UNIVERSAL MUSIC INDIA P.LTD, MUMBAI V. ASST CIT 7(3), MUMBAI

ITA 6752/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3431 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 07-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NANI WADEKAR
• Keywords: Principle of natural justice; Initiation of penalty proceedings; Revised return
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI JASON P.BOAZ, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO. 6752/MUM/2014 (ASSESSMENT YEAR : 2010-11) M/S.UNIVERSAL MUSIC INDIA PVT. LTD., SAMIR COMPLEX, ST. ANDREWS ROAD, BANDRA(W), MUMBAI 400 050 PAN: AAACP 1985C ..... APPELLANT VS. THE ACIT, CIR. 7(3), MUMBAI. .... RESPONDENT APPELLANT BY : S/SHRI NANIWADEKAR & RUTURAJ H. GURJAR RESPONDENT BY : MS. ANU KRISHNA AGARWAL DATE OF HEARING : 10/08/2016 DATE OF PRONOUNCEMENT : 19/08/2016 ORDER PER JASON P. BOAZ,A.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF CIT(APPEALS)-13, MUMBAI DATED 4/09/2014 CONFIRMING THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) FOR THE ASSESSMENT YEAR 2010-11. 2. THE FACTS OF THE CASE AS EMANATE FROM THE RECORD , BRIEFLY, ARE AS UNDER:- 2 ITA NO. 6752/MUM/2014 (ASSESSMENT YEAR : 2010-11 2.1 THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF PRODUCING, ACQUIRING, MARKETING AND DISTRIBUTION OF MUSIC IN I NDIA, FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2010-11 ON 24/4/2011 DE CLARING NIL INCOME. THE RETURN WAS PROCESSED U/S.143(1) OF TH E ACT. A REVISED RETURN DECLARING NIL INCOME WAS FILED ON 26/3/2012 . THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY AND THE ASSESSME NT WAS COMPLETED U/S. 143(3) OF THE ACT VIDE ORDER DATED 1/8/2012, WHEREIN AN AMOUNT OF RS.71,76,623/- WAS DISALLOWED RESULTING IN REDU CTION OF CARRY FORWARD LOSSES TO THIS EXTENT AND IN RESPECT OF WHICH PENAL TY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WAS INITIATED BY SIM ULTANEOUS ISSUE OF NOTICE U/S. 274 R.W. 271(1)(C) OF THE ACT DATED 8/3 /2013. SUBSEQUENTLY, THE ASSESSING OFFICER (A.O) VIDE ORDER DATED 20/9 /2013, PROCEEDED TO LEVY PENALTY OF RS.22,17,577/- UNDER SECTION 271(1) (C) OF THE ACT FOR CONCEALMENT OF INCOME ON THE AFORESAID AMOUNT OF R S.71,76,623/-. 2.2 ON APPEAL, THE LD. CIT(APPEAL)-13, MUMBAI DISMI SSED THE ASSESSEES APPEAL VIDE ORDER DATED 4/9/2014 AND CO NFIRMED THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT FOR ASSE SSMENT YEAR 2010-11. 3.1 AGGRIEVED BY THE ORDER OF THE CIT(APPEALS)-13, MUMBAI DATED 4/9/2014, CONFIRMING THE LEVY OF PENALTY UNDER SECT ION 271(1)(C) OF THE ACT FOR ASSESSMENT YEAR 2010-11, THE ASSESSEE HAS PREFERRED THIS APPEAL RAISING THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) HAS ERRED IN CONFIRMING THE CONCEALMENT OF PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT AMOUNTING TO RS.22, 17,577/-. THE CONCEALMENT PENALTY OF LEVIED UNDER SECTION. 271(1 )(C) OF THE INCOME TAX ACT SHOULD BE CANCELLED. 2. THE APPELLANT RESERVES ITS RIGHT TO ADD TO, ALTE R, AMEND, MODIFY OR DELETE ANY OF THE GROUNDS TAKEN IN THIS APPEAL. 3 ITA NO. 6752/MUM/2014 (ASSESSMENT YEAR : 2010-11 4.1 SUBSEQUENTLY, BY LETTER DATED 3/2006, THE ASSE SSEE FIELD ADDITIONAL GROUNDS OF APPEAL WHICH READ AS UNDER:- 'ON FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF PENALTY U/S 271 (1)(C) OF THE ACT IS BAD IN LAW AND VOID AB INITIO, AS THE NOTICE ISSUED U/S 274 R. W.S. 271 IS NOT IN ACCORDANCE WITH LAW. FROM THE NOTICE, IT IS NOT DISCERNIBLE AS TO WHY PENALTY IS INITIATED, WHETHER THE PENALTY IS IN ITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME OR FOR CONCEALMENT OF INCOME, ETC. CONSEQUENTLY, THE PENALTY PROCEEDINGS ARE WHOLLY UN SUSTAINABLE IN LAW AND VOID AB INITIO, AND THE PENALTY DESERVES TO BE CANC ELLED'. 4.2 THE ADDITIONAL GROUND RAISED (SUPRA), CHALLENGE S THE VALIDITY OF THE NOTICE ISSUED U/S. 274 R.W.S. 271(1)(C) OF THE ACT DATED 8/3/2013, WHICH IS WITHOUT PROPER INDICATION OF THE EXACT DEF AULT OF THE ASSESSEE FOR WHICH PENALTY PROCEEDINGS UNDER SECTION 271(1)( C) OF THE ACT ARE INITIATED (COPY OF THE NOTICE DATED 8/3/2013 HAS BE EN FILED ON RECORD). THE LD. REPRESENTATIVE FOR THE ASSESSEE ALSO PLACED BEFORE US COPIES OF THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF ROADLINKS INDIA PVT. LTD. VS. ACIT IN ITA NO.1485/B ANG/2013 DATED 27/2/2015 AND OF THE CO-ORDINATE BENCH OF THIS TRIB UNAL IN THE CASE OF SANGHVI SAVLA COMMODITY BROKERS PVT. LTD. VS. ACIT IN ITA NO.1746/MUM/2011 DATED 22/12/2015, WHEREIN IN SIMIL AR CIRCUMSTANCES THE BENCH ADMITTED THE ADDITIONAL GR OUND AND DISPOSED OFF THE ASSESSEES APPEALS ON THE LEGAL GROUNDS SO RAISED. 4.3 WE HAVE HEARD THE RIVAL CONTENTIONS ON THE ISSU E OF ADMISSION OF THE ADDITIONAL GROUNDS OF APPEAL RAISED BY THE ASSE SSEE(SUPRA) AND CONSIDERED THE MATERIAL ON RECORD. WE FIND THAT T HE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS A PURELY LEGAL GROUND AND SINCE THE SAME GOES TO VERY ROOT OF THE MATTER REGARDING THE LEVY OF T HE SAID PENALTY UNDER 4 ITA NO. 6752/MUM/2014 (ASSESSMENT YEAR : 2010-11 SECTION 271(1)(C) OF THE ACT, WE, THEREFORE, ADMIT THE SAME FOR CONSIDERATION AND ADJUDICATION IN THIS APPEAL. 4.4 ALONG WITH THE APPLICATION FOR ADMISSION OF ADD ITIONAL GROUNDS, THE ASSESSEE HAS ALSO FIELD A COPY OF THE NOTICE I SSUED U/S. 274 OF THE ACT DATED 8/3/2013 FOR INITIATING PENALTY UNDER SE CTION 271(1)(C) OF THE ACT FOR ASSESSMENT YEAR 2010-11. A PERUSAL OF THE SAID NOTICE REVEALS THAT THE ASSESSING OFFICER HAS NOT DELETED THE INAP PROPRIATE WORDS AND PARTS OF THE NOTICE, WHEREBY IT IS NOT CLEAR AS TO THE DEFAULT COMMITTED BY THE ASSESSEE; I.E., WHETHER IT IS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME T HAT THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS SOUGHT TO BE LEVIED . IN THIS REGARD, WE FIND THAT THE HONBLE HIGH COURT OF KARNATAKA IN IT S ORDER IN THE CASE OF M/S.MANJUNATHA COTTON & GINNING FACTORY, (2013) 359 ITR 565(KAR), RELIED ON BY THE ASSESSEE, HAS HELD THAT SUCH A NOT ICE, AS HAS ALSO BEEN ISSUED TO THE ASSESSEE IN THE CASE ON HAND(SUPRA), IS INVALID AND CONSEQUENTIAL PENALTY PROCEEDINGS ARE ALSO INVALID. THE RELEVANT PORTION THEIR LORDSHIPS JUDGMENT AT PARAS 59 TO 62, THEREOF ARE AS UNDER:- 59. AS THE PROVISION STANDS, THE PENALTY PROCEEDIN GS CAN BE INITIATED ON VARIOUS GROUND SET OUT THEREIN. IF THE ORDER PASSED BY THE AUTHORITY CATEGORICALLY RECORDS A FINDING REGARDING THE EXISTENCE OF ANY SAID GROUNDS MENTIONED THEREIN AND THEN PENALTY PROCEEDINGS IS INITIATED, IN THE NOTICE TO BE ISSUED UNDER SECTION 274, THEY COULD CONVENIENTLY REFER TO THE SAID ORDER WHICH CONTAINS THE SATISFACTION OF THE AUTHORITY WHICH HAS PASSED THE ORDER. HOWEVE R, IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORDER AND IF IT IS A CASE OF RELYING ON DEEMING PRO VISION CONTAINED IN EXPLANATION-1 OR IN EXPLANATION-1(B), THEN THOUGH P ENALTY PROCEEDINGS ARE IN THE NATURE OF CIVIL LIABILITY, I N FACT, IT IS PENAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PENALTY ON HIM AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS 5 ITA NO. 6752/MUM/2014 (ASSESSMENT YEAR : 2010-11 AND SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE O F THE DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1)(C) DO NOT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED FARM WHERE ALL THE GRO UND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQU IREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASSESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 100% TO 300% OF THE TAX LIABILITY. AS THE SAID PROV ISIONS HAVE TO BE HELD TO BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICAL LY OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED IF THE SH OW CAUSE NOTICE IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, TH AT 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 MAY BE OV ERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF TH E PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFENCES. 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. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROUNDS MENTIO NED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOS E GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. A FTER HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSED ONLY ON THE GROUND S ON WHICH HE IS CALLED UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHOR ITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS O THER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FIN AL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROU ND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS N OT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSI TION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERI ALS IN THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IM POSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PA SSED, WAS NOT SUSTAINABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE AC T TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COU RSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING 6 ITA NO. 6752/MUM/2014 (ASSESSMENT YEAR : 2010-11 OF INACCURATE PARTICULARS OF TOTAL INCOME UNDER CLA USE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF I NCOME ARE DIFFERENT. THUS THE ASSESSING OFFICER WHILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT WHETHER IS IT A CASE OF CONCEALMENT OF INCOME OR IS IT A CASE OF FURNISHING OF INACCURATE PARTICULARS. THE APEX COURT IN THE CASE OF ASHOK PAI REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHI NG INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJRAT HIGH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 1 22 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO M ARKETING REPORTED IN 171 TAXMAN 156, HAS HELD THAT LEVY OF P ENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CON CEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATELY MARKED. SIMILAR IS T HE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE ST ANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LE AD TO AN INFERENCE AS TO NON-APPLICATION OF MIND. THE CONCLUSION DRAWN THEREIN BY THEIR LORDSHIPS AT PARA 63 THEREOF AND PARTICULARLY AT P) TO S) THEREOF ARE AS UNDER:- 63. .............................................. ........... A)............................................... ............ P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECI FICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I.E., WHETH ER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORREC T PARTICULARS OF INCOME Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTIO NED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HA S TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUST ICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AND FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW 4.5 IT MAY BE MENTIONED THAT IN THIS REGARD NO CONT RARY DECISION OF THE HONBLE APEX COURT OR THE HONBLE BOMBAY HIGH COURT HAS BROUGHT TO OUR NOTICE OR PLACED BEFORE US FOR CONSIDERATION . THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTOR Y (SUPRA), WE HOLD 7 ITA NO. 6752/MUM/2014 (ASSESSMENT YEAR : 2010-11 THAT THE NOTICE ISSUED U/S. 274 R.W.S. 271(1)(C) OF THE ACT DATED 8/3/2013 FOR ASSESSMENT YEAR 2010-11 FOR INITIATIN G PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT IN T HE CASE ON HAND IS INVALID AND CONSEQUENTLY, THE PENALTY PROCEEDINGS A ND LEVY OF PENALTY THEREUNDER ARE ALSO INVALID. IN THIS VIEW OF THE M ATTER, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ALLOWED. SINCE TH E VERY BASIS OF THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT HAS BEEN HELD TO BE INVALID, WE ARE OF THE VIEW THAT SINCE THE ASSESSEE S GRIEVANCE HAS BEEN ADDRESSED BY DISPOSAL OF THE ADDITIONAL GROUND RAI SED, THE OTHER GROUNDS OF APPEAL AT S.NO.1 AND 2 RAISED BY THE ASS ESSEE (SUPRA) ON THE MERITS OF THE LEVY OF PENALTY UNDER SECTION 271(1)( C) OF THE ACT REQUIRE NO ADJUDICATION AT THIS STAGE. 5. IN THE RESULT, THE ASSESSEES APPEAL FOR ASSESSM ENT YEAR 2010-11 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/08/2016 SD/- SD/- (SANDEEP GOSAIN) (JASON P. BOAZ) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 19/08/2016 VM , SR. PS 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