MAYAR INDIA LTD., NEW DELHI V. DCIT, CIRCLE- 6(1), NEW DELHI

ITA 6096/DEL/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0953 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 28-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Question of law; Initiation of penalty proceedings
• Section: 271(1)(c); 43B; 274; 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DLEHI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NO. 6096/DEL/2017 ASSESSMENT YEAR: 2009-10 MAYAR INDIA LIMITED, VS. DCIT, CIRCLE 6(1), PLOT NO. 1, BASANT LOK COMMUNITY CENTRE, NEW DELHI . VASANT VIHAR, NEW DELHI. PAN : AAACM8246P (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY: SH. RAMESH KUMAR, SR. DR DATE OF HEARING: 07/07/2021 DATE OF ORDER : 07/07/2021 ORDER PER K. NARASIMHA CHARY, J.M. AGGRIEVED BY THE ORDER DATED 31/07/2017 PASSED BY T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-37, NEW DELHI ('LD. CIT(A)') FOR THE ASSESSMENT YEAR 2009-10, MAYAR INDIA LIMITED(T HE ASSESSEE) FILED THIS APPEAL. 2. BRIEF FACTS, AS ARE NECESSARY FOR DISPOSAL OF TH IS APPEAL, ARE THAT BASED ON THE ADDITIONS OF RS.10,44,192/- ON ACCOUNT OF DISALLOWANCE U/S. 14A, RS.7,62,258/- ON ACCOUNT OF DISALLOWANCE U/S. 40A(3), RS.37,230/- ON ACCOUNT OF EXCESS CLAIM U/S. 43B AND RS.4,52424/- O N ACCOUNT OF DISALLOWANCE OF EXPENSES U/S. 37(1), THE ASSESSING OFFICER INITIATED 2 PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE INCOME-TA X ACT AND IMPOSED PENALTY OF RS.7,59,780/-. 3. AGGRIEVED BY PENALTY ORDER, THE ASSESSEE PREFERR ED AN APPEAL BEFORE THE LD. CIT(A), AND CHALLENGING THE VALIDITY OF THE PENALTY NOTICE ISSUED UNDER SECTION 274 READ WITH SECTION 271 OF T HE ACT, THE LD. AR CONTENDED THAT THE LEARNED ASSESSING OFFICER HAD OM ITTED TO SPECIFY THE RELEVANT CHARGE THAT IS, WHETHER CONCEALMENT OR INACCURATE PARTICULARS BOTH IN THE ASSESSMENT ORDER AND IN TH E PENALTY NOTICE THEREBY RENDERING THE NOTICE AS VAGUE. BY PLACING R ELIANCE ON THE DECISIONS OF THE HONBLE KARNATAKA HIGH COURT IN TH E CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 IT R 565, COMMISSIONER OF INCOME TAX V. SSAS EMERALD MEADOWS (2016) 73 TAXMAN.COM 241 (KAR) AND ALSO THE DECISION OF THE H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF LD. PCIT VS. SAHARA INDIA LIFE INSURANCE CO LTD IN ITA NO. 475 AND BATCH OF 2019, LD. AR SUBMITTED THA T THE PENALTY CANNOT BE SUSTAINED. LEARNED CIT(A) BY IMPUGNED ORDER PART LY ALLOWING THE APPEAL, DELETED THE PENALTY BASED ON DISALLOWANCE U /S. 14A, BUT SUSTAINED THE REMAINING AMOUNT OF PENALTY IMPOSED. 4. WHEN THE MATTER IS CALLED, THERE IS NO REPRESEN TATION FROM THE ASSESSEE. NOTICE WAS SENT TO THE ADDRESS GIVEN IN F ORM NO. 36. IF THE ASSESSEE IS AVAILABLE IN SUCH ADDRESS, SUCH NOTICE SHOULD HAVE BEEN SERVED ON THE ASSESSEE. IF FOR ANY REASON, THE ASSE SSEE IS NOT AVAILABLE THERE, IT IS FOR THE ASSESSEE TO MAKE ARRANGEMENTS FOR SERVICE OF SUCH NOTICE BY FURNISHING THE ADDRESS WHERE THE ASSESSEE WOULD BE AVAILABLE, OR TO DELIVER IT TO SOME AUTHORISED PERSON, OR BY M AKING REQUEST TO THE POSTAL DEPARTMENT TO DETAIN THE MAIL TILL THE ASSES SEE CLAIMS THE SAME. 3 NON-SERVICE OF NOTICE IS SOLELY ATTRIBUTABLE TO THE CONDUCT OF ASSESSEE. IN THESE CIRCUMSTANCES, WE PROCEED TO DECIDE THE APPEA L BASING ON THE MATERIAL AVAILABLE ON RECORD. 5. LD. DR RELIED ON THE ORDERS OF AUTHORITIES BELOW AND PLACING ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CA SE OF SUNDARAM FINANCE LTD VS. CIT (2018) 403 ITR 407 (MADRAS), LD . DR SUBMITTED THAT THE ASSESSEE UNDERSTOOD THE PURPORT OF THE NOTICE A ND WITHOUT RAISING ANY OBJECTION WHATSOEVER THEY HAVE PARTICIPATED IN THE PENALTY PROCEEDINGS AS WELL AS THE PROCEEDINGS BEFORE THE L D. CIT(A) AND, THEREFORE, NO PREJUDICE WAS CAUSED TO THE CASE OF T HE ASSESSEE. SHE THEREFORE, PRAYED TO DISMISS THE APPEAL. 6. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE BY LD. DR. IT IS AN UNDISPUTED FACT THAT THE N OTICE ISSUED TO THE ASSESSEE DOES NOT SPECIFY THE CHARGE UNDER WHICH TH E PENALTY WAS PROPOSED TO BE LEVIED BY THE ASSESSING OFFICER. 9. IN THE CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY, 359 ITR 565 (KAR) ,VIDE PARAGRAPH 60, THE HONBLE KARNATAKA HIGH COUR T HAS HELD AS FOLLOWS :- 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, T HAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INAC CURATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CASES THERE M AY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES T HE INITIATION OF THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE O FFENCES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING HIM G UILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROU NDS MENTIONED IN 4 SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INI TIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONF INED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECI FICALLY 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 SHOU LD 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 T O IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDI NGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY W OULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAIN ED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PE NALTY 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 I N 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 WHI CH, WHEN PASSED, WAS NOT SUSTAINABLE. 10. IN COMMISSIONER OF INCOME TAX V. 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 FURN ISHING OF INACCURATE PARTICULARS OR THAT FOR CONCEALMENT OF INCOM E MAKES THE PENALTY ORDER LIABLE FOR CANCELLATION EVEN WHEN IT HAS BEEN PROVED BEYOND REASONABLE DOUBT THAT THE ASS ESSEE HAD CONCEALED INCOME IN THE FACTS AND CIRCUMSTANCES O F THE CASE? 11. AND THE HONBE HIGH COURT ANSWERED THE SAME IN FAVOUR OF THE ASSESSEE OBSERVING THAT: 5 THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY THE AS SESSEE HOLDING THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SE CTION 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 SPECIFY WHICH LIMB OF SECTION 271(1)(C) OF THE ACT, THE PENALTY PROCEEDINGS HAD B EEN INITIATED I.E., WHETHER FOR CONCEALMENT OF PARTICULARS OF INC OME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE TRIBUNAL, WHILE ALLOWING THE APPEAL OF THE ASSESSEE, HAS RELIED ON THE DECIS ION OF THE DIVISION BENCH OF THIS COURT RENDERED IN THE CASE O F 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 L AW ARISES IN THIS APPEAL FOR DETERMINATION BY THIS COURT. THE APPEAL IS ACCORDINGLY DISMISSED. 12. THE SPECIAL LEAVE PETITION FILED BY THE REVENUE CHALLENGING THE AFORESAID JUDGEMENT OF THE HIGH COURT WAS DISMISSED BY THE HONBLE SUPREME COURT HOLDING: WE DO NOT FIND ANY MERIT IN THIS PETITION. THE SPECIA L LEAVE PETITION IS, ACCORDINGLY, DISMISSED. 13. IN PCIT VS. SAHARA INDIA LIFE INSURANCE COMPANY LIMITED CASE ITA NO 475/2019 AND BATCH ORDER DATED 02/08/2019, HONB LE DELHI HIGH COURT, UPHELD THE VIEW TAKEN BY THE TRIBUNAL BASING ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MAN JUNATHA COTTON AND GINNING FACTORY (SUPRA) AND SSAS EMERALD MEADOWS ( SUPRA) WHEREIN IT WAS HELD THAT THE NOTICE ISSUED BY THE LEARNED ASSE SSING OFFICER WOULD BE BAD IN LAW IF IT DID NOT SPECIFY UNDER WHICH LIMB O F SECTION 271(1)(C) OF THE ACT THE PENALTY PROCEEDINGS HAD BEEN INITIATED I.E ., WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISH ING OF INACCURATE PARTICULARS THEREOF. RELEVANT OBSERVATIONS OF THE HONBLE HIGH COURT READ THAT,- 6 21. THE RESPONDENT HAD CHALLENGING THE UPHOLDING O F THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT, WHICH WAS ACCEPTED BY THE ITAT. IT FOLLOWED THE DECISION OF K ARNATAKA HIGH COURT IN CIT V. MANJUNATHA COTTON & GINNING FACTORY 359 ITR 565 (KAR) AND OBSERVED THAT THE NOTICE ISSUED BY THE AO WOULD BE BAD IN LAW IF IT DID NOT SPECIFY WHICH LIMB OF SECTION 271(1)(C) THE PENALTY PROCEEDINGS HAD BEEN INITIATED UNDER I.E. W HETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISH ING OF INACCURATE PARTICULARS OF INCOME. THE KARNATAKA HIG H COURT HAD FOLLOWED THE ABOVE JUDGEMENT IN THE SUBSEQUENT ORDE R IN COMMISSIONER OF INCOME TAX V. SSAS EMERALD MEADOWS (2016) 73 TAXMAN.COM 241 (KAR), THE APPEAL AGAINST WHICH WAS DISMISSED BY THE SUPREME COURT OF INDIA IN SLP NO. 11485 OF 2016 BY ORDER DATED 5 TH AUGUST, 2016. 22. ON THIS ISSUE AGAIN THIS COURT IS UNABLE TO FIN D ANY ERROR HAVING BEEN COMMITTED BY THE ITAT. 14. IT IS, THEREFORE, CLEAR THAT FOR THE AO TO ASSU ME JURISDICTION U/S 271(1)(C), PROPER NOTICE IS NECESSARY AND THE DEFEC T 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 ST ATED SUPRA, CLEARLY ESTABLISH THAT THE NOTICE ISSUED UNDER SECTION 274 READ WITH 271 OF THE ACT IS DEFECTIVE AND, THEREFORE, WE FIND IT DIFFICU LT TO HOLD THAT THE LEARNED AO RIGHTLY ASSUMED JURISDICTION TO PASS THE ORDER L EVYING THE PENALTY. AS A CONSEQUENCE OF OUR FINDINGS ABOVE, WE DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY IN QUESTION. 15. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 7 TH DAY OF JULY, 2021. SD/- SD/- (PRASHANT MAHARISHI) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 07/07/2021