SONALI D. MEHTA, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX 17 (3) ERSTWHILE DEPUTY COMMISSIONER INCOME TAX 12(1), MUMBAI

ITA 6708/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5404 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2008-2009
• Appeal Filed On: 27-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Keywords: Business income; Principle of natural justice; Rule 8D
• Section: 271(1)(c); 143(3); 14A; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.6708/M/2017 ASSESSMENT YEAR: 2008-09 MRS. SONALI D. MEHTA, 105, APOLLO STREET, 2 ND FLOOR, ROOM NO.31, M.S. MARG, FORT, MUMBAI 400 023 PAN: AANPM 7994C VS. ACIT 17(3), ERSTWHILE- DCIT-12(1), MUMBAI (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI PARESH SHAPARIA, A.R. REVENUE BY : SHRI CHAUDHARY ARUNKUMAR SINGH, D.R . DATE OF HEARING : 10.04.2019 DATE OF PRONOUNCEMENT : 15.05.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 17.08.2017 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE HAS RAISED TWO GROUNDS OF APPEAL. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS CHALLENGED THE P ENALTY ON THE TECHNICAL ISSUE THAT LD. CIT(A) HAS CONFIRMED T HE PENALTY AS LEVIED BY THE AO DESPITE THE FACT THAT PENALTY WAS INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME BUT FINALLY LEVIED FOR CONCEALMENT OF INCOME AND ALSO IGNORING THE FAC T THAT THE NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF T HE ACT WAS ISSUED IN A MECHANICAL MANNER WITHOUT APPLICATION O F MIND AS ITA NO.6708/M/2017 MRS. SONALI D. MEHTA 2 THE AO HAS NOT SPECIFIED ONE THE TWO LIMBS ON WHICH PENALTY WAS PROPOSED TO BE LEVIED. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSMENT WAS FRAMED IN THIS CASE VIDE ORDER DATED 06.12.2010 ASSESSING THE INCOME AT RS.24,91,180/- AS AGAINST THE RETURN OF INCOME OF RS.24,90,922/- WHEREIN THE AO ASSESSED THE PROFIT O F RS.24,90,922/- ON SALE OF SHARES AS BUSINESS INCOME AS AGAINST THE SHORT TERM CAPITAL GAIN SHOWN BY THE ASSESSEE B ESIDES DISALLOWANCE OF RS.32,922/- UNDER SECTION 14A READ WITH RULE 8D2(III). THE AO INITIATED THE PENALTY PROCEEDINGS AS MENTIONED IN PAGE 6 OF THE ASSESSMENT ORDER FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND ALSO NOTICE DATED 06.12. 2010 WAS ISSUED UNDER SECTION 274 READ WITH SECTION 271 OF T HE ACT WITHOUT MENTIONING OR STATING THE PARTICULAR LIMB O N WHICH THE PENALTY WAS PROPOSED TO BE LEVIED. FINALLY, THE PE NALTY WAS LEVIED IN THE PENALTY ORDER DATED 29.03.2014 FOR CO NCEALMENT OF INCOME AS STATED IN PAGE 6 OF THE PENALTY ORDER. 4. THE LD. CIT(A) ALSO DISMISSED THE APPEAL OF THE ASSESSEE AFTER TAKING INTO ACCOUNT THE SUBMISSIONS AND CONTE NTIONS RAISED DURING THE APPELLATE PROCEEDINGS AND HENCE T HE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD. A.R. VEHEMENTLY SUBMITTED BEFORE THE BEN CH THAT THE ORDER PASSED BY THE AO UNDER SECTION 271(1)(C) OF THE ACT DATED 29.03.2014 IS VOID AND BAD IN LAW FOR THE REA SON THAT AO INITIATED PENALTY PROCEEDINGS IN THE ASSESSMENT ORD ER PASSED UNDER SECTION 143(3) DATED 06.12.2010 FOR FILING OF INACCURATE PARTICULARS OF INCOME AND THE NOTICE UNDER SECTION 274 READ ITA NO.6708/M/2017 MRS. SONALI D. MEHTA 3 WITH SECTION 271 DATED 06.12.2010 WAS ISSUED WITHOU T MENTIONING THEREIN THE PARTICULAR LIMB ON WHICH THE PENALTY WAS PROPOSED TO BE LEVIED. IN OTHER WORDS, THE NOTICE WAS ISSUED IN A MECHANICAL MANNER WITHOUT APPLICATION OF MIND AS TH E AO FAILED TO STRIKE OFF THE INAPPROPRIATE WORDS IN THE NOTICE . THUS THE PENALTY NOTICE WAS ISSUED UNDER BOTH THE LIMBS I.E. FOR CONCEALMENT OF PARTICULARS OF INCOME AS WELL AS FO R FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE LD. A.R. FUR THER STATED THAT THE PENALTY ORDER PASSED UNDER SECTION 271(1)( C) DATED 29.03.2014 LEVYING THE PENALTY FOR CONCEALMENT OF PARTICULARS OF INCOME WHICH IS BLATANTLY WRONG AND AGAINST THE RATIO LAID DOWN BY THE VARIOUS JUDICIAL FORUMS. THE LD AR CONT ENDED THAT THE ORDER SO FRAMED IS BAD IN LAW AS THE ASSESSEE WAS GIVEN PROPER OPPORTUNITY TO DEFEND HIMSELF AS THE CHARGE WAS NOT SPECIFICALLY CONFRONTED TO THE ASSESSEE. IN DEFENS E OF HIS ARGUMENTS, THE LD. A.R. RELIED ON THE FOLLOWING CAS E LAWS: CIT VS. SSA'S EMERALD MEADOWS (SC) 73 TAXMANN.COM 248 DATED 5.8.2016 MRS. PIEDADE PERINCHERY (BOMHC) ITANO. 1310 OF 20 14 DATED 10.01.2017 SHRI SAMSON PERINCHERY VS. CIT (BOM HC ) 392 ITR 4 DATED 05.01.2017 CIT VS. SSA'S EMERALD MEADOWS (KAR HC) 73 TAXMANN .COM 241 DATED 23. 11. 20 15 CIT VS. MANJUNATHA COTTON & GINNING FACTORY 35 TA XMANN.COM 250 (KARNATAKA) K.M. BHATIA VS. CIT 62 TAXMAN 430 (GUJ.) CIT VS. LAKHDHIR LALJI 85 ITR 77 (GUJ.) PR.CITVS.BAISETTYREVATHI(APHC)ITANO684OF2016DATED L3.7.2017 SHRI S. NARENDRAKUMAR & CO. VS. ACIT- ITA NO.7334 /MUM/2016 DATED 22.03.2019 ACIT VS. BHUSHANKAMALNAYANVORA [2017] 60 ITR(T) 8 2 (MUMBAI -TRIB.) ORBIT ENTERPRISES VS. ITO (ITAT MUMBAI) ITA 1596& 1597 /M/2014 DATED 01.09.2017 JEHANGIR HC JEHANGIR VS. ACIT - ITA NO. 1261/MUM/ 201 1 DATED 17.05.2017 MEHERJEE CASSINATH HOLDINGS (P.) LTD. VS. ACIT (M UMBAI TRIB.) DATED 28.04.2017 PRINCE CONSULTANCY (P.) LTD. VS. DCIT [2017] 54 I TR(T) 334 (MUMBAI -TRIB.) EON AVIATION PVT LTD VS. DCIT (MUM ITAT) 301 L/M/ 2016 DHARNI DEVELOPERS VS. ACIT [2015] 61 TAXMANN.COM 208 (MUMBAI -TRIB.) THE LD. A.R. FURTHER SUBMITTED THAT IN THE ASSESSM ENT ORDER FRAMED BY THE AO DATED 06.12.2010, THE AO HAS ONLY ITA NO.6708/M/2017 MRS. SONALI D. MEHTA 4 CHANGED THE HEADS OF INCOME I.E. THE INCOME BY WAY OF PROFIT ON SALE OF SHARES WHICH WAS SHOWN BY THE ASSESSEE AS S HORT TERM CAPITAL WAS ASSESSED AS BUSINESS INCOME BY THE AO B ESIDES MAKING SMALL ADDITIONS ON ACCOUNT OF DISALLOWANCE U NDER SECTION 14A OF THE ACT RULE 8D(2)(III) OF RS.32,922 /-. THE LD. A.R., THEREFORE, SUBMITTED THAT ON MERE CHANGE OF H EADS OF INCOME BY THE AO, PENALTY U/S 271(1) IS NOT ATTRA CTED RELYING ON THE FOLLOWING DECISIONS: CIT VS. INDERSONS LEATHER P. LTD. 328 ITR 167 (P&H - HC) CIT VS. SHYAM TEX INTERNATIONAL LTD. 43 DTR 19 (DEL HI HC) CIT VS. CHANDRASEKARAN [2015] 56 TAXMANN.COM 210 (K AMATAKA) BHARAT TILES & MARBLE (P.) LTD. VS. DCIT (MUMBAI TRIB.) DATED 14.0 2.2018 PARINEE DEVELOPERS (P.) LTD. VS. ACIT [2017] 88 TAX MANN.COM 42 (MUMBAI - TRIB.) ITO VS. ROBORANT INVESTMENTS (P) LTD 7 SOT 181 (MUM ITAT) M/S SUPERB ROYAL TRAVELS AND TOURS PVT LTD. VS. ITO - ITA NO.: 4147/MUM/2012 DCIT VS. JMD ADVISORS PVT. LTD. 124ITD 223 (DELHI I TAT) FURTHER, THE LD. A.R. SUBMITTED THAT NO PENALTY IS ATTRACTED UNDER SECTION 271(1)(C) FOR THE DISALLOWANCE MADE U NDER SECTION 14A OF THE ACT AS THE ASSESSEE HAS DISCLOSED ALL TH E PARTICULARS IN THE ANNUAL ACCOUNTS FILED BEFORE THE REVENUE AUT HORITIES. THE LD. A.R. RELIED ON THE DECISION OF PR. CIT VS. GRUH FINANCE LTD. (2018) 100 TAXMAN.COM 104 SC AND CIT VS. RELIANCE PETROPRODUCT PVT. LTD. 322 ITR 158 SC. THE LD. A.R ., WHILE SUMMING UP HIS ARGUMENTS, SUBMITTED THAT THE ORDER PASSED UNDER SECTION 271(1)(C) OF THE ACT DATED 06.12.2010 IS BAD IN LAW FOR THE VARIOUS REASONS AS STATED HEREINABOVE AND M AY KINDLY BE QUASHED AS BEING VOID AB INITIO. 6. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE O RDER OF AUTHORITIES BELOW BY SUBMITTING THAT THE ORDER PASS ED BY AO UNDER SECTION 271(1)(C) WAS AS PER THE PROVISIONS O F THE ACT AND WAS RIGHTLY UPHELD BY THE LD. CIT(A). THE LD. D.R. SUBMITTED ITA NO.6708/M/2017 MRS. SONALI D. MEHTA 5 THAT THE PENALTY PROCEEDINGS WERE INITIATED BY THE AO IN THE ASSESSMENT ORDER FOR FURNISHING OF INACCURATE PARTI CULARS OF INCOME. THEREAFTER, THE NOTICE UNDER 274 READ WITH SECTION 271(1)(C) OF THE ACT WAS ISSUED WHEREIN BOTH THE LI MBS OF THE PENALTY WERE MENTIONED AND THERE IS NO DEFECT WHATS OEVER IN THE SAID NOTICE. THEREAFTER, THE PENALTY ORDER DATED 0 6.12.2010 WAS PASSED FOR CONCEALMENT OF PARTICULARS OF INCOME. S INCE THE AO HAS CORRECTLY INITIATED THE PENALTY PROCEEDINGS THE REAFTER THE NOTICE ISSUED UNDER SECTION 274 READ WITH SECTION 2 71 AND THE ASSESSEE DULY PARTICIPATED IN THE PENALTY PROCEEDIN GS, THEREFORE THE CONTENTIONS RAISED BY THE ASSESSEE WERE DULY CO NSIDERED AND ASSESSEE SHOULD NOT BE GIVEN THE BENEFIT OF JUST NO N STRIKING OFF G OF PARTICULAR CHARGE ON THE PENALTY NOTICE. THE LD DR CONTENDED THAT IT IS NOT OPEN TO THE ASSESSEE TO CLAIM THAT N O PROPER OPPORTUNITY WAS GIVEN AS PARTICULAR LIMB ON WHICH T HE PENALTY WAS PROPOSED TO BE LEVIED WAS NOT MENTIONED. THE L D. A.R. RELIED ON THE FOLLOWING DECISIONS: 1. UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS (2007) 295 ITR 244 2. RL TRADERS VS. ITO (2017-TIOL-2583-HC-DEL-IT) 3. CIT VS. ZOOM COMMUNICATION (P) LTD. (191 TAXMAN 179 (DELHI)/(2010) 327 ITR 510 (DELHI)/(2010) 233 C TR 465 4. CIT VS. MOSER BAER INDIA LTD. (184 TAXMAN 8 (SC) / (2009) 315 ITR 460 (SC)/(2009) 222 CTR 213 5. CIT VS. GOLD COIN HEALTH FOOD (P.) LTD. (172 TAX MAN 386 (SC)/(2008) 304 ITR 308 (SC)/(2008) 218 CTR 359 ) 6. MAK DATA P. LTD. VS. CIT (38 TAXMANN.COM 448 (SC)/(2013) 358 ITR 593 (SC)/(2013) 263 CTR 1 7. B.A. BALASUBRAMANIAM & BROS. CO VS. CIT (116 TAXMAN 842, 236 ITR 977, 157 CTR 556) 8. CIT VS. GATES FOAM & RUBBER CO (91 ITR 467) 9. STEEL INGOTS LTD. VS. CIT (296 ITR 228) 10. CIT VS. ESCORTS FINANCE LTD. (183 TAXMAN 453 (DELHI)/(2010) 328 ITR 44 (DELHI)/(2009) 226 CTR 10 5 ITA NO.6708/M/2017 MRS. SONALI D. MEHTA 6 11. CIT VS. R.M.P. PLASTO (P.) LTD. (184 TAXMAN 372 (SC)/(2009) 313 ITR 397 (SC)/(2009) 227 CTR 635) 12. K.P. MADHUSUDHANAN VS. CIT (2010) 118 TAXMAN 32 4 (SC)/(2001) 251 ITR 99 (SC)/(2001) 169 CTR 489 (SC) 7. THE LD. D.R. ALSO FILED THE WRITTEN SUBMISSIONS AT THE TIME OF HEARING. 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT IN THIS CASE THE AO INITIAT ED PENALTY PROCEEDINGS IN THE ASSESSMENT ORDER DATED 06.12.201 0 FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AT P AGE NO.6 O THE ASSESSMENT ORDER, PARA 5.3 BY ISSUING NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE ACT DATED 06.12.2010 W HEREIN THE AO HAS NOT MENTIONED THE PARTICULAR LIMB UNDER WHIC H THE PENALTY WAS PROPOSED TO BE LEVIED. IN OTHER WORDS, THE NOTICE WAS ISSUED IN A STANDARD FORMAT WITHOUT ANY APPLICA TION OF MIND AND THE INAPPROPRIATE/REDUNDANT WORDS WERE NOT DELE TED BY THE AO. THEREAFTER, THE PENALTY WAS IMPOSED FOR CONCEA LMENT OF PARTICULARS OF INCOME WHICH IS DIFFERENT FROM THE L IMB ON WHICH THE PENALTY WAS INITIATED IN THE ASSESSMENT ORDER. IN OUR OPINION, BY THESE ACTS OF THE AO IN NOT STRIKING OF F THE INAPPROPRIATE LIMB IN THE NOTICE AND INITIATING TH E PENALTY ON ONE LIMB AND IMPOSING PENALTY FINALLY ON THE OTHER LIMB IS CLEAR CUT IN VIOLATION OF PRINCIPLE OF NATURAL JUSTICE AS THE ASSESSEE WAS DEPRIVED OF REASONABLE OPPORTUNITY TO RESPOND A ND DEAL WITH THE PARTICULAR CHARGE ON WHICH THE PENALTY WAS LEVI ED. IN OUR VIEW, THE PENALTY ORDER IN SUCH A SCENARIO IS CLEAR LY BAD IN LAW AND CAN NOT BE SUSTAINED. THE CASE OF THE ASSESSEE IS CLEARLY SUPPORTED BY THE DECISION RELIED UPON BY THE ASSESS EE AS STATED HEREINABOVE IN THE CASE OF SHRI SAMSON PERINCHERY V S. CIT ITA NO.6708/M/2017 MRS. SONALI D. MEHTA 7 (SUPRA) AND CIT VS. MRS. PIEDADE PERINCHERY (BOM-HC ) (SUPRA) THE HONBLE BOMBAY HIGH COURT HAS HELD THAT WHERE T HE AO HAS FAILED TO STATE PARTICULARLY THE ONE OF THE TWO LIM BS ON WHICH THE PENALTY WAS PROPOSED TO BE LEVIED THEN THE PENALTY ORDER WOULD BE BAD IN LAW AS THE ASSESSEE WAS NOT GIVEN PROPER OPPORTUNITY TO RESPOND TO THE CHARGE ON WHICH THE PENALTY WAS L EVIED. THE SIMILAR RATIO HAS BEEN LAID DOWN IN THE CASE OF CIT VS. SSA SSA'S EMERALD MEADOWS (SUPRA) WHICH HAS BEEN AFFIRMED BY THE HONBLE SUPREME COURT IN 73 TAXMAN.COM 248. THE CAS E LAWS RELIED BY THE LD DR WERE CAREFULLY PERUSED AND WE FIND THAT SAME ARE NOT OF ANY HELP TO THE REVENUE WHEN THE IS SUE IS SETTLED BY THE JURISDICTIONAL HIGH COURT AND ALSO BY THE HO NBLE APEX COURT AS HAS BEEN STATED ABOVE. WE, THEREFORE, RESP ECTFULLY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH C OURT IN THE CASE OF SHRI SAMSON PERINCHERY VS. CIT (SUPRA) AND CIT VS. MRS. PIEDADE PERINCHERY (BOM-HC) (SUPRA) AND ALSO THE DE CISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SSA SS A'S EMERALD MEADOWS (SUPRA) HOLD THAT THE PENALTY AS LE VIED BY THE AO HAS TO BE DELETED ON THE TECHNICAL GROUND RAISED BY THE ASSESSEE. ACCORDINGLY, WE HEREBY DIRECT THE AO TO DELETE THE PENALTY. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 15.05.2019. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 15.05.2019. * KISHORE, SR. P.S. ITA NO.6708/M/2017 MRS. SONALI D. MEHTA 8 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.