INSTYLE EXPORTS PVT. LTD., NEW DELHI V. ACIT, CIRCLE- 12(2), NEW DELHI

ITA 7086/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5093 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 24-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Depreciation; Principle of natural justice; Question of law; Wrong claim; Bonafide mistake
• Section: 271(1)(c); 143(3); 274; 44AB; 73; 6

Judgement Text

1 ITA NO. 7086/DEL/2017 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE MS SUCHITRA KAMBLE, JUDICIAL ME MBER AND SH. PRASHANT MAHARISHI, ACCOUN TANT MEMBER I.T.A. NO.7086/DEL/201 7 (A.Y 2013-14) (THROUGH VIDEO CON FERENCING) INSTYLE EXPORTS PVT. LTD. D-6/8, OKHLA INDUSTRIAL AREA, PHASE-II, NEW DELHI AAACI0898K (APPELLANT) VS ACIT CIRCLE-12(2) NEW DELHI (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER DATED 30/08/2017 PASSED BY CIT(A)-22, NEW DELHI FOR ASSESSMENT YEAR 2013-14. 2. THE GROUNDS OF APPEAL ARE AS UNDER: 1. THE ORDER PASSED BY THE LD. CIT (A) AGAINST PEN ALTY ORDER IS BAD IN LAW, WRONG ON FACTS AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN CONFIRMING PENALTY OF RS. 4,50,530/- U/S 2 71(1 )(C) OF THE INCOME TAX ACT, 1961, MERELY ON DISALLOWANCE OF DEPRECIATION O F RS. 13,88,600/- WITHOUT CONSIDERING THE FACTS THAT THE APPELLANT COMPANY HA S NOT CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E 3. THAT ON THE FACTS THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT ALL RELEVANT APPELLANT BY SH. V. K. JAIN, CA RESPONDENT BY MS. ANIMA BARNWAL, SR. DR DATE OF HEARING 14.09.2021 DATE OF PRONOUNCEMENT 28.09.2021 2 ITA NO. 7086/DEL/2017 FACTS AND FIGURES WERE DULY DISCLOSED IN THE INCOME TAX RETURN AND IN THE BOOKS OF ACCOUNTS AND THE SAME WAS PRODUCED AT THE TIME OF ASSESSMENT PROCEEDINGS AND THEREFORE THE QUESTION OF FURNISHIN G INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME WITH THE INTENTION OF SUPPRESSING THE TAXABLE INCOME DOES NOT ARISE. 4. THE LD CIT(A) HAS FAILED TO APPRECIATE T HAT THE TAX AUDIT REPORT DULY FURNISHED DIS NOT MENTION ANY DISALLOWANCE REQUIRED OUT OF DEPRECIATION ON PART OF BUILDING GIVEN ON RENT AND THE MISTAKE WAS ONLY A BONAFIDE MISTAKE. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORTS OF READYMADE GARMENTS, JOB WORK AND TRADING IN FABRIC ETC. THE RETURN OF INCOME WAS FILED ON 30/09/2013 AT THE INCOME OF RS. 92,01,530/-. THE ASSESSING OFFICER PASSED ASSESSMENT ORDER U/S 143(3) DATED 23/03/2016 AND ASSESSED TOTAL INCOME AT RS. 1,05,90,130/- BY MAKING DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS. 13,88,600/-. SUBSEQUE NT TO THE PASSING OF THE ORDER U/S 143(3) DATED 23/03/2016, THE ASSESSING OF FICER HAS INITIATED PENALTY PROCEEDINGS AND PASSED THE PENALTY ORDER U/ S 271(L)(C) DATED 29.09.2016 AND IMPOSED PENALTY AMOUNTING TO RS. 4,5 0,530 . 4. BEING AGGRIEVED BY THE PENALTY ORDER, THE ASSESS EE FILED APPEAL BEFORE THE CIT(A). THE CIT (A) DISMISSED THE APPEAL OF THE AS SESSEE. 5. THE LD. AR SUBMITTED THAT THE PENALTY OF RS. 4,5 0,531/- WAS IMPOSED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 MERELY ON DISALLOWANCE OF DEPRECIATION OF RS. 13,88,600/- WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE COMPANY HAS NOT CONCEALED THE INCOME OR FURNISHED I NACCURATE PARTICULARS OF SUCH INCOME. THE LD. AR SUBMITTED THAT THE NOTICE D ATED 23.03.2016 HAS NOT GIVEN A SPECIFIC CHARGE FOR PENALTY. THE LD. AR SU BMITTED THAT THE CIT(A) ERRED IN CONFIRMING THE PENALTY U/S 271(1)(C) OF THE ACT AS UNDER WHICH LIMB OF SECTION 271(1)(C), THE PENALTY IS LEVIED WAS NOT ME NTIONED IN THE NOTICE ISSUED UNDER SECTION 271(1)(C) READ WITH SECTION 274 OF TH E ACT. THE LD. AR SUBMITTED 3 ITA NO. 7086/DEL/2017 THAT WHETHER THE PENALTY IS FOR CONCEALMENT OF INCO ME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WAS NOT EVIDENT FR OM THE NOTICE NOR FROM THE PENALTY ORDER AS WELL. THE LD. AR FURTHER SUBMITTED THAT THE PENALTY PROVISION BEING QUASI JUDICIAL, UNLESS THERE IS SPECIFIC CHAR GE THERE CANNOT BE LEVY OF PENALTY. THEREFORE, THE ORDER LEVYING PENALTY IS WR ONG AND BAD IN LAW. THE LD. AR RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF CIT VS. SSAS EMERALD MEADOWS (2016) 73 TAXMAN.COM 248 (SC) AND CIT V. MANJUNATHA COTTON & GINNING FACTORY (2013) 359 ITR 565 (KAR). THE LD AR FURTHER SUBMITTED THAT THE HONBLE DELHI HIGH COURT IN CASE OF PR. CIT VS. M/S. SAHARA INDIA LIFE INSURANCE COMPANY LTD. (ITA NO.47 5/2019 VIDE ORDER DATED 02.08.2019) HELD THAT NOTICE ISSUED BY THE ASSESSIN G OFFICER WOULD BE BAD IN LAW IF IT DID NOT SPECIFY WHICH LIMB OF SECTION 271 (1)(C) OF THE PENALTY PROCEEDINGS HAD BEEN INITIATED. THE LD. AR FURTHER SUBMITTED THAT THE WRONG CLAIM OF DEPRECIATION CANNOT BE HELD TO HAVE BEEN C LAIMED WITH AN INTENTION TO SUPPRESS THE FACTS OR EVADE TAX AS THE BOOKS OF ACC OUNTS OF THE ASSESSEE COMPANY WAS AUDITED U/S 44AB OF THE ACT. IN FACT, T HE TAX AUDITOR OF THE ASSESSEE COMPANY HAS NOT MADE ANY ADVERSE REMARKS I N RESPECT OF CLAIM OF DEPRECIATION INCLUDING THE CLAIM OF RS. 13,88,600/- ON RENTED PROPERTY ON WHICH THE ASSESSEE CLAIMED STANDARD DEDUCTION U/S 2 4(B) OF THE ACT. ITS A BONAFIDE MISTAKE AND HENCE NO APPEAL WAS FILED AGAI NST THE SAID DISALLOWANCE BY THE ASSESSEE. 6. THE LD. DR SUBMITTED THAT THE PENALTY ORDER IS V ERY CLEAR THAT THE PENALTY IS IMPOSED ON CONCEALMENT OF INCOME AND, TH EREFORE, MERELY NOT MENTIONING THE SPECIFIC LIMB OF SECTION 271(1)(C) W ILL NOT MAKE THE PENALTY ORDER BAD IN LAW. THE LD. DR RELIED UPON THE ASSESS MENT ORDER, PENALTY ORDER AND THE ORDER OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIALS AVAILABLE ON RECORD. FIRST OF ALL, IN THE NOTICE IS SUED U/S 274 R.W.S 271(1)(C) OF THE INCOME TAX ACT, 1961, THERE WAS NO SPECIFIC CHA RGES AS RELATES TO 4 ITA NO. 7086/DEL/2017 CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. FROM THE NOTICE DATED 23.03.2016 PRODUCED BY THE LD . AR DURING THE HEARING, IT CAN BE SEEN THAT THE ASSESSING OFFICER WAS NOT S URE UNDER WHICH LIMB OF PROVISIONS OF SECTION 271 OF THE INCOME TAX ACT, 19 61, THE ASSESSEE IS LIABLE FOR PENALTY. BESIDES THAT THE ASSESSMENT ORDER ALSO DID NOT SPECIFY THE CHARGE AS TO WHETHER THERE IS CONCEALMENT OF INCOME OR FURNIS HING OF INACCURATE PARTICULARS OF INCOME IN ASSESSEES CASE. BESIDES T HIS, THE PRESENT CASE IS RELATING TO WRONG CLAIM OF DEPRECIATION WHICH WAS A BONAFIDE MISTAKE ON PART OF THE ASSESSEE FOR WHICH IT CANNOT BE SAID THAT IT IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULAR OF INCOME. THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN CASE O F M/S SSA EMERALD MEADOW. THE EXTRACT OF THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN M/S SSA EMERALD MEADOWS ARE AS UNDER WHICH WAS CON FIRMED BY THE HONBLE APEX COURT: '3. THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY TH E ASSESSEE HOLDING THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTIO N 274 READ WITH SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'T HE ACT') TO BE BAD IN LAW AS IT DID NOT SPECIFY WHICH LIMB OF SECTION 271(1)(C) OF THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED I.E., WHETHER FOR CO NCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. THE TRIBUNAL, WHILE ALLOWING THE APPEAL OF THE ASSESSEE, HAS RELIED ON THE ITA NO. 4913/DEL/2015 DECISION OF THE DIVISION BENCH OF THI S COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565. 4. IN OUR VIEW, SINCE THE MATTER IS COVERED BY JUDG MENT OF THE DIVISION BENCH OF THIS COURT, WE ARE OF THE OPINION, NO SUBSTANTIA L QUESTION OF LAW ARISES IN THIS APPEAL FOR DETERMINATION BY THIS COURT. THE AP PEAL IS ACCORDINGLY DISMISSED.' THUS, ADDITIONAL GROUND NO. (II) OF THE ASSESSEE'S APPEAL IS ALLOWED. SINCE THE INCEPTION OF THE NOTICE ISSUED U/S 271(1)(C) HAS BE COME NULL AND VOID, THERE IS NO NEED TO COMMENT ON MERIT OF THE CASE. THE PENALT Y U/S 271(1)(C) OF THE ACT IS QUASHED. SINCE IN THE INSTANT CASE ALSO THE INAPPROPRIATE W ORDS IN THE PENALTY NOTICE HAS NOT BEEN STRUCK OFF AND THE NOTICE DOES NOT SPECIFY AS TO UNDER WHICH LIMB OF THE PROVISIONS, THE PENALTY U/S 271(1 )(C) HAS BEEN INITIATED, 5 ITA NO. 7086/DEL/2017 THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT TH E PENALTY LEVIED U/S 271(1)(C) IS NOT SUSTAINABLE AND HAS TO BE DELETED. ALTHOUGH THE LD. DR SUBMITTED THAT MERE NON-STRIKING OFF OF THE INAPPROPRIATE WORDS WI LL NOT INVALIDATE THE PENALTY PROCEEDINGS, HOWEVER, THE DECISION OF THE HONBLE K ARNATAKA HIGH COURT IN THE CASE OF SSAS EMERALD MEADOWS (SUPRA) WHERE THE SLP FILED BY THE REVENUE HAS BEEN DISMISSED IS DIRECTLY ON THE ISSUE CONTEST ED HEREIN BY THE ASSESSEE. FURTHER, WHEN THE NOTICE IS NOT MENTIONING THE CONC EALMENT OR THE FURNISHING OF INACCURATE PARTICULARS, THE RATIO LAID DOWN BY T HE HONBLE HIGH COURT IN CASE OF M/S. SAHARA INDIA LIFE INSURANCE COMPANY LTD. (S UPRA) WILL BE APPLICABLE IN THE PRESENT CASE. THE HONBLE DELHI HIGH COURT HELD AS UNDER: 21. THE RESPONDENT HAD CHALLENGED THE UPHOLDING OF THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT, WHICH W AS ACCEPTED BY THE ITAT. IT FOLLOWED THE DECISION OF THE KARNATAKA HIGH COURT I N CIT V. MANJUNATHA COTTON & GINNING FACTORY 359 ITR 565 (KAR) AND OBSE RVED THAT THE NOTICE ISSUED BY THE AO WOULD BE BAD IN LAW IF IT DID NOT SPECIFY WHICH LIMB OF SECTION 271(1)(C) THE PENALTY PROCEEDINGS HAD BEEN INITIATED UNDER I.E. WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE KARNATAKA HIG H COURT HAD FOLLOWED THE ABOVE JUDGMENT IN THE SUBSEQUENT ORDER IN COMMISSIO NER OF INCOME TAX V. SSAS EMERALD MEADOWS (2016) 73 TAXMAN.COM 241(KAR) , THE APPEAL AGAINST WHICH WAS DISMISSED BY THE SUPREME COURT OF INDIA I N SLP NO. 11485 OF 2016 BY ORDER DATED 5 TH AUGUST, 2016. 22. ON THIS ISSUE AGAIN THIS COURT IS UNABLE TO FIN D ANY ERROR HAVING BEEN COMMITTED BY THE ITAT. NO SUBSTANTIAL QUESTION OF LAW ARISES. THUS, NOTICE UNDER SECTION 271(1)(C) R.W.S. 274 OF THE ACT ITSELF IS BAD IN LAW. WE, THEREFORE, SET-ASIDE THE ORDER OF THE CIT(A) AN D DIRECT THE ASSESSING OFFICER TO CANCEL THE PENALTY SO LEVIED. 6 ITA NO. 7086/DEL/2017 8. IN RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28TH DA Y OF SEPTEMBER , 2021 SD/- SD/- (PRASHANT MAHARISHI) (SUCH ITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 28 /09/2021 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI