGINAL ASSESSMENT ORDER MADE A MISTAKE IN OVERLOOKING THE CONTENTS OF THE TAX AUDIT REPORT. THE CONTENTS OF THE TAX AUDIT REPORT SUGGEST THAT THERE IS NO QUESTION OF THE ASSESSEE CONCEALING ITS INCOME. THERE IS ALSO NO QUESTION OF THE ASSESSEE SHRI KIRIT NIHALCHAND ITA NO. 6079/MUM/2014 8 FURNISHING ANY INACCURATE PARTICULARS . ALL THAT HAPPENED IN THE PRESENT CASE IS THAT THROUGH A BONA FIDE AND INADVERTENT ERROR FAILED TO ADD THE PROVISION FOR GRATUITY TO ITS TOTAL INCOME. THIS CAN ONLY BE DESCRIBE D AS A HUMAN ERROR WHICH WE ARE ALL PRONE TO MAKE. THE CALIBRE AND EXPERTISE OF THE ASSESSEE HAS LITTLE OR NOTHING TO DO WITH THE INADVERTENT ERROR . THAT THE ASSESSEE SHOULD HAVE BEEN CAREFUL CANNOT BE DOUBTED, BUT THE ABSENCE OF DUE CARE , IN A CASE SUCH A S THE PRESENT, DOES NOT MEAN THAT THE ASSESSEE IS GUILTY OF EITHER FURNISHING INACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. CONSEQUENTLY, GIVEN THE PECULIAR FACTS OF THIS CASE, THE IMPOSITION OF PENALTY ON THE ASSESSEE IS NOT JUSTIFIED. 7.1 FIRST WE DEAL WITH THE CONTENTIONS OF THE ASSESSEE THAT NO PENALTY U/S 271(1)(C) WAS INITIATED ON INTEREST OF RS. 6,88,376/ - IN MAK DATA PVT. LTD . (SUPRA), THE HONBLE SUPREME COURT HAS HELD AT PARA 10 THE FOLLOWING: THE AO HAS TO SATISFY WHETHER THE PE NALTY PROCEEDINGS BE INITIATED OR NOT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND THE AO IS NOT REQUIRED TO RECORD HIS SATISFACTION IN A PARTICULAR MANNER OR REDUCE IT INTO WRITING. THE SCOPE OF SECTION 271(1)(C) HAS ALSO BEEN ELABORATELY DISCUSSED BY THIS COURT IN UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS (2008) 13 SCC 369 AND CIT VS. ATUL MOHAN BINDAL (2009) 9 SCC 589. IN THE CASE OF CIT VS. SMT. KAUSHALYA AND OTHERS (1995) 216 ITR 660 (BOM), THE HONBLE BOMBAY HIGH COURT HELD: 9. WE WI LL FIRST TAKE UP THE SHOW - CAUSE NOTICE DATED MARCH 29, 1972, PERTAINING TO THE ASSESSMENT YEARS 1968 - 69 AND 1969 - 70. THE ASSESSMENT ORDERS WERE ALREADY MADE AND THE REASONS FOR ISSUING THE NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(C) WERE RECORDED BY THE INCOME - TAX OFFICER. THE ASSESSEE FULLY KNEW IN DETAIL THE EXACT CHARGE OF THE DEPARTMENT AGAINST HIM. IN THIS BACKGROUND, IT COULD NOT BE SAID THAT EITHER THERE WAS NON - APPLICATION OF MIND BY THE INCOME - TAX OFFICER OR THE SHRI KIRIT NIHALCHAND ITA NO. 6079/MUM/2014 9 SO - CALLED AMBIGUOUS WORDING IN THE NOTICE IMPAIRED OR PREJUDICED THE RIGHT OF THE ASSESSEE TO REASONABLE OPPORTUNITY OF BEING HEARD. AFTER ALL, SECTION 274 OR ANY OTHER PROVISION IN THE ACT OR THE RULES, DOES NOT EITHER MANDATE THE GIVING OF NOTICE OR ITS ISSUANCE IN A PARTICULAR FORM. PENALTY PROCEEDINGS ARE QUASI - CRIMINAL IN NATURE. SECTION 274 CONTAINS THE PRINCIPLE OF NATURAL JUSTICE OF THE ASSESSEE BEING HEARD BEFORE LEVYING PENALTY. RULES OF NATURAL JUSTICE CANNOT BE IMPRISONED IN ANY STRAIGHT - JACKET FORMULA. FOR SUSTAINING A COMPLAINT OF FAILURE OF THE PRINCIPLES OF NATURAL JUSTICE ON THE GROUND OF ABSENCE OF OPPORTUNITY, IT HAS TO BE ESTABLISHED THAT PREJUDICE IS CAUSED TO THE CONCERNED PERSON BY THE PROCEDURE FOLLOWED. THE ISSUANCE OF NOTICE IS AN ADMINISTRATIVE DEVICE FOR INFORMING THE ASSESSEE ABOUT THE PROPOSAL T O LEVY PENALTY IN ORDER TO ENABLE HIM TO EXPLAIN AS TO WHY IT SHOULD NOT BE DONE. MERE MISTAKE IN THE LANGUAGE USED OR MERE NON - STRIKING OF THE INACCURATE PORTION CANNOT BY ITSELF INVALIDATE THE NOTICE. THE ENTIRE FACTUAL BACKGROUND WOULD FALL FOR CONSIDER ATION IN THE MATTER AND NO ONE ASPECT WOULD BE DECISIVE. IN THIS CONTEXT, USEFUL REFERENCE MAY BE MADE TO THE FOLLOWING OBSERVATION IN THE CASE OF CIT V. MITHILA MOTOR 'S (P.) LTD. [1984] 149 ITR 751 (PA TNA) (HEAD NOTE): UNDER SECTION 274 OF THE INCOME - TAX ACT, 1961, ALL THAT IS REQUIRED IS THAT THE ASSESSEE SHOULD BE GIVEN AN OPPORTUNITY TO SHOW CAUSE. NO STATUTORY NOTICE HAS BEEN PRESCRIBED IN THIS BEHALF. HENCE, IT IS SUFFICIENT IF THE ASSESSEE WAS AWARE OF THE CHARGES HE HAD TO MEET AND WAS GIVEN AN OPPORTUNITY OF BEING HEARD. A MISTAKE IN THE NOTICE WOULD NOT INVALIDATE PENALTY PROCEEDINGS.' IN THE INSTANT APPEAL, IN THE ASSESSMENT ORDER DATED 12.03.2013, THE AO HAS IN THE CONCLUDING PARA, INITIATED PENALTY SEPARATELY FOR CONCEALING THE PARTICULARS OF TAXABLE INCOME. IN THE PENALTY ORDER DATED 27.09.2013 THE AO HAS CATEGORICALLY MENTIONED AT PARA 4 AND 5 THAT PENALTY PROC EEDINGS U/S 271(1)(C) R.W. EXPLANATION 1 WAS INITIATED FOR FURNISHING INACCURATE PARTICULARS OF TAXABLE INCOME AND SHRI KIRIT NIHALCHAND ITA NO. 6079/MUM/2014 10 SHOW CAUSE NOTICE U/S 274 R.W.S. 271(1)(C) WAS ISSUED ALONG WITH ASSESSMENT ORDER. BEFORE A PENALTY IS IMPOSED, THE ASSESSEE MUST BE APPRISED OF THE PRECISE CHARGE BROUGHT AGAINST HIM. HE MUST BE TOLD DISTINCTLY WHETHER HE IS HELD GUILTY OF HAVING CONCEALED THE PARTICULARS OF HIS INCOME OR OF HAVING FURNISHED INACCURATE PARTICULARS THEREOF. THE AO HAS RIGHTLY FOLLOWED THE ABOVE PROCEDURE IN THE INSTANT CASE. 7.2 WE NOW DEAL WITH THE PENALTY LEVIED BY THE AO ON INTEREST ON FDR WITH STANDARD CHARTERED BANK. NON - DISCLOSURE OF INTEREST ON FDR BY THE ASSESSEE CANNOT BE EQUATED WITH THE REJECTION OF BONAFIDE CLAIM U/S 10A IN KANBAY SOFTWARE INDIA ( P) LTD . (SUPRA) . IT CANNOT BE EQUATED WITH 6% GOVERNMENT OF INDIA CAPITAL INDEX BONDS PURCHASED DURING THE YEAR CATEGORIZED INADVERTENTLY AS TAX - FREE BONDS AND THE CHANGE OF HEAD OF INCOME AS FOUND IN M/S BENNETT COLEMAN & CO. LTD. (SUPRA) ALSO IT IS NOT A CASE OF DISALLOWANCE OF EXPENDITURE AS IN M/S PRICE WATER HOUSE COOPERS LTD. (SUPRA). THUS THE INSTANT CASE IS DISTINGUISHABLE FROM THE ABOVE CASE - LAWS RELIED ON BY THE LD. COUNSEL IN THE INSTANT APPEAL DURING THE COURSE OF SCRUTINY ASSESSMENT THE AO HAD ISSUED NOTICE U/S 142(1) TO THE ASSESSEE ON 20.09.2012. AS RIGHTLY MENTIONED BY THE ASSESSEE WHILE SUBMITTING FACTS BEFORE THE CIT(A), DURING THE SCRUTINY PROCEEDINGS, THE ASSESSEE CAME TO KNOW THAT A SUM OF RS.6,88,376/ - BEING THE AMOUNT OF INTEREST ON F DR WITH STANDARD CHARTERED BANK HAS REMAINED TO BE INCLUDED IN THE TOTAL INCOME. TDS OF RS.86,047/ - WHICH WAS CALCULATED AS PER DTAA PROVISIONS @ 12.5% WAS ALSO NOT CLAIMED IN THE ORIGINAL RETURN OF INCOME. ACCORDINGLY, ON 27.11.2012, THE ASSESSEE FILED A REVISED COMPUTATION OF INCOME BEFORE THE AO WHEREIN RS.6,88,376/ - BEING SHRI KIRIT NIHALCHAND ITA NO. 6079/MUM/2014 11 INTEREST ON FD WAS SHOWN UNDER THE HEAD I NCOME FROM OTHER SOURCES AND WAS OFFERED FOR TAXATION . IN THE REVISED COMPUTATION, THE ASSESSEE HAD ALSO TAKEN CREDIT OF TDS OF RS.86,047/ - D EDUCTED ON INTEREST ON FDR WITH STANDARD CHARTERED BANK. IN UOI V. DHARMENDRA TEXTILE PROCESSORS (2008) 166 TAXMAN 65 (SC), IT IS HELD THAT PENALTY U/S 271(1)(C) IS A CIVIL LIABILITY AND FOR ATTRACTING SUCH LIABILITY, WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT AS IS CASE IN MATTER OF PROSECUTION U/S 276C. IN THE INSTANT CASE, ASSESSEE HAS SHO WN IN HIS STATEMENT OF TOTAL INCOME FILED ALONG WITH RETURN OF INCOME INTEREST ON FDR AND SAVINGS BANK ACCOUNT AMOUNTING TO RS.14,12,678/ - . THE ASSESSEE COULD HAVE ALSO SHOWN THE INTEREST OF RS.6,88,376/ - ON FDR WITH STANDARD CHARTED BANK. THE ASSESSEE HAS FAILED TO DO SO. THE NOTICE U/S 142(1) ISSUED BY THE AO ON 20.09.2012 LED TO THE DISCLOSURE OF INTEREST OF RS.6,88,376/ - BY THE ASSESSEE ON 27.11.2012. AS IT IS A CLEAR CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME, WE ARE OF THE CONSIDERED VIEW THAT IT IS A FIT CASE FOR IMPOSITION OF PENALTY ON INTEREST INCOME OF RS.6,88,376/ - U/S 271(1)(C) OF THE ACT . 7.3 FINALLY, WE DEAL WITH THE PENALTY LEVIED BY THE AO ON STCG OF RS.1,41,629/ - ON SALE OF SHARES. THERE IS MERIT I N THE CONTENTIONS OF THE LD. COUNSEL THAT THE ASSESSEE WAS NOT AWARE OF THE CHANGE IN THE DTAA PROVISIONS AND AS SUCH, THE SAME WAS CLAIMED EXEMPT ON THE PRESUMPTION THAT THE DTAA PROVISIONS HAS REMAINED THE SAME. FURTHER, THE ASSESSEE HAD CLAIMED STCG ON SALE OF SHARES AS NOT TAXABLE BY MENTIONING IT ON NOTE - 5, WHICH IS REPRODUCED BELOW: SHRI KIRIT NIHALCHAND ITA NO. 6079/MUM/2014 12 5. CAPITAL GAIN ON SALE OF SHARES AMOUNTING TO RS.1,41,629/ - IS NOT CHARGEABLE TO CAPITAL GAIN TAX IN VIEW OF SEC. 90(2) OF THE I.T. ACT, 1961 READ WITH PROVISIONS OF PA RA - 3 OF ARTICLE - 13 OF THE INDIA - UAE DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). THIS WAS ALSO DECIDED BY MUMBAI ITAT IN THE CASE OF GREEN EMIRATE SHIPPING & TRAVELS (100 ITD 203) AND OTHER VARIOUS JUDICIAL PRONOUNCEMENTS. FROM THE AFORESAID FACTS, IT IS EVIDENT THAT IN THE ORIGINAL RETURN OF INCOME, THE ASSESSEE HAD DECLARED INCOME AND HAD ALSO STATED THE REASONS FOR NOT PAYING TAX ON IT. THE REASON STATED BY THE APPELLANT WAS BONAFIDE. THEREFORE, PENALTY IS NOT LEVIABLE ON STCG OF RS. 1,41,629/ - TH US THE AO IS DIRECTED TO RESTRICT THE PENALTY U/S 271(1)(C) ON INTEREST INCOME OF RS.6,88,376/ - ONLY . 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 19/11/2018. SD/ - SD/ - ( SANDEEP GASAIN ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 19/11/2018 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// ( SR. PRIVATE SECRETARY ) ITAT, MUMBAI