DR. BISWAJEET S. NAIDU, MUMBAI V. ACIT 11(2),

ITA 623/MUM/2014

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1501 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 24-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MILIND V PATIL
• Assessee Lawyers: SHETH
• Keywords: Depreciation; Initiation of penalty proceedings; Procedural lapse
• Section: 6; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD , JM ITA NO. 623/ MUM/20 14 ( ASSESSMENT YEAR : 2009 - 10 ) DR. BISWAJEET S. NAIDU PLOT NO.537, KARUNA 4 TH FLOOR, 11 TH ROAD CHEMBUR MUMBAI 400 074 VS. ACIT 11(2) MUMBAI PAN/GIR NO. AAAPN7002K ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY SHRI M.S. SHETH REVENUE BY SHRI MILIND V. PATIL DATE OF HEARING 07 / 09 /201 8 DATE OF PRONOUNCEMENT 27 / 11 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - 3, MUMBAI DATED 23/09/2013 FOR A.Y.2009 - 10, IN THE MATTER OF IMPOSITION OF PENALTY U/S.271(1)(C) OF THE INCOME TAX ACT, 1961. 2. IN THIS APPE AL, ASSESSEE IS AGGRIEVED BY ACTION OF CIT(A) FOR CONFIRMING THE PENALTY OF RS.15,11,240/ - . 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. ITA NO. 623/MUM/2014 DR. BISWAJEET S. NAIDU 2 4. THE ASSESSEE IS A MEDICAL PROFESSIONAL PRACTICING AS ORTHOPAEDIC SURGEON. HE IS REGULARLY ASSESSED TO IN COME TAX BEFORE ACIT 11(2), MUMBAI. THE ASSESSMENT FOR THE A.Y.2009 - 10 WAS COMPLETED U/S.143(3) OF THE I.T.ACT. 5. DURING THE COURSE OF ASSESSMENT, AO MADE ADDITION IN RESPECT OF CHEQUE DEPOSITED IN KOTAK MAHENDRA BANK LTD., AND ALSO ON ACCOUNT OF DISALLOW ANCE OF DEPRECIATION ON THE COMMERCIAL PREMISES AMOUNTING TO RS.2,39,253/ - AND ON ACCOUNT OF DIFFERENTIAL AMOUNT OF LOAN FROM LIC AMOUNTING TO RS.1,23,118/ - . 6. THE ADDITION SO MADE WAS CONFIRMED BY CIT(A). AO LEVIED PENALTY U/S.271(1)(C) OF THE ACT WITH R ESPECT TO THE ADDITION SO MADE. 7. DURING THE COURSE OF HEARING LEARNED AR DRAWN OUR ATTENTION TO THE QUANTUM ORDER DATED 28/12/2011, WHEREIN PENALTY PROCEEDINGS WAS INITIATED BY AO FOR FURNISHING INACCURATE PARTICULARS OF INCOME . HOWEVER, IN THE PENA LTY ORDER PASSED U/S.271(1)(C) DATED 22/06/2012, PENALTY WAS IMPOSED FOR CONCEALMENT OF PARTICULARS OF INCOME. AS PER LEARNED AR, THERE IS DIFFERENT ALLEGATION AS TO INITIATION OF PENALTY AND LEVY OF PENALTY , THE ORDER PASSED FOR LEVY OF PENALTY HAS BEEN VITIATED . RELIANCE WAS PLACED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SAMSON PERINCHERY AND THE SERIES OF THE DECISION OF THE TRIBUNAL WHEREIN PENALTY WAS DELETED ON THE PLEA THAT INITIATION OF PENALTY IN THE QUANTUM ASSESSMENT ORDER A ND LEVY OF PENALTY IN THE ORDER PASSED U/S.271(1)(C) SHOULD BE ON THE VERY SAME GROUND I.E., EITHER FOR ITA NO. 623/MUM/2014 DR. BISWAJEET S. NAIDU 3 CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 8. IN THE QUANTUM ORDER, AO HAS MENTIONED THAT ASSESSEE IS LIABLE FOR PENA LTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME T HEN IN THE PENALTY ORDER U/S.271 (1)(C) ALSO PENALTY SHOULD BE IMPOSED FOR FURNISHING INACCURATE PARTICULARS OF INCOME . IF IN THE QUANTUM ORDER AND PENALTY ORDER, THE AO HAS STATED DIFFERENTLY, IT WILL BE CONSIDERED AS NON - APPLICATION OF MIND AND NO PENALTY IS IMPOSABLE AS PER THE DECISION OF JURISDICTIONAL HIGH COURT IN CASE OF SHRI SAMSON PERINCHERY DATED 05/01/2017. 9 . ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES AND CON TENDED THAT ADDITION SO MADE BY THE AO HAS BEEN CONFIRMED BY CIT(A), THEREFORE, THE AO HAS CORRECTLY LEVIED THE PENALTY BY ISSUE OF NOTICE U/S.274. AS PER LEARNED DR, MERELY MENTIONING OF ALLEGATION OF FURNISHING INACCURATE PARTICULARS OF INCOME IN QUANTUM ORDER AND MENTIONING OF CONCEALMENT OF PARTICULARS OF INCOME IN PENALTY ORDER IS A PROCEDURAL LAPSE AND WILL NOT INVALIDATE LEVY OF PENALTY. 10 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAV E ALSO DELIBERATED ON THE VARIOUS JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY LEARNED AR AND DR DURING THE COURSE OF HEARING BEFORE US IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. IN OUR CONSIDERED VIEW, TWO CHARGES FOR INITIATING THE PENALTY OPERATE ON ITA NO. 623/MUM/2014 DR. BISWAJEET S. NAIDU 4 TWO DIFFERENT FOOTING AND UNDER THE PENAL PROVISION THE CHARGE HAS TO BE VERY SPECIFIC AND NOT VAGUE. THESE CHARGES ARE NOT TO BE RECKONED AS ANY CASUAL REMARK, WHICH CAN BE INTERCHANGED BY THE AO AT ANY STAGE ON HIS WHIMS AND FANCIES. IT IS NOT AN ERROR WHICH IS RECTIFIABLE OR TO BE IGNORED, ALBEIT IT IS A FATAL ERROR WHICH VITIATES THE ENTIRE INITIATION ITSELF. IF CHARGE ITSELF IS VAGUE AND NOT CLEAR, THEN THE ONUS CAST UPON THE ASSESSEE UNDER EXPLAN ATION ITSELF GETS VITIATED AS ASSESSEE IS PRECLUDED FROM A CHANCE TO GIVE A SPECIFIC REBUTTAL ON THAT CHARGE. IT IS A TRITE LAW THAT CIRCUMSTANCES AND FACTS FOR LEVY OF PENALTY UNDER BOTH THE GROUNDS OPERATE IN A DIFFERENT FIELDS. THE COURTS HAVE HELD THAT IN THE NOTICE UNDER SECTION 274 R.W.S. 271, THE AO HAS TO SPECIFY THE CHARGE ON WHICH HE INTENDS TO LEVY PENALTY. THIS ASPECT OF THE MATTER HAS BEEN CONSISTENTLY REITERATED BY THE HON'BLE HIGH COURTS FRO M TIME TO TIME. 1 1 . IN THE INSTANT CASE, WE FOUND THAT AO HAS PASSED QUANTUM ORDER DATED 28/12/2011, WHEREIN HE PROPOSED TO IMPOSE PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME, HOWEVER, WHILE PASSING THE PENALTY ORDER U/S.271(1)(C) DATED 22/06 /2012, THE SAME WAS LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME WHICH INDICATE NON - APPLICATION OF MIND ON THE PART OF THE ASSESSING OFFICER RENDERING THE PENALTY ORDER UNSUSTAINABLE IN LAW. 12 . THERE CAN BE NO DOUBT THAT PENALTY U/S. 271(1)(C) OF THE A CT IS LEVIED FOR CONCEALING PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF SUCH INCOME, WHICH ARE THE TWO LIMBS OF THIS PROVISION. IN ITA NO. 623/MUM/2014 DR. BISWAJEET S. NAIDU 5 OTHER WORDS, IT IS ONLY WHEN THE AUTHORITY INVESTED WITH THE REQUISITE POWER IS SATISFIED THAT EITHER O F THE TWO EVENTS EXISTED IN A PARTICULAR CASE THAT PROCEEDINGS U/S. 271(1)(C) OF THE ACT ARE INITIATED. THIS PRE - REQUISITE SHOULD INVARIABLY BE EVIDENT FROM THE QUANTUM ASSESSMENT ORDER WHEREIN PENALTY IS INITIATED AND THE ORDER LEVYING PENALTY PASSED U/S. 271(1)(C) OF THE IT ACT. ITAT AMRITSAR BENCH IN THE CASE OF HPCL MITTAL ENERGY LTD., IN THE THIRD BENCH ORDER DATED 07/05/2018 HAS CATEGORICALLY OBSERVED AS UNDER: 14. IT HAS BEEN NOTED ABOVE THAT PENALTY PROCEEDINGS ARE SEPARATE FROM ASSESSMENT PROCEEDI NGS, WHICH GET KICKED WITH THE ISSUE OF NOTICE U/S 274 AND CULMINATE IN THE PENALTY ORDER U/S 271(1)(C) OF THE ACT. MANY A TIMES, PENALTY INITIATED IN THE ASSESSMENT ORDER ON ONE OR MORE COUNTS BY MEANS OF NOTICE U/S 274, IS NOT EVENTUALLY IMPOSED BY THE A O ON GETTING SATISFIED WITH THE EXPLANATION TENDERED BY THE ASSESSEE IN THE PENALTY PROCEEDINGS. IN ANY CASE, CONFRONTING THE ASSESSEE WITH THE CHARGE AGAINST HIM IS SINE QUA NON FOR ANY VALID PENALTY PROCEEDINGS. IT IS ONLY WHEN THE ASSESSEE IS MADE AWARE OF SUCH A CHARGE AGAINST HIM THAT HE CAN PRESENT HIS SIDE. THUS PRESCRIBING THE CHARGE IN THE PENALTY NOTICE AND PENALTY ORDER IS MUST. ABSENCE OF A CHARGE IN THE PENALTY NOTICE OR NOT FINDING THE ASSEESSEE GUILTY OF A CLEAR OFFENCE IN THE PENALTY ORDER, VITIATES THE PENALTY ORDER. 15 . THE MOOT QUESTION IS THAT WHAT SHOULD BE THE NATURE OF SPECIFICATION OF A CHARGE BY THE AO AT THE STAGE OF INITIATION OF PENALTY PROCEEDINGS AND AT THE TIME OF PASSING THE PENALTY ORDER. IS THE AO REQUIRED TO SPECIFY IN TH E PENALTY NOTICE/ORDER AS TO WHETHER IT IS A CASE OF `CONCEALMENT OF PARTICULARS OF INCOME OR `FURNISHING OF INACCURATE PARTICULARS OF INCOME; OR BOTH OF THEM, WHICH CAN BE EXPRESSED BY USING THE WORD `AND BETWEEN THE TWO EXPRESSIONS. WHEN THE AO IS SAT ISFIED THAT IT IS A CLEAR - CUT CASE OF CONCEALMENT OF PARTICULARS OF INCOME, HE MUST SPECIFY IT SO IN THE NOTICE AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS AND ALSO IN THE PENALTY ORDER. THE AO CANNOT INITIATE PENALTY ON THE CHARGE OF `CONCEALMENT OF PARTICULARS OF INCOME, BUT ULTIMATELY FIND THE ASSESSEE GUILTY IN THE PENALTY ORDER OF `FURNISHING INACCURATE PARTICULARS OF INCOME. IN THE SAME MANNER, HE CANNOT BE UNCERTAIN IN THE PENALTY ORDER AS TO CONCEALMENT OR ITA NO. 623/MUM/2014 DR. BISWAJEET S. NAIDU 6 FURNISHING OF INACCURATE PARTICULARS OF INCOME BY USING SLASH BETWEEN THE TWO EXPRESSIONS. WHEN THE AO IS SATISFIED THAT IT IS A CLEAR - CUT CASE OF `FURNISHING OF INACCURATE PARTICULARS OF INCOME, HE MUST AGAIN SPECIFY IT SO IN THE NOTICE AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS AND ALSO IN THE PENALTY ORDER. AFTER INITIATING PENALTY ON THE CHARGE OF `FURNISHING OF INACCURATE PARTICULARS OF INCOME, HE CANNOT IMPOSE PENALTY BY FINDING THE ASSESSEE GUILTY OF `CONCEALMENT OF PARTICULARS OF INCOME. AGAIN, HE CANNOT BE UNCERTAIN IN THE P ENALTY ORDER AS TO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY USING SLASH BETWEEN THE TWO EXPRESSIONS. WHEN THE AO IS SATISFIED THAT IT IS A CLEAR - CUT CASE OF IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT ON TWO OR MORE ADDITIONS/DIS ALLOWANCES, ONE OR MORE FALLING UNDER THE EXPRESSION `CONCEALMENT OF PARTICULARS OF INCOME AND THE OTHER UNDER THE `FURNISHING OF INACCURATE PARTICULARS OF INCOME, HE MUST SPECIFY IT SO BY USING THE WORD `AND BETWEEN THE TWO EXPRESSIONS IN THE NOTICE AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS. IF HE REMAINS CONVINCED IN THE PENALTY PROCEEDINGS THAT THE PENALTY WAS RIGHTLY INITIATED ON SUCH COUNTS AND IMPOSES PENALTY ACCORDINGLY, HE MUST SPECIFICALLY FIND THE ASSESSEE GUILTY OF `CONCEALMENT OF PARTI CULARS OF INCOME AND ALSO `FURNISHING OF INACCURATE PARTICULARS OF INCOME IN THE PENALTY ORDER. IF THE CHARGE IS NOT LEVIED IN THE ABOVE MANNER IN ALL THE THREE CLEAR - CUT SITUATIONS DISCUSSED ABOVE IN THE PENALTY NOTICE AND ALSO IN THE PENALTY ORDER, THE PENALTY ORDER BECOMES UNSUSTAINABLE IN LAW. 1 6 . THE HONBLE KARNATAKA HIGH COURT IN MANJUNATHA COTTON AND GINNING FACTORY 359 ITR 565 (KAR) HAS HELD THAT A PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD BE MADE KNOWN ABOUT THE G ROUNDS ON WHICH THEY INTEND IMPOSING PENALTY ON HIM AS SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF THE DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 2 71(1)(C) DO NOT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE HONBLE HIGH COURT WENT ON TO HOLD THAT : `CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. 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. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOUL D 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. 1 7 . IN CIT VS. MANU ENGINEERING WORKS (1980) 122 IT R 306 (GUJ) PENALTY WAS IMPOSED BY NOTING `THAT THE ASSESSEE HAD CONCEALED ITS INCOME AND/OR THAT IT HAD FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. STRIKING DOWN THE PENALTY, THE HONBLE HIGH COURT HELD THAT : ITA NO. 623/MUM/2014 DR. BISWAJEET S. NAIDU 7 `IT WAS INCUMBENT UPON THE IAC TO COME TO A POSITIVE FINDING AS TO WHETHER THERE WAS CONCEALMENT OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF SUCH INCOME HAD BEEN FURNISHED BY THE ASSESSEE. NO SUCH CLEAR - CUT FINDING WAS REACHED BY THE IAC AND, ON THAT GROUND ALONE, THE ORD ER OF PENALTY PASSED BY THE IAC WAS LIABLE TO BE STRUCK DOWN. 1 8 . IN PADMA RAM BHARALI VS. CIT (1977) 110 ITR 0054 (GAU), THE HONBLE HIGH COURT DID NOT SUSTAIN PENALTY LEVIED U/S 271(1)(C) WHEN : `THE INITIATION OF THE PENALTY PROCEEDING WAS FOR CONCEA LMENT OF THE PARTICULARS OF INCOME. BUT THE TRIBUNAL FINALLY HELD THAT THE ASSESSEE WOULD BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF INCOME OR TO HAVE FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 1 9 . THUS IT IS EVIDENT THAT WHEN THE AO IS SATISFI ED AT THE STAGE OF INITIATION OF PENALTY PROCEEDINGS OF A CLEAR - CUT CHARGE AGAINST THE ASSESSEE IN ANY OF THE THREE SITUATIONS DISCUSSED ABOVE (SAY, CONCEALMENT OF PARTICULARS OF INCOME), BUT IMPOSES PENALTY BY HOLDING THE ASSESSEE AS GUILTY OF THE OTHER C HARGE (SAY, FURNISHING OF INACCURATE PARTICULARS OF INCOME) OR AN UNCERTAIN CHARGE (CONCEALMENT OF PARTICULARS OF INCOME/FURNISHING OF INACCURATE PARTICULARS OF INCOME), THE PENALTY CANNOT BE SUSTAINED. 1 3 . IN VIEW OF THE ABOVE DISCUSSIONS, RESPECTFULLY APPLYING THE PROPOSITION OF LAW LAID DOWN BY JURISDICTIONAL HIGH COURT IN THE CASE OF SAMSON PERINCHERY (SUPRA) & ITAT, AMRITSAR BENCH (SUPRA), TO THE FACT S OF INSTANT CASE, WE DO NOT FIND ANY MERIT IN THE PENALTY ORDER SO PASSED BY AO . A CCORDINGLY, AO IS DIRECTED TO DELETE THE PENALTY SO IMPOSED U/S. 271(1)(C) OF THE IT ACT. 1 4 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 / 11 /201 8 SD/ - ( RAVISH SOOD ) SD/ - (R.C .SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 27 / 11 /201 8 KARUNA SR. PS ITA NO. 623/MUM/2014 DR. BISWAJEET S. NAIDU 8 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. GUA RD FILE. //TRUE COPY//