KHANDELWAL LABORATORIES P. LTD, MUMBAI V. DCIT CEN CIR 11, MUMBAI

ITA 62/MUM/2011

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9785 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 05-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Search and seizure; Principle of natural justice; Question of law; Revenue expenditure
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.62/MUM/2011 (A. Y. 2007-08) ITA NO.63/MUM/2011 (A. Y. 2008-09) M/S. KHANDELWAL LABORATORIES PRIVATE LIMITED, 79/87, DATTARAM LAD PATH, KALACHOWKI, NEAR HAKOBA MILLS, MUMBAI - 400 033 PAN:AAACK 4225E ...... AP PELLANT VS. THE DY. C.I.T, CENTRAL CIRCLE 11, MUMBAI .... RESPONDENT ASSESSEE BY : SHRI DHARMESH SHAH RESPONDENT BY : SHRI V.JUSTIN DATE OF HEARING : 06/07/2017 DATE OF PRONOUNCEMENT : 23 /08/201 7 ORDER PER G.S.PANNU,A.M: THE CAPTIONED TWO APPEALS BY THE ASSESSEE PERTAIN TO ASSESSMENT YEARS 2007-08 &2008-09, AND SINCE THEY INVOLV E A COMMON ISSUE, THEY HAVE BEEN CLUBBED, HEARD TOGETHER AND A CONSOLIDATE D ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 2 ITA NO.62/MUM/2011 (A. Y. 2007-08) ITA NO.63/MUM/2011 (A. Y. 2008-09) 2. IN BOTH THESE APPEALS THE SINGLE COMMON ISSUE IS WITH RESPECT TO IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF TH E ACT. FIRST, WE MAY TAKE UP THE APPEAL FOR ASSESSMENT YEAR 2007-08, WHICH I S DIRECTED AGAINST ORDER PASSED BY THE CIT(A)-37, MUMBAI DATED 03/12 /2010, WHICH IN TURN, ARISES OUT OF ORDER PASSED BY THE ASSESSING OFFIC ER UNDER SECTION 271(1)(C) R.W.S. 274 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 30/06/2010. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THI S APPEAL READ AS UNDER:- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) LEGALLY ERRED IN CONFIRMING THE ORDER OF THE AO LEVYING THE PENALTY U/S.271(1)(C) OF THE ACT OF RS.28,57,054/-. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) ERRED IN REJECTING THE CLAIM OF THE APPELLANT, THAT THE ORDE R PASSED U/S 271(L)(C) IS BAD IN LAW, VOID AB-INITIO INASMUCH AS THE ASSESSMENT ORDE R ITSELF IS BAD IN LAW, FOR THE REASON THAT IT IS PASSED PURSUANT TO THE SEARCH AND SEIZURE AND THERE IS NO ADDITION TO THE INCOME QUA SEARCH, HENCE THE ORDER PASSED U/ S 153C R.W.S. 143(3) OF THE ACT ITSELF IS BAD IN LAW. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (APPEALS) FAILED TO APPRECIATE THAT BEFORE DETECTION BY THE DEPARTMENT, THE APPELLANT HAD SUO MOTO OFFERED THE IMPUGNED DISALLOWANCE OF DEFERRED REVEN UE EXPENDITURE OF RS.84,87,981/- DURING THE ASSESSMENT PROCEEDINGS. H ENCE, THERE IS NO CONCEALMENT OF INCOME ON THE PART OF THE APPELLANT AND THE APPE LLANT IS ENTITLED TO SUCCEED ON MERITS, 4) YOUR APPELLANT CRAVES LEAVE OF YOUR HONOUR TO AD D, TO ALTER, TO AMEND AND/OR TO DELETE ALL OR ANY OF THE FORGOING GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING.. 3. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT THE APP ELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS, INTER- ALIA, ENGAGED IN THE BUSINESS OF MANUFACTURING AND MARKETING OF ETHICAL PHARMACEUTICAL FORMULATIONS. IN AN ASSESSMENT FINA LIZED UNDER SECTION 143(3) R.W.S. 153C OF THE ACT DATED 30/12/2009, THE ASSESSING OFFICER 3 ITA NO.62/MUM/2011 (A. Y. 2007-08) ITA NO.63/MUM/2011 (A. Y. 2008-09) DETERMINED THE TOTAL INCOME UNDER THE NORMAL PROVIS IONS OF THE ACT AT RS.1,30,85,500/- AS AGAINST THE INCOME OF RS.50,05, 833/- DECLARED IN THE RETURN OF INCOME FILED IN RESPONSE TO THE NOTICE IS SUED UNDER SECTION 153A OF THE ACT . THE SUBSTANTIVE DIFFERENCE BETWEEN THE R ETURNED INCOME AND ASSESSED INCOME, WHICH IS RELEVANT FOR OUR PRESENT PURPOSE, WAS RS.84,87,981/- BEING ADDITION MADE ON ACCOUNT OF DE FERRED REVENUE EXPENDITURE DEBITED TO THE P&L ACCOUNT UNDER THE HE AD MISCELLANEOUS EXPENDITURE. SUBSEQUENT TO THE ASSESSMENT, THE AS SESSING OFFICER PASSED AN ORDER UNDER SECTION 271(1)(C) R.W.S. 274 OF TH E ACT ON 30/06/2010 HOLDING THE ASSESSEE GUILTY FOR CONCEALMENT/FURNISH ING OF INACCURATE PARTICULARS OF INCOME IN RESPECT OF THE DEFERRED RE VENUE EXPENDITURE OF RS.84,87,981/- AND ACCORDINGLY LEVIED A PENALTY EQU IVALENT TO100% OF THE TAX SOUGHT TO BE EVADED ON THE AFORESAID ADDITION, THER EBY DETERMINING THE PENALTY AT RS.28,57,054/-. THIS LEVY OF PENALTY HA S SINCE BEEN AFFIRMED BY THE CIT(A) ALSO AND ACCORDINGLY, ASSESSEE IS IN FUR THER APPEAL BEFORE US. 4. APART FROM CHALLENGING THE LEVY OF PENALTY ON ME RITS, ASSESSEE COMPANY HAS RAISED AN ADDITIONAL GROUND OF APPEAL, WHICH READS AS UNDER:- 1 . WITHOUT PREJUDICE, WITHOUT ADMITTING AND IN T HE ALTERNATIVE, THE ORDER OF PENALTY PASSED UNDER SECTION 271(L)(C) OF THE ACT I S 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 INITIATED 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. 5. IN SUPPORT OF THE ADMISSION OF THE SAID ADDITION AL GROUND, THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IT RAISES A QUESTION OF LAW AND THE RELEVANT FACTS ARE ALREADY ON RECORD AND, T HEREFORE, THE SAME BE 4 ITA NO.62/MUM/2011 (A. Y. 2007-08) ITA NO.63/MUM/2011 (A. Y. 2008-09) ADMITTED FOLLOWING THE JUDGMENT OF THE HON'BLE SUPR EME COURT IN THE CASE OF NATIONAL THERMAL POWER COMPANY LTD. VS. CIT, 229 ITR 383(SC)AND HON'BLE BOMBAY HIGH COURT IN THE CASE OF AHMEDABAD ELECTRICITY CO. LTD.,199 ITR 351(BOM) IT HAS ALSO BEEN ASSERTED TH E POINT SOUGHT TO BE RAISED BY THE ASSESSEE IS BASED ON THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SHRI SAMSON PERIN CHERY IN ITA NOS.1154,953, 1097 & 1226 OF 2014 DATED 05/01/2017 AND, THEREFORE , IT WAS CANVASSED THAT IN VIEW OF THE LATER JUDGMENT OF THE HON'BLE B OMBAY HIGH COURT, THE ASSESSEE WAS JUSTIFIED IN RAISING SUCH ADDITIONAL GROUND OF APPEAL. 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE POINTED OUT THAT THE NEW PLEA SOUGHT TO BE RAISED BY THE ASSES SEE WAS HITHERTO NOT RAISED BEFORE THE LOWER AUTHORITIES AND THAT THERE WAS NO JUSTIFICATION TO RAISE SUCH A PLEA BELATEDLY. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS ON THE ISSUE OF ADMISSION OF AFORESAID ADDITIONAL GROUND OF APPEAL. IN OUR VIEW, THE AFORESTATED ADDITIONAL GROUND RAISED BY THE ASSESSE E INVOLVES A PURE POINT OF LAW AND ITS DETERMINATION IS FEASIBLE IN THE IN STANT CASE,ON THE BASIS OF THE MATERIAL AND FACTS ALREADY EXISTING ON RECORD. THEREFORE, FOLLOWING THE RATIO OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER COMPANY (SUPRA) THE SAID ADDITIONAL G ROUND OF APPEAL DESERVES TO THE ADMITTED FOR ADJUDICATION. IN SO F AR AS THE PLEA OF THE REVENUE THAT THE GROUND IS RAISED BELATEDLY, IN OUR CONSIDERED OPINION, ASSESSEE HAS EXPLAINED THE CIRCUMSTANCES IN WHICH IT HAS RAISED THE SAID GROUND BEFORE THE TRIBUNAL. IN ANY CASE, IT IS PER MISSIBLE TO RAISE ADDITIONAL GROUND BEFORE THE APPELLATE AUTHORITY SO LONG AS TH E APPEAL IS PENDING FOR 5 ITA NO.62/MUM/2011 (A. Y. 2007-08) ITA NO.63/MUM/2011 (A. Y. 2008-09) DETERMINATION AND THAT THE TIME PERIOD IS NOT CRITI CAL, SPECIALLY IN A CASE WHERE THE ADDITIONAL GROUND IS OTHERWISE RAISED BO NAFIDELY. IN THE PRESENT CASE, IT IS QUITE CLEAR THAT THE POINT RAISED IN TH E ADDITIONAL GROUND IS NOT ONLY RELEVANT, FOR THE PURPOSES OF DETERMINING TH E CORRECT TAX LIABILITY OF THE ASSESSEE, BUT ALSO THAT THERE IS NO CHALLENGE TO IT S BONAFIDES. THEREFORE, THE ADDITIONAL GROUND IS ADMITTED FOR ADJUDICATION, AND AS A CONSEQUENCE BOTH THE PARTIES WERE ALSO HEARD ON MERITS OF THE SAID G ROUND. 7.1 ACCORDING TO THE LD.REPRESENTATIVE FOR THE ASSE SSEE, THE NOTICE ISSUED UNDER SECTION 274 R.W.S. 271 OF THE ACT DATED 30/1 2/2009, COPY OF WHICH IS PLACED ON RECORD IS NOT CLEAR AS TO WHETHER THE PEN ALTY PROCEEDINGS ARE INITIATED FOR CONCEALMENT OF THE PARTICULARS OF IN COME OR FOR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. IT IS FURT HER MORE POINTED OUT THAT IN THE ASSESSMENT ORDER THE PENALTY PROCEEDINGS HAVE B EEN STATED TO BE INITIATED SEPARATELY FOR FURNISHING THE INACCURATE PARTICULARS OF INCOME , WHEREAS IN THE ORDER LEVYING PENALTY, THE SAME HAS BEEN IMPOSED ON THE ASSESSEE FOR CONCEALMENT/FURNISHING INACCURATE PART ICULARS IN RESPECT OF DEFERRED REVENUE EXPENDITURE OF RS.84,87,981/-. 7.2 IN THE BACKGROUND OF THE AFORESAID FACTS, IT WA S SOUGHT TO BE POINTED OUT THAT FIRSTLY, THERE WAS NO APPLICATION OF MIND BY THE ASSESSING OFFICER AT THE TIME OF ISSUANCE OF NOTICE UNDER SECTION 274 R. W.S.271 OF THE ACT AND THAT IT WAS NOT CLEAR THAT UNDER WHICH LIMB OF SECT ION 271(1)(C) OF THE ACT THE PENALTY HAS BEEN INITIATED AGAINST THE ASSESSEE . IT HAS BEEN EMPHASIZED BY REFERRING ON THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY & ORS., 35 9 ITR 565 (KAR) THAT 6 ITA NO.62/MUM/2011 (A. Y. 2007-08) ITA NO.63/MUM/2011 (A. Y. 2008-09) THE ASSESSING OFFICER HAS TO BE CLEAR AS TO THE LI MB ON WHICH THE PENALTY IS SOUGHT TO BE LEVIED AND IN CASE THE POSITION IS UNC LEAR, THE PENALTY IS UNSUSTAINABLE. IN THIS CONTEXT, THE LD.REPRESENTAT IVE FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE TRIBUNAL IN THE CAS E OF SHRI SAMSON PERINCHERY, IN ITA NO. 4625 TO 4630/MUM/2013 DATED 11/10/2013, WHICH HAS SINCE BEEN UPHELD BY THE HON'BLE BOMBAY HIGH CO URT VIDE ITS ORDER IN ITA NOS. 1154,953, 1097 & 1226 OF 2014 DATED 5/01/2 017. APART THEREFROM, RELIANCE HAS ALSO BEEN PLACED ON THE RECENT DECISIO N OF THE MUMBAI TRIBUNAL IN THE CASE OF MEHERJEE CASSINATH HOLDINGS PRIVATE LIMITED VS. ACIT, ITA NO.2555/MUM/2012 VIDE ORDER DATED 28/04/2017, WHERE IN UNDER SIMILAR CIRCUMSTANCES THE LEVY OF PENALTY UNDER SECTION 271 (1)(C) OF THE ACT HAS BEEN SET ASIDE. 7.3 ON THIS ASPECT, THE LD. DEPARTMENTAL REPRESENTA TIVE APPEARING FOR THE REVENUE POINTED OUT THAT IN THE ASSESSMENT ORDE R THE ASSESSING OFFICER HAS INITIATED THE PENALTY FOR FURNISHING OF INACCUR ATE PARTICULARS OF INCOME AND, THEREFORE, EVEN IF IN THE NOTICE ISSUED UNDER SECTION 274 R.W.S. 271 OF THE ACT DATED 30/12/2009, THE IRRELEVANT LIMB HAS NOT BEEN STRUCK OFF, IT WOULD STILL IMPLY THAT THE PENALTY WAS SOUGHT TO BE INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN SO FAR AS THE MERIT OF THE PENALTY IS CONCERNED, THE LD. DEPARTMENTAL REPRESENTATIVE ARGU ED THAT IN THE PRESENT CASE, THE CLAIM MADE WAS INHERENTLY WRONG AND, THER EFORE, PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS JUSTIFIED. SO HOWE VER, IN SO FAR AS THE LEGAL POSITION CANVASSED BY THE ASSESSEE BASED ON THE JUD GMENTS OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SHRI SAMSON PERINC HERY (SUPRA) AS WELL AS IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTOR Y & ORS.,(SUPRA) 7 ITA NO.62/MUM/2011 (A. Y. 2007-08) ITA NO.63/MUM/2011 (A. Y. 2008-09) RENDERED BY THE HON'BLE KARNATAKA HIGH COURT IS CON CERNED, THE LD. DEPARTMENTAL REPRESENTATIVE DID NOT MAKE ANY SPECIF IC PLEAS. 7.4 HAVING HEARD THE RIVAL CONTENTIONS ON THE PRELI MINARY ISSUE RAISED IN THE ADDITIONAL GROUND OF APPEAL, WE PROCEED TO ADJU DICATE THE SAME AT THE THRESHOLD ITSELF. SO FAR AS THE FACT-SITUATION REL ATING TO THE INITIATION OF THE PROCEEDINGS FOR INITIATION AND SATISFACTION OF THE ASSESSING OFFICER FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS CONCE RNED, WE HAVE PERUSED THE RELEVANT MATERIAL. FIRSTLY, IN PARA 5.2 OF THE ASS ESSMENT ORDER DATED 30/12/2009 (SUPRA), THE ASSESSING OFFICER RECORDS A S UNDER:- ACCORDINGLY, THE DIFFERENCE REVENUE EXPENDITURE OF RS.84,87,981/- IS BEING ADDED BACK TO THE ASSESSEES TOTAL INCOME. PENALTY PROCE EDINGS UNDER SECTION 271(1)(C) OF IT ACT, 1961 ARE INITIATED SEPARATELY FOR FURNIS HING THE INACCURATE PARTICULARS. 7.5 FROM THE ABOVE, IT FOLLOWS THAT THE PENALTY PRO CEEDING UNDER SECTION 271(1)(C) OF THE ACT WAS TO BE INITIATED FOR FURNIS HING OF INACCURATE PARTICULARS AND NOT FOR CONCEALMENT OF INCOME. H OWEVER, IN THE NOTICE ISSUED UNDER SECTION 274 R.W.S. 271 OF THE ACT OF E VEN DATE, WHICH IS IN A STANDARD FORMAT, THE ASSESSING OFFICER DID NOT STRI KE OFF EITHER OF THE TWO LIMBS. THUS, THE NOTICE CONTAIN BOTH THE SITUATIO NS I.E. CONCEALMENT OF INCOME AS WELL AS FURNISHING OF INACCURATE PARTIC ULARS OF INCOME; AND, OSTENSIBLY THE CONNOTATION OF THE TWO LIMBS ARE QU ITE DIFFERENT, AS NOTED BY OUR CO-ORDINATE BENCH IN THE CASE OF MEHERJEE CAS SINATH HOLDINGS PRIVATE LIMITED (SUPRA). THEREFORE, FACTUALLY, IT IS CLEAR THAT ASSESSEE WAS NOT MADE CLEAR AS TO WHICH OF THE TWO LIMBS OF SECTION 271(1 )(C) OF THE ACT HE WAS SUPPOSED TO MEET WITH, CONSEQUENT TO THE NOTICE ISS UED UNDER SECTION 274 R.W.S. 271 OF THE ACT DATED 30/12/2009 (SUPRA). BE FORE GOING ON TO THE APPLICABLE LEGAL POSITION ON THE SAID FACTS, IT WOU LD ALSO BE APPROPRIATE TO 8 ITA NO.62/MUM/2011 (A. Y. 2007-08) ITA NO.63/MUM/2011 (A. Y. 2008-09) NOTE THE MANNER IN WHICH THE PENALTY HAS BEEN ULTIM ATELY IMPOSED BY THE ASSESSING OFFICER IN HIS ORDER DATED 30/06/2010 (SU PRA). IN THE PENALTY ORDER, THE ASSESSING OFFICER HOLDS AS UNDER:- THAT THE ASSESSEE HAS CONCEALED/FURNISHING OF INA CCURATE PARTICULARS OF INCOME TO THE EXTENT OF RS.84,87,981/- AND THUS COMMITTED DEF AULT UNDER SECTION. 271(1)(C) OF THE I T ACT, 1961. THE AFORESAID INFERENCE OF THE ASSESSING OFFICER CL EARLY REFLECTS CONFUSION IN HIS MIND AS TO UNDER WHICH OF THE TWO LIMBS, PENALT Y IS TO BE LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 7.6 IN OUR CONSIDERED THE OPINION, THE FOLLOWING DI SCUSSION IN THE ORDER OF THE TRIBUNAL IN THE CASE OF MEHERJEE CASSINATH HOLD INGS PRIVATE LIMITED (SUPRA) COVERS THE CONTROVERSY:- ............. ANOTHER PERTINENT POINT RAISED BY THE ASSESSEE WAS THAT THE PENALTY NOTICE ISSUED U/S 274 R.W.S. 271 OF THE ACT DATED 1 0.12.2010, A COPY OF WHICH HAS BEEN PLACED ON RECORD, REVEALS NON-APPLICATION OF M IND BY THE ASSESSING OFFICER INASMUCH AS THE IRRELEVANT PORTION OF THE NOTICE HAS NOT BEEN STRUCK OFF. IT WAS, THEREFORE, CONTENDED THAT THE LEVY OF PENALTY IS IL LEGAL AND DESERVES TO BE SET- ASIDE. IN SUPPORT OF THE AFORESAID PROPOSITION, RE LIANCE HAS BEEN PLACED ON THE FOLLOWING DECISIONS :- I) M/S. SSAS EMERALD MEADOWS, ITA NO. 380/2015 DAT ED 23.11.2015 (HON'BLE KARNATAKA HIGH COURT); II) MANJUNATHA COTTON AND GINNING FACTORY & ORS., 3 59 ITR 565 (KAR.); III) DILIP N. SHROFF, 161 TAXMAN 218 (SC); IV) DR. SARITA MILIND DAVARE, ITA NO. 2187 & 1789/M UM/2014 DATED 21.12.2016; V) SHRI SAMSON PERINCHERY, ITA NO. 4625 TO 4630/MUM /2013 DATED 11.10.2013 ................................................... ................................................... .................... WITH REGARD TO THE PLEA OF ASSESSEE THAT NOTICE ISS UED U/S 274 R.W.S 271(1)(C) OF THE ACT WAS LEGALLY UNTENABLE, THE LD. CIT-DR POINT ED OUT THAT IN THE ASSESSMENT ORDER ITSELF THE ASSESSING OFFICER IN PARA 4 HAS RE CORDED THAT THE PENALTY U/S 271(1)(C) OF THE ACT WAS INITIATED FOR FURNISHING O F INACCURATE PARTICULARS OF INCOME. IT WAS, THEREFORE, CONTENDED THAT THE ASSESSMENT OR DER ITSELF SHOWS DUE 9 ITA NO.62/MUM/2011 (A. Y. 2007-08) ITA NO.63/MUM/2011 (A. Y. 2008-09) APPLICATION OF MIND BY THE ASSESSING OFFICER FOR IN ITIATION OF PROCEEDINGS U/S 271(1)(C) OF THE ACT AND THAT THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT DATED 10.12.2010 CANNOT BE SOLELY EXAMINED TO SEE W HETHER THE ASSESSING OFFICER HAS DULY APPLIED HIS MIND TO THE INITIATION OF PROC EEDINGS U/S 271(1)(C) OF THE ACT. ................................................... ................................................... .................... 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. SEC. 271(1)(C) OF THE ACT EMPOWERS THE ASSESSING OFFICER TO IMPOSE PENALT Y TO THE EXTENT SPECIFIED IF, IN THE COURSE OF ANY PROCEEDINGS UNDER THE ACT, HE IS SATISFIED THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF SUCH INCOME. IN OTHER WORDS, WHAT SEC. 271(1)(C) OF THE ACT POSTULATES IS THAT THE PENALTY CAN BE LEVIED ON THE EXISTENCE OF ANY OF TH E TWO SITUATIONS, NAMELY, FOR CONCEALING THE PARTICULARS OF INCOME OR FOR FURNISH ING INACCURATE PARTICULARS OF INCOME. THEREFORE, IT IS OBVIOUS FROM THE PHRASEOL OGY OF SEC. 271(1)(C) OF THE ACT THAT THE IMPOSITION OF PENALTY IS INVITED ONLY WHEN THE CONDITIONS PRESCRIBED U/S 271(1)(C) OF THE ACT EXIST. IT IS ALSO A WELL ACCE PTED PROPOSITION THAT CONCEALMENT OF THE PARTICULARS OF INCOME AND FURNISHING OF IN ACCURATE PARTICULARS OF INCOME REFERRED TO IN SEC. 271(1)(C) OF THE ACT DENOTE DIF FERENT CONNOTATIONS. IN FACT, THIS DISTINCTION HAS BEEN APPRECIATED EVEN AT THE LEVEL OF HON'BLE SUPREME COURT NOT ONLY IN THE CASE OF DILIP N. SHROFF (SUPRA) BUT ALS O IN THE CASE OF T.ASHOK PAI, 292 ITR 11 (SC). THEREFORE, IF THE TWO EXPRESSIONS, NA MELY CONCEALMENT OF THE PARTICULARS OF INCOME AND FURNISHING OF INACCURAT E PARTICULARS OF INCOME HAVE DIFFERENT CONNOTATIONS, IT IS IMPERATIVE FOR THE AS SESSEE TO BE MADE AWARE AS TO WHICH OF THE TWO IS BEING PUT AGAINST HIM FOR THE P URPOSE OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT, SO THAT THE ASSESSEE CAN DEFE ND ACCORDINGLY. IT IS IN THIS BACKGROUND THAT ONE HAS TO APPRECIATE THE PRELIMINA RY PLEA OF ASSESSEE, WHICH IS BASED ON THE MANNER IN WHICH THE NOTICE U/S 274 R.W .S. 271(1)(C) OF THE ACT DATED 10.12.2010 HAS BEEN ISSUED TO THE ASSESSEE-COMPANY. A COPY OF THE SAID NOTICE HAS BEEN PLACED ON RECORD AND THE LEARNED REPRESENT ATIVE CANVASSED THAT THE SAME HAS BEEN ISSUED 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 CONCEALM ENT 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 NOT ICE 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 REFL ECTION OF NON-APPLICATION OF MIND BY THE ASSESSING OFFICER, AND IN SUPPORT, REFE RENCE HAS BEEN MADE TO THE FOLLOWING SPECIFIC DISCUSSION IN THE ORDER OF HON'B LE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA):- 83. IT IS OF SOME SIGNIFICANCE THAT IN THE STANDAR D PROFORMA USED BY THE ASSESSING OFFICER IN ISSUING A NOTICE DESPITE THE F ACT THAT THE SAME POSTULATES THAT INAPPROPRIATE WORDS AND PARAGRAPHS WERE TO BE DELETED, BUT THE SAME HAD NOT BEEN DONE. THUS, THE ASSESSIN G OFFICER HIMSELF WAS NOT SURE AS TO WHETHER HE HAD PROCEEDED ON THE BASI S THAT THE ASSESSEE 10 ITA NO.62/MUM/2011 (A. Y. 2007-08) ITA NO.63/MUM/2011 (A. Y. 2008-09) HAD CONCEALED HIS INCOME OR HE HAD FURNISHED INACCU RATE PARTICULARS. EVEN BEFORE US, THE LEARNED ADDITIONAL SOLICITOR GE NERAL WHILE PLACING THE ORDER OF ASSESSMENT LAID EMPHASIS THAT HE HAD DEALT WITH BOTH THE SITUATIONS. 84. THE IMPUGNED ORDER, THEREFORE, SUFFERS FROM NON -APPLICATION OF MIND. IT WAS ALSO BOUND TO COMPLY WITH THE PRINCIP LES OF NATURAL JUSTICE. (SEE MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 2 SC C 718] 9. FACTUALLY SPEAKING, THE AFORESAID PLEA OF ASSESS EE IS BORNE OUT OF RECORD AND HAVING REGARD TO THE PARITY OF REASONING LAID D OWN BY THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA), THE N OTICE IN THE INSTANT CASE DOES SUFFER FROM THE VICE OF NON-APPLICATION OF MIND BY THE ASSESSING OFFICER. IN FACT, A SIMILAR PROPOSITION WAS ALSO ENUNCIATED BY THE HON' BLE KARNATAKA HIGH COURT IN THE CASE OF M/S. SSAS EMERALD MEADOWS (SUPRA) AND AGAINST SUCH A JUDGMENT, THE SPECIAL LEAVE PETITION FILED BY THE REVENUE HAS SIN CE BEEN DISMISSED BY THE HON'BLE SUPREME COURT VIDE ORDER DATED 5.8.2016, A COPY OF WHICH IS ALSO PLACED ON RECORD. 10. IN FACT, AT THE TIME OF HEARING, THE LD. CIT-DR HAS NOT DISPUTED THE FACTUAL MATRIX, BUT SOUGHT TO POINT OUT THAT THERE IS DUE A PPLICATION OF MIND BY THE ASSESSING OFFICER WHICH CAN BE DEMONSTRATED FROM TH E DISCUSSION IN THE ASSESSMENT ORDER, WHEREIN AFTER DISCUSSING THE REAS ONS FOR THE DISALLOWANCE, HE HAS RECORDED A SATISFACTION THAT PENALTY PROCEEDING S ARE INITIATED U/S 271(1)(C) OF THE ACT FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN OUR CONSIDERED OPINION, THE ATTEMPT OF THE LD. CIT-DR TO DEMONSTRA TE APPLICATION OF MIND BY THE ASSESSING OFFICER IS NO DEFENCE INASMUCH AS THE HON 'BLE SUPREME COURT HAS APPROVED THE FACTUM OF NON-STRIKING OFF OF THE IRRE LEVANT CLAUSE IN THE NOTICE AS REFLECTIVE OF NON-APPLICATION OF MIND BY THE ASSESS ING OFFICER. SINCE THE FACTUAL MATRIX IN THE PRESENT CASE CONFORMS TO THE PROPOSIT ION LAID DOWN BY THE HON'BLE SUPREME COURT, WE PROCEED TO REJECT THE ARGUMENTS A DVANCED BY THE LD. CIT-DR BASED ON THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. FURTHER, IT IS ALSO NOTICEABLE THAT SUCH PROPOSITIO N HAS BEEN CONSIDERED BY THE HON'BLE BOMBAY HIGH COURT ALSO IN THE CASE OF SHRI SAMSON PERINCHERY, ITA NOS. 1154, 953, 1097 & 1126 OF 2014 DATED 5.1.2017 (SUPR A) AND THE DECISION OF THE TRIBUNAL HOLDING LEVY OF PENALTY IN SUCH CIRCUMSTAN CES BEING BAD, HAS BEEN APPROVED. 11. APART FROM THE AFORESAID, THE LD. CIT-DR MADE A N ARGUMENT BASED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF SMT. KAUSHALYA & OTHERS, 216 ITR 660 (BOM.) TO CANVASS SUPPORT FOR HIS PLEA THAT NON-STRIKING OFF OF THE IRRELEVANT PORTION OF NOTICE WOULD NOT INVALIDATE T HE IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT. WE HAVE CAREFULLY CONSIDERED THE SAID ARGUMENT SET-UP BY THE LD. CIT-DR AND FIND THAT A SIMILAR ISSUE HAD CO ME UP BEFORE OUR COORDINATE BENCH IN THE CASE OF DR. SARITA MILIND DAVARE (SUPR A). OUR COORDINATE BENCH, AFTER CONSIDERING THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SMT. 11 ITA NO.62/MUM/2011 (A. Y. 2007-08) ITA NO.63/MUM/2011 (A. Y. 2008-09) KAUSHALYA & ORS., (SUPRA) AS ALSO THE JUDGMENTS OF THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA) AND DHARMENDRA TEXTILE PROCESSORS, 306 ITR 277 (SC) DEDUCED AS UNDER :- 12. A COMBINED READING OF THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT. B KAUSHALYA AND OTHE RS (SUPRA) AND THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE C ASE OF DILIP N SHROFF (SUPRA) WOULD MAKE IT CLEAR THAT THERE SHOULD BE AP PLICATION OF MIND ON THE PART OF THE AO AT THE TIME OF ISSUING NOTICE. I N THE CASE OF LAKHDIR LALJI (SUPRA), THE AO ISSUED NOTICE U/S 274 FOR CONCEALM ENT OF PARTICULARS OF INCOME BUT LEVIED PENALTY FOR FURNISHING INACCURAT E PARTICULARS OF INCOME. THE HONBLE GUJARAT HIGH COURT QUASHED THE PENALTY SINCE THE BASIS FOR THE PENALTY PROCEEDINGS DISAPPEARED WHEN IT WAS HEL D THAT THERE WAS NO SUPPRESSION OF INCOME. THE HONBLE KERALA HIGH COUR T HAS STRUCK DOWN THE PENALTY IMPOSED IN THE CASE OF N.N.SUBRAMANIA IYER VS. UNION OF INDIA (SUPRA), WHEN THERE IS NO INDICATION IN THE N OTICE FOR WHAT CONTRAVENTION THE PETITIONER WAS CALLED UPON TO SHO W CAUSE WHY A PENALTY SHOULD NOT BE IMPOSED. IN THE INSTANT CASE, THE AO DID NOT SPECIFY THE CHARGE FOR WHICH PENALTY PROCEEDINGS WERE INITI ATED 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 O FFICER DID NOT SPECIFY THE CHARGE FOR WHICH THE PENALTY PROCEEDINGS WERE I NITIATED AND ALSO ISSUED AN INCORRECT NOTICE. BOTH THE ACTS OF THE AO , IN OUR VIEW, CLEARLY SHOW THAT THE AO DID NOT APPLY HIS MIND WHEN HE ISS UED NOTICE TO THE ASSESSEE AND HE WAS NOT SURE AS TO WHAT PURPOSE THE NOTICE WAS ISSUED. THE HONBLE BOMBAY HIGH COURT HAS DISCUSSED ABOUT N ON-APPLICATION OF MIND IN THE CASE OF KAUSHALYA (SUPRA) AND OBSERVED AS UNDER:- ....THE NOTICE CLEARLY DEMONSTRATED NON-APPLICATIO N OF MIND ON THE PART OF THE INSPECTING ASSISTANT COMMISSIONER. THE VAGUENESS AND AMBIGUITY IN THE NOTICE HAD ALSO PREJUDICED THE RIG HT OF REASONABLE OPPORTUNITY OF THE ASSESSEE SINCE HE DID NOT KNOW W HAT EXACT CHARGE HE HAD TO FACE. IN THIS BACK GROUND, QUASHIN G OF THE PENALTY PROCEEDINGS FOR THE ASSESSMENT YEAR 1967-68 SEEMS T O BE FULLY JUSTIFIED. IN THE INSTANT CASE ALSO, WE ARE OF THE VIEW THAT T HE AO HAS ISSUED 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 TH E TIME OF ISSUING PENALTY NOTICE TO THE ASSESSEE. 12. THE AFORESAID DISCUSSION CLEARLY BRINGS OUT AS TO THE REASONS WHY THE PARITY OF REASONING LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA) IS TO PREVAIL. FOLLOWING THE DECISION OF O UR COORDINATE BENCH IN THE CASE OF 12 ITA NO.62/MUM/2011 (A. Y. 2007-08) ITA NO.63/MUM/2011 (A. Y. 2008-09) DR. SARITA MILIND DAVARE (SUPRA), WE HEREBY REJECT THE AFORESAID ARGUMENT OF THE LD. CIT-DR. 13. APART FROM THE AFORESAID DISCUSSION, WE MAY ALS O REFER TO THE ONE MORE SEMINAL FEATURE OF THIS CASE WHICH WOULD DEMONSTRAT E THE IMPORTANCE OF NON- STRIKING OFF OF IRRELEVANT CLAUSE IN THE NOTICE BY THE ASSESSING OFFICER. AS NOTED EARLIER, IN THE ASSESSMENT ORDER DATED 10.12.2010 T HE ASSESSING OFFICER RECORDS THAT THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE A CT ARE TO BE INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. HO WEVER, IN THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT OF EVEN DATE, BOTH THE LIMBS OF SEC. 271(1)(C) OF THE ACT ARE REPRODUCED IN THE PROFORMA NOTICE AND THE I RRELEVANT CLAUSE HAS NOT BEEN STRUCK-OFF. QUITE CLEARLY, THE OBSERVATION OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND NON-STRIKING OFF OF THE IRRELE VANT CLAUSE IN THE NOTICE CLEARLY BRINGS OUT THE DIFFIDENCE ON THE PART OF ASSESSING OFFICER AND THERE IS NO CLEAR AND CRYSTALLISED 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 OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESS MENT ORDER ALONGSIDE HIS ACTION OF NON-STRIKING OFF OF THE IRRELEVANT CLAUSE IN THE NOTICE SHOWS THAT THE CHARGE BEING MADE AGAINST THE ASSESSEE QUA SEC. 271(1)(C) OF THE ACT IS NOT FIRM AND, THEREFORE, THE PROCEEDINGS SUFFER FROM NON-COMPLIAN CE WITH PRINCIPLES OF NATURAL JUSTICE INASMUCH AS THE ASSESSING OFFICER IS HIMSEL F UNSURE AND ASSESSEE IS NOT MADE AWARE AS TO WHICH OF THE TWO LIMBS OF SEC. 271 (1)(C) OF THE ACT HE HAS TO RESPOND. 14. 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) O F THE ACT DATED 10.12.2010 IS UNTENABLE AS IT SUFFERS FROM THE VICE OF NON-APPLIC ATION OF MIND HAVING REGARD TO THE RATIO OF THE JUDGMENT OF THE HON'BLE SUPREME CO URT IN THE CASE OF DILIP N. SHROFF (SUPRA) AS WELL AS THE JUDGMENT OF THE HON'B LE BOMBAY HIGH COURT IN THE CASE OF SHRI SAMSON PERINCHERY (SUPRA). THUS, ON T HIS COUNT ITSELF THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT IS LIABLE TO BE DE LETED. WE HOLD SO. SINCE THE PENALTY HAS BEEN DELETED ON THE PRELIMINARY POINT, THE OTHER ARGUMENTS RAISED BY THE APPELLANT ARE NOT BEING DEALT WITH. 7.7 IN VIEW OF THE AFORESAID PRECEDENT, IN OUR VIE W, THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 274 R.W.S. 271 OF THE ACT DATED 30/12/2009 IS UNTENABLE SINCE IT REFLECTS NON-APPLI CATION OF THE MIND BY THE ASSESSING OFFICER, HAVING REGARD TO THE RATIO OF TH E HONBLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA) AS WELL AS H ON'BLE BOMBAY HIGH COURT IN 13 ITA NO.62/MUM/2011 (A. Y. 2007-08) ITA NO.63/MUM/2011 (A. Y. 2008-09) THE CASE OF SHRI SAMSON PERINCHERY (SUPRA). THUS, ON THIS PRELIMINARY POINT ITSELF THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT IS LIABLE TO BE DELETED. WE HOLD SO. 8. IN VIEW OF OUR AFORESAID DECISION, THE ISSUES RA ISED BY THE ASSESSEE ON MERITS OF THE PENALTY BECOME ACADEMIC AND ARE NOT B EING ADJUDICATED FOR THE PRESENT. AS A CONSEQUENCE, WE SET-ASIDE THE OR DER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY OF RS. 28,57,054/- IMPOSED U/S 271(1)(C) OF THE ACT FOR ASSESSMENT YEAR 2007-0 8. 9. IN SO FAR AS THE APPEAL FOR ASSESSMENT YEAR 2008 -09 IS CONCERNED, IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE FAC TS AND CIRCUMSTANCES ARE PARI-MATERIA TO THOSE CONSIDERED BY US IN THE A PPEAL FOR ASSESSMENT YEAR 2007-08 IN THE EARLIER PARAS AND, THEREFORE, OUR DE CISION FOR ASSESSMENT YEAR 2007-08 WOULD APPLY MUTATIS MUTANDIS IN THE APPEAL FOR THE ASSESSMENT YEAR 2008-09 ALSO. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 23/08/2017 SD/- SD/- (RAVISH SOOD) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 23/08 /2017 VM , SR. PS 14 ITA NO.62/MUM/2011 (A. Y. 2007-08) ITA NO.63/MUM/2011 (A. Y. 2008-09) 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// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI