M/s.Thoughtline Technologies P. Ltd, Trivandrum V. The ITO, Trivandrum

ITA 614/COCH/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0673 (ITAT-COCHIN)
• Duration Of Justice: 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-11-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 27-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: R KRISHNAN
• Keywords: Principle of natural justice; Bonafide belief; Competent authority
• Section: 271(1)(c); 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFOR E S/ SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., J M I .T . A. NO . 614 / COCH/ 2 01 7 ASSESSMENT YEAR : 2011 - 12 M/S. THOUGHTLINE TECHNOLOGIES P. LTD., TECHNOPARK, KAZHAKOOTAM, TRIVANDRUM. [PAN:AACCT 8839M] VS. THE INCOME TAX OFFICER, WARD - 1(1), TRIVANDRUM. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) A SSESSEE BY SHRI R. KRISHNAN, CA REVENUE BY SMT. A.S. BINDHU, DR D ATE OF HEARING 13/11/2018 DATE OF PRONOUNCEMENT 15 / 1 1 /2018 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT (A), TRIVANDRUM DATED 21/09/2017 AND PERTAINS TO THE A SSESSMENT YEAR 2011 - 12. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT . IT FILED ITS RETURN FOR THE YEAR UNDER CONSIDERATION ON 27.09.2011 DECLARING A LOSS OF RS.3,76,848/ - AFTER CLAIMING DEDUCTION UNDER SECT ION 10A TO THE TUNE OF RS. 28,71,31 1/ - . WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT , THE ASSESSING OFFICER CALLED FOR PROOF TO SUBSTANTIATE THE ELIGIBILITY OF CLAIM MADE UNDER SECTION 10A OF THE ACT . DURING THE I.T.A. NO . 61 4 /COCH/201 7 2 COURSE OF ASSESSMENT, IT WAS SUBMITTED BY THE ASSESSEE THAT THEY ARE ELIGIBLE FOR DEDUCTION UNDER SECTION I 0 A AS THEY GOT REGISTERED WITH STPI AS 100% EXPORT ORIENTED UNIT (EOU). IT WAS SUBMITTED THAT THE REGISTRATION CERTIFICATE ISSUED BY THE DIRECTOR, STP I WAS NOT IMMEDIATELY AVAILABLE AN D THE ASSESSES HA D REQUESTED TIME TO PRODUCE THE SAME. MEANWHILE, A LETTER WAS ISSUED BY THE ASSESSING OFFIC ER TO THE DIRECTOR, STP I ENQUIRING WHETHER ASSESSEE WAS REGISTERED AS A 100% EOU TO BE ELIGIBLE FOR DEDUCTION U/S 10A. IN REPLY DATED 19.02.2014, THE DIRECTOR, STP I INTIMATED T HE ASSESSING OFFICER THAT THE ASSESSEE HAD NOT BEEN REGISTERED AS STPI UNIT. IN THE ASSESSMENT, THE CLAIM FOR DEDUCTION MADE UNDER SECTION 10A OF RS.28,71,311/ - WAS THUS DISALLOWED AND THE PENALTY PROCEEDINGS U/S 271( 1( C) GOT INITIATED. 2.1 DURING THE COURSE OF PENAL PROCEEDINGS, THE ASSESSEE CLAIMED TO HAVE STATED THAT THE CLAIM FOR DEDUCTION UNDER SECTION 10A WAS MADE BASED ON THE ASSUMPTION THAT THEY GOT REGISTERED WITH STPI AS 100% EOU. HOWEVER, SINCE THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 10A WITHOUT HAVING REGISTRATION WITH THE STPI, THE ASSESSING OFFICER CAME TO TH E CONCLUSION THAT THAT IT HAD CONCEALED THE TRUE PARTICULARS OF ITS INCOME. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE HAD WILLFULLY CLAIMED DEDUCTION UNDER SECTION 10A WITHOUT HAVING NECESSARY QUALIFICATION TO CLAIM SUCH A DEDUCTION WHICH DEFINITEL Y POINTS THE FINGER TOWARDS WILLFUL CONCEALMENT. FURTHER, IT WAS NOTED THAT THE ASSESSEE HAD ACCEPTED THE ASSESSMENT AND PAID THE TAX AS WELL WITHOUT FILING AN APPEAL. I.T.A. NO . 61 4 /COCH/201 7 3 ACCORDINGLY, THE ASSESSING OFFICER TREATED THE ENTIRE CLAIM OF DEDUCTION MADE UNDER SEC TION 10A OF RS.28,71311/ - AS THE ASSESSEE CONCEALED INCOME BY FURNISHING INACCURATE PARTICULARS AND THEREBY, LEVIED PENALTY OF RS.4,19,460/ - . 3. THE CIT(A) HELD THAT B Y VIRTUE OF THE PROVISIONS OF SECTION 271(L) ( C), THERE MUST BE CONCEALMENT OF INCOME O R THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. IT WAS OBSERVED THAT THE INTENTION EITHER TO CONCEAL THE INCOME OR TO FURNISH INACCURATE PARTICULARS OF SUCH INCOME SHOULD NECESSARILY BE ESTABLISHED WITHOUT WHICH NO PENALTY UNDER TH E ABOVE MENTIONED SECTION COULD BE LEVIED. CONSIDERING THE FACT THAT THE ASSESSEE HA D CLAIMED DEDUCTION UNDER SECTION 10A WITHOUT HAVING REGISTRATION GRANTED BY THE DIRECTOR, SOFTWARE TECHNOLOGY PARK OF INDIA WHO IS THE COMPETENT AUTHORITY TO ALLOW THE ASS ESSEE AS 100% EOU WITHOUT WHICH NO DEDUCTION U/S 10A COULD BE CLAIMED, THE CIT(A) HELD THAT IT CANNOT BE SAID THAT THE ASSESSEE HAD NO INTENTION EITHER TO CONCEAL THE INCOME OR HAS NOT FILED INACCURATE PARTICULARS OF ITS INCOME BECAUSE, APPROVAL FROM THE SAID COMPETENT AUTHORITY NOT ONLY TO IDENTIFY THE ASSESSEE AS 100% EOU BUT ALSO TO CLAIM DEDUCTION U/S 10A, IS MUST . ACCORDING TO THE CIT(A), TH E ASSESSEE SEEMS TO HAVE TAKEN FOR GRANTED THIS VERY IMPORTANT CONDITION WHEN THE CLAIM OF DEDUCTION WAS MADE A ND THE ASSESSEE WAS VERY MUCH IN THE KNOWLEDGE OF THE NECESSARY APPROVAL WHICH IN TURN WAS NOT OBTAINED FROM THE COMPETENT AUTHORITY BUT STILL IT WENT AHEAD WITH CLAIMING DEDUCTION OF RS.28,71,311 U/S 10A WITHOUT FULFILLING THE VERY IMPORT CONDITION AS MEN TIONED ABOVE. ACCORDING TO THE CIT(A), IT IS NOT THE CASE OF THE ASSESSEE THAT IT HAD I.T.A. NO . 61 4 /COCH/201 7 4 BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER ABOUT THE CLAIM OF DEDUCTION WRONGLY MADE U/S 10A AND IT IS ALSO NOT THE CASE OF THE ASSESSEE THAT IT HAD DISPUTED THE VER Y ADDITION IN THE APPEAL AND IT HAD A PRIMA FACIE CASE TO REBUT. THE CIT(A) JUSTIFIED THE PENALTY LEVIED AND HELD THAT THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF C I T VS . RELIANCE PETROPRODUCTS P VT. LTD . (322 1TR 158) RELIED ON BY THE ASSESSEE WAS TO TALLY MISPLACED SINCE AS PER THE JUDGMENT WHEN THERE IS FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THEN THERE IS A NEED TO INVITE THE PENALTY U/S 271(L)(C), THE PENALTY LEVIED WAS THUS C ONFIRMED. 4. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE PENALTY OF RS.419460/ - LEVIED BY THE AO U/S 271 (1 )(C) OF THE IT ACT. 2. THE LEARNED CIT(A) ERRED IN CONCLUDING THAT FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 10A THE APPELLANT SHOULD HAVE BEEN REGISTERED WITH THE STPI. NOWHERE IN THE ACT THERE IS SUCH A PRE - CONDITION. 3. THE LEARNED CIT ( A) OUGHT TO HAVE APPRECIATED THAT THAT THE APPELLANT IS A 100% EOU OPERATING IN THE SOFTWARE TECHNOLOGY PARK AND THE SECTION PRESCRIBES THAT IF THE APPELLANT IS A 100% EOU THEN THEY ARE ELIGIBLE FOR EXEMPTION U/S 10A. NOWHERE IN THE SECTION IT IS STATED THAT THE APPROVAL FROM THE COMPETENT AUTHORITY IS REQUIRED . 4. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAD BY IGNORANCE ACCEPTED THE ASSESSMENT AND PAID TAX, PURELY WITH AN INTENTION TO PURCHASE PEACE AND AVOID LITIGATION. THAT THE ASSESSMENT WAS ACCEPTED IS NOT A GROUND FOR LEVY OF PENA LTY U/S271(1)(C) OF THE IT ACT. 5. THE LEARNED CIT(A) ERRED IN CONCLUDING THAT THE APPELLANT HAD WILFULLY CONCEALED THE PARTICULARS OF INCOME AND FURNISHED INACCURATE PARTICULARS, WHEN I.T.A. NO . 61 4 /COCH/201 7 5 THE APPELLANT WAS UNDER THE BONAFIDE BELIEF THAT THEY HAD THE REGISTR ATION IN THE STPI. YOUR APPELLANT PRAYS THAT THE PENALTY SUSTAINED BE DELETED. 5. THE ASSESSEE HAS ALSO RAISED THE FOLLOWING ADDITIONAL GROUNDS ALONG WITH A PETITION FOR ADMITTING THE ADDITIONAL GROUND. 1. THE LEARNED ASSESSING OFFICER ERRED IN LEVYIN G A PENALTY ON A WRONG NOTICE U/S 274 R.W.S 271(L)(C ), WITHOUT SPECIFYING UNDER WHICH OF THE LIMBS, THE SHOW CAUSE NOTICE IS BEING ISSUED. 2. THE LEARNED ASSESSING OFFICER ERRED IN NOT SPECIFICALLY MENTIONING IN THE NOTICE AS TO WHETHER THE ACTION WAS B EING INITIATED FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. TO THAT EXTENT, THE NOTICE IS AB - INITIO VOID. 5.1 THE LD. AR PLEADED THAT THE ADDITIONAL GROUNDS OF APPEAL RAISED BY THE ASSESSEE INVOLVED A POINT OF LAW FOR WHICH THE NE CESSARY FACTS ARE ALREADY ON RECORD AND, THEREFORE, THE SAME BE ADMITTED FOR ADJUDICATION FOR THE REASON THAT JUSTICE IS TO BE RENDERED TO THE ASSESSEE BY WAY OF ADDITIONAL GROUNDS. IN SO FAR AS THE ADDITIONAL GROUND S OF APPEAL ARE CONCERNED, THERE WAS NO SERIOUS OPPOSITION BY THE LD. DR EXCEPT POINTING OUT THAT THIS GROUND WAS OTHERWISE NOT RAISED BEFORE THE LOWER AUTHORITIES. 5.2 WE HAVE CAREFULLY GONE THROUGH THE ARGUMENTS OF BOTH THE PARTIES. THE SUPREME COU R T IN THE CASE OF NTPC LTD. VS. CIT (2 29 ITR 383) AS WELL AS IN THE CASE OF JUTE CORPORATION OF INDIA LTD. (187 ITR 683) HELD THA T THE ADDITIONAL GROUND RAISED DESERVES TO BE ADMITTED FOR ADJUDICATION AS IT INVOLVES A POINT OF I.T.A. NO . 61 4 /COCH/201 7 6 LAW WHICH DOES NOT REQUIRE ANY FURTHER OR FRESH INVESTIGATION OF FA CTS. IT WAS ALSO NOTED THAT THE ISSUE RAISED BY WAY OF ADDITIONAL GROUND S OF APPEAL GO TO THE ROOT OF THE JURISDICTION OF THE ASSESSING OFFICER TO IMPOSE PENALTY U/S. 271(1)(C) OF THE ACT AND, THEREFORE, THE SAME IS RELEVANT TO LEVY OF PENALTY U/S. 271(1) (C) OF THE ACT. THEREFORE, THE SAME IS ADMITTED FOR ADJUDICATION. THE PLEA OF THE ASSESSEE IN THE ADDITIONAL GROUND IS THAT THE ASSESSING OFFICER ERRED IN IMPOSING PENALTY BY ISSUING NOTICE U/S. 274 R.W.S. 271(1)(C) OF THE ACT WITHOUT SPECIFYING UNDER W HICH LIMB , THE SHOW CAUSE NOTICE WAS ISSUED. HE DREW OUR ATTENTION TO THE COPY OF NOTICE DATED 24/02/2014 ISSUED U/S. 274 OF THE ACT AND SUBMITTED THAT IT WAS NON APPLICATION OF MIND BY THE ASSESSING OFFICER IN AS MUCH AS THE SAME WAS ISSUED IN THE STA ND ARD PROFORMA AND THE IRRELEVANT PORTION OF THE NOTICE WAS NOT STRUCK OFF BY THE ASSESSING OFFICER. IT WAS ALSO SUBMITTED BY THE LD. AR THAT THE ISSUE HAS BEEN DECIDED IN FAVOR OF THE ASSESSEE IN THE FOLLOWING CASES: I) CIT VS. MANJUNATHA COTTON AND GINNI NG FACTORY (359 ITR 565) II) CIT VS. SSAS EMERALD MEADOWS (CC NO. 11485/2016 DATED 05/08/2016. 5.3 T HE LD. DR SUBMITTED THAT THE PURPOSE OF LEVYING PENALTY WAS ALREADY INDICATED BY THE ASSESSING OFFICER THROUGH DISCUSSIONS IN THE ASSESSMENT ORDER WHE REIN PENALTY HAS BEEN INITIATED FOR CONCEALMENT OF INCOME. SHE ALSO SUBMITTED THAT A READING OF PENALTY ORDER ITSELF SHOWS THAT THE ASSESSEE WILLFULLY I.T.A. NO . 61 4 /COCH/201 7 7 CONCEALED THE INCOME BY CLAIMING DEDUCTION U/S. 10A OF THE ACT WITHOUT HAVING THE NECESSARY QUALIFICATIO N TO CLAIM SUCH DEDUCTION WHICH DEFINITELY ATTRACT PENALTY FOR CONCEALMENT OF INCOME U/S. 271(1)(C) OF THE ACT. IT WAS THEREFORE, CONTENDED THAT NON - STRIKING OFF THE IR RELEVANT PORTION OF THE NOTICE ISSUED U/S. 274 R.W.S 271(1)(C) OF THE ACT DATED 24/02/ 2014 DOES NOT CREATE ANY AMBIGUITY AS THE ASSESSEE WAS AWARE THAT PENALTY PROCEEDINGS WERE INITIATED FOR CONCEALMENT OF INCOME AND NOT FOR FURNISHING INACCURATE PARTICULARS OF INCOME. SHE ALSO SUBMITTED THAT EVEN OTHERWISE THE PROVISION OF SECTION 292BB O F THE ACT SAVES THE ERROR, IF ANY, IN THE NOTICE ISSUED U/S. 274 R.W.S. 271(1)(C) OF THE ACT AND THEREFORE, THE PLEA OF THE ASSESSEE IS TO BE REJECTED. 6. W E HAV E CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. SEC.271(1)(C) OF THE ACT POSTULATES THAT PENAL TY PRESCRIBED THEREIN CAN BE LEVIED ON EXISTENCE OF ANY OF THE TWO SITUATIONS, NAMELY FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF SUCH INCOME. IT HAS BEEN JUDICIALLY WELL UNDERSTOOD BY NOW THAT 'CONCEALMENT OF PARTI CULARS OF INCOME' AND 'FURNISHING OF INACCURATE PARTICULARS OF INCOME' REFERRED TO IN SEC. 271(1)(C) OF THE ACT DENOTE TWO DIFFERENT CONNOTATIONS. AS A READY REFERENCE FOR THE AFORESAID PROPOSITION, WE MAY LOOK UPON THE JUDGMENTS OF THE SUPREME COURT IN TH E CASE OF DILIP N. SHROFF VS. JCIT (291 ITR 519) AND ALSO T. ASHOK PAI VS. CIT (292 ITR 11 ) TO APPRECIATE THAT THE AFORESAID TWO EXPRESSIONS CONVEY DIFFERENT CONNOTATIONS. HAVING UNDERSTOOD THAT THE TWO EXPRESSIONS HAVE DIFFERENT CONNOTATIONS, IN OUR OPINI ON, IT WAS IMP ERATIVE FOR THE ASSESSING OFFICER TO MAKE THE ASSESSEE AWARE I.T.A. NO . 61 4 /COCH/201 7 8 IN THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT AS TO WHICH OF THE TWO LIMBS ARE BEING PUT - UP AGAINST HIM FOR THE PURPOSES OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. OSTE NSIBLY, UNLESS THE ASSESSEE IS MADE AWARE OF THE SPECIFIC CHARGE AGAINST HIM, IT WOULD BE VIOLATIVE OF THE PRINCIPLES OF NATURAL JUSTICE INASMUCH AS THE ASSESSEE WOULD NOT BE IN A POSITION TO PUT UP HIS DEFENCE APPROPRIATELY. IT IS IN THIS MANNER ONE HAS T O APPRECIATE THE POINT BEING CANVASSED BY THE ASSESSEE BEFORE US, WHICH IS BASED ON THE TONE AND TENOR OF THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT DATED 24/02/2014. IT IS IN THIS BACKGROUND THAT ONE HAS TO APPRECIATE THE PRELIMINARY PLEA OF AS SESSEE, WHICH IS BASED ON THE MANNER IN WHICH THE NOTICE U/S 274 R.W.S, 271(1)(C) OF THE ACT DATED 24.02.2014 HAS BEEN ISSUED TO THE ASSESSEE - COMPANY. A COPY OF THE SAID NOTICE HAS BEEN PLACED ON RECORD AND THE LD. AR CANVASSED THAT THE SAME WAS I SSUED BY THE ASSESSING OFFICER IN A STANDARD PROFORMA, WITHOUT STRIKING OUT THE IRRELEVANT CLAUSE. IN OTHER WORDS, THE NOTICE REFERS TO BOTH THE LIMBS OF SEC. 271(1)(C) OF THE ACT, NAMELY CONCEALMENT OF THE PARTICULARS OF INCOME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. QUITE CLEARLY, NON STRIKING OFF OF THE IRRELEVANT LIMB IN THE SAID NOTICE DOES NOT CONVEY TO THE ASSESSEE AS TO WHICH OF THE TWO CHARGES IT HAS TO RESPOND. THE AFORESAID INFIRMITY IN THE NOTICE HAS BEEN SOUGHT TO BE DEMONSTRATED AS A REFLECTION OF NON - APPLICATION OF MIND BY THE ASSESSING OFFICER, AND IN SUPPORT, REFERENCE HAS BEEN MADE TO THE JUDGMENT OF THE S UPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA): - I.T.A. NO . 61 4 /COCH/201 7 9 IT IS OF SOME SIGNIFICANCE THAT IN THE STANDARD PROFORMA USED BY THE ASSESSING OFFICER I SSUING A NOTICE DESPITE THE FACT THAT THE SAME POSTULATES THAT INAPPROPRIATE WORDS AND PARAGRAPHS WERE TO BE DELETED, BUT THE SAME HAD NOT BEEN DONE. THUS, THE ASSESSING OFFICER HIMSELF WAS NOT SURE AS TO WHETHER HE HAD PROCEEDED ON THE BASIS THAT THE ASSESSES HAD CONCEALED HIS INCOME OR HE HAD FURNISHED INACCURATE PARTICULARS. EVEN BEFORE US, THE LEARNED ADDITIONAL SOLICITOR GENERAL WHI L E PLACING THE ORDER OF ASSESSMENT LAID EMPHASIS THAT HE HAD DEALT WITH BOTH THE SITUATIONS. 84. THE I MPUGNED ORDER, THEREFORE, SUFFERS FROM NON - APPLICATION OF MIND. IT WAS ALSO BOUND TO COMPLY WITH THE PRINCIPLES OF NATURAL JUSTICE. (SEE MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 2 SC C 718]' 6.1 FACTUALLY SPEAKING, THE AFORESAID PLEA OF THE ASSESSEE IS BORNE OUT OF RECORD AND HAVING REGARD TO THE PARITY OF REASONING LAID DOWN BY THE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA), THE NOTICE IN THE INSTANT CASE DOES SUFFER FROM THE VICE OF NON - APPLICATION OF MIND BY THE ASSESSING OFFICER. THE KARNA TAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HELD THAT NOTICE U/S. 274 OF THE ACT SHOULD SPECIFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I.E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FURNISHING OF I NACCURATE PARTICULARS OF INCOME. SENDING PRINTED FORM WHERE ALL THE GROUNDS MENTIONED IM SECTION 271(1)(C) WOULD NOT SATISFY THE REQUIREMENT OF LAW. HENCE, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE ENTIRE PENALTY PROCEEDINGS WERE VITIATED ON THE GROU ND THAT THE NOTICE ISSUED WAS NOT IN ACCORDANCE WITH LAW. IN FACT, A SIMILAR PROPOSITION WAS ALSO ENUNCIATED BY THE KA RNATAKA HIGH COURT IN THE CASE OF M/S. SSA'S EMERALD MEADOWS (SUPRA) AND AGAINST SUCH A I.T.A. NO . 61 4 /COCH/201 7 10 JUDGMENT, THE SPECIAL LEAVE PETITION FILED BY THE REVENUE HAS SINCE BEEN DISMISSED BY THE SUPREME COURT VIDE ORDER DATED 5.8.2016 . 6.2 THE ITAT, MUMBAI BENCH IN THE CASE OF DR. SARITA MILIND DAVARE (48 CCH 312) (MUMBAI TRIBUNAL) AFTER CONSIDERING THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF S MT . B. KAUSHALY A & OTHERS ( 216 ITR 660 ) AS ALSO THE JUDGMENTS OF THE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA) AND DHARMENDRA TEXTILE PROCESSORS ( 306 ITR 277 ) HELD AS UNDER ; - '12. A COMBINED READING OF THE DECISION RENDERED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF SMT. B. KAUSHA L YA AND OTHERS (SUPRA) AND THE DECISION RENDERED BY HON'BLE SUP REME COURT IN THE CASE OF DI L IP N SHROFF (SUPRA) WOULD MAKE IT CLEAR THAT THERE SHOULD BE APPLICATION OF MIND ON THE PART OF THE AO AT THE TIME OF ISSUIN G NOTICE. IN THE CASE OF LAKHDIR LALJI (SUPRA), THE AO ISSUED NOTICE U/S 274 FOR CONCEALMENT OF PARTICULARS OF INCOME BUT LEVIED PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE HON'BIE GUJARAT HIGH COURT QUASHED THE PENALTY SINCE THE BASIS FOR THE PENALTY PROCEEDINGS DISAPPEARED WHEN IT WAS HELD THAT THERE WAS NO SUPPRESSION OF INCOME. THE HON'BLE KERALA HIGH COURT HAS STRUCK DOWN THE PENALTY IMPOSED IN THE CASE OF N.N. SUBRAMANIA LYER VS. UNION OF INDIA (SUPRA), WHEN THERE IS NO INDICATION IN THE NOTICE FOR WHAT CONTRAVENTION THE PETITIONER WAS CALLED UPON TO SHOW CAUSE WHY A PENALTY SHOULD NOT BE IMPOSED. IN THE INSTANT CASE, THE AO DID NOT SPECIFY THE CHARGE FOR WHICH PENALTY PROCEEDINGS WERE INITIATED AND FURTHER HE HAS ISSUED A NOTICE MEANT FOR CALLING THE ASSESSEE TO FURNISH THE RETURN OF INCOME. HENCE, IN THE INSTANT CASE, THE ASSESSING OFFICER DID NOT SPECIFY THE CHARGE FOR WHICH THE PENALTY PROCEEDINGS WERE INITIATED AND A L SO ISSUED AN INCORRECT NOTICE. BOTH THE ACTS OF THE AO, IN OUR VI EW, CLEARLY SHOW THAT THE AO DID NOT APPLY HIS MIND WHEN HE ISSUED NOTICE TO THE ASSESSEE AND HE WAS NOT SURE AS TO WHAT PURPOSE THE NOTICE WAS ISSUED. THE HON'BLE BOMBAY HIGH COURT HAS DISCUSSED ABOUT NON - APPLICATION OF MIND IN THE CASE OF KAUSHA L YA & OTH ERS (SUPRA) AND OBSERVED AS UNDER : '....THE NOTICE CLEARLY DEMONSTRATED NON - APPLICATION OF MIND ON THE PART OF THE INSPECTING ASSISTANT COMMISSIONER. THE VAGUENESS AND AMBIGUITY IN THE NOTICE HAD A L SO PREJUDICED THE RIGHT OF REASONABLE OPPORTUNITY OF THE ASSESSEE SINCE HE DID NOT KNOW WHAT EXACT CHARGE HE HAD TO FACE. IN I.T.A. NO . 61 4 /COCH/201 7 11 THIS BACK GROUND, QUASHING OF THE PENALTY PROCEEDINGS FOR THE ASSESSMENT YEAR 1967 - 68 SEEMS TO BE FULLY JUSTIFIED.' 6.3 IN THE INSTANT CASE ALSO, WE ARE OF THE VIEW THAT THE AO HA D ISSU ED A NOTICE, THAT TOO INCORRECT ONE, IN A ROUTINE MANNER. FURTHER THE NOTICE DID NOT SPECIFY THE CHARGE FOR WHICH THE PENALTY NOTICE WAS ISSUED. HENCE, IN OUR VIEW, THE AO HAS FAILED TO APPLY HIS MIND AT THE TIME OF ISSUING PENALTY NOTICE TO THE ASSESSEE. 6.4 THE AFORESAID DISCUSSION CLEARLY BRINGS OUT AS TO THE REASONS WHY THE PARITY OF REASONING LAID DOWN BY THE SUPREME COURT IN THE CASE OF DI L IP N. SHROFF (SUPRA) IS TO PREVAIL. APART FROM THE AFORESAID DISCUSSION, WE MAY A L SO REFER TO ONE MORE SEMIN AL FEATURE OF THIS CASE WHICH WOULD DEMONSTRATE THE IMPORTANCE OF NON - STRIKING OFF OF IRRELEVANT CLAUSE IN THE NOTICE BY THE ASSESSING OFFICER. HOWEVER, IN THE NOTICE ISSUED U/S 274 OF THE ACT DATED 24/02/2014, BOTH THE LIMBS OF SEC. 271(1)(C) ARE PRODUCED IN THE PROFORMA NOTICE AND THE IRRELEVANT CLAUSE HAS NOT BEEN STRUCK - OFF. QUITE DEARLY, THE NON - STRIKING OFF OF THE IRRELEVANT CLAUSE IN THE NOTICE CLEARLY BRINGS OUT THE FACT THAT THERE IS NO CLEAR AND CRYSTALLIZED CHARGE BEING CONVEYED TO THE ASSESSEE U /S 271(1)(C), WHICH HAS TO BE MET BY HIM. AS NOTED BY THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA), THE QUASI - CRIMINAL PROCEEDINGS U/S 271(1)(C) OF THE ACT OUGHT TO COMPLY WITH THE PRINCIPLES OF NATURAL JUSTICE, AND IN THE PRESENT CASE, CONSIDERING THE ACTION OF THE ASSESSING OFFICER IN NON - STRIKING OFF OF THE IRRELEVANT CLAUSE IN THE NOTICE SHOWS THAT THE CHARGE BEING MADE AGAINST THE ASSESSEE QUA SEC. I.T.A. NO . 61 4 /COCH/201 7 12 271(1)(C) OF THE ACT IS NOT FIRM AND, THEREFORE, THE PROCEEDINGS SUFFER FROM NON - COM PLIANCE WITH PRINCIPLES OF NATURAL JUSTICE IN AS MUCH AS THE ASSESSING OFFICER IS HIMSELF UNSURE AND ASSESSEE IS NOT MADE AWARE AS TO WHICH OF THE TWO LI MBS OF SEC. 271(1)(C) OF THE ACT HE HAS TO RESPOND. 6.5 THEREFORE, IN VIEW OF THE AFORESAID DISCUSSI ON, IN OUR VIEW, THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S 274 R.W.S. 271(1)(C) OF THE ACT DATED 24/02/2014 IS UNTENABLE AS IT SUFFERS FROM THE VICE OF NON - APPLICATION OF MIND HAVING REGARD TO T HE RATIO OF THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF D ILI P N. SHROFF (SUPRA). THUS, ON THIS COUNT ITSELF THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT IS LIABLE TO BE DELETED. SINCE THE PENALTY HAS BEEN DELETED ON THE PRELIMINARY POINT, WE REFRAIN FROM GOING INTO OTHER GROUNDS OF APPEAL RAISED BY THE ASSE SSEE. THEREFORE, IN VIEW OF THE AFORESAID DISCUSSION, IN OUR VIEW, THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S 274 R.W.S. 271(1)(C) OF THE ACT DATED 2 4.0 2. 2014 IS UNTENABLE AND SUFFERS FROM THE INFIRMITY OF NON - APPLICATION OF MIND BY THE ASSESSING OFFI CER. ON THIS COUNT ITSELF, IN OUR VIEW, THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT DESERVES TO BE DELETED. I.T.A. NO . 61 4 /COCH/201 7 13 7 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH NOVEMB ER , 201 8 . SD/ - SD/ - ( GEORGE GEOR GE K. ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 15 TH NOVEMBER , 2018 GJ COPY TO: 1 . M/S. THOUGHTLINE TECHNOLOGIES P. LTD., TECHNOPARK, KAZHAKO OTAM, TRIVANDRUM. 2. THE INCOME TAX OFFICER, WARD - 1(1), TRIVANDRUM. 3. THE COMMISSIONER OF INCOME - TAX (AP P EALS) , TRIVANDRUM 4. THE PR. COMMISSIONER OF INCOME - TAX, TRIVANDRUM. 5. D. R., I.T.A.T., COCHIN BENCH, COCHIN. 6 . GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN