MADHAV NARAYAN BHATKULY, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-19(2), MUMBAI

ITA 7224/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8118 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 17-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAMAL MANGAL J
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Invalid notice; Salary income; Initiation of penalty proceedings; Difference of opinion
• Section: 271(1)(c); 143(3); 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENCH MUM BAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMB ER & SHRI G. MANJUNATHA, ACCOUNTANT MEMB ER ITA NO.7224/MUM/2018 ( ASSESSMENT YEAR :2009-10 ) MADHAV N. BHATKULY 1501/02/03 RAHEJA EMPRESS 392, VEER SAVARKAR MARG PRABHADEVI MUMBAI-400 006 VS. ACIT, CIRCLE-19(2) ROOM NO.207, 2 ND FLOOR MATRU MANDIR, TARDEO MUMBAI-400 007 PAN/GIR NO. A AAPB7378J APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI KAMAL MANGAL, JCIT-DR ASSESSEE BY SHRI JITENDRA SINGH, AR DATE OF HEARING 1 6 /01/2020 DATE OF PRONOUNCEME NT 22 /01/2020 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)55, MU MBAI, DATED 27/11/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2009- 10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. THE LD, COMMISSIONER OF INCOME TAX (APPEALS) - 55, MUMBAI [HEREINAFTER REFERRED TO AS THE 'LD- CIT(A)'] ERRED IN PASSING THE ORDER DATED 27.11-2018 UPHOLDING THE PENALTY ORDER PASSED BY LD, ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 19(2), MUMBAI [HEREINAFTER REFERRED TO AS 'LD. A.O] LEVYING CONCEALMENT PENALTY OF RS. 2,73,256/-WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CAS E. THUS, THE ORDER DATED 27.11.2018 PASSED BY LD. CIT(A) IS BAD IN LAW AND THE SAME MAY BE QUASHED. 2. NOTICE ISSUED UNDER SECTION 271(1) OF THE ACT W ITHOUT RECORDING ANY SATISFACTION IS BAD IN LAW ITA NO.7224/MUM/2018 MADHAV NARAYAN BHATKULY 2 I . THE PENALTY NOTICES DATED 25.11.2011 AND 20,03.2017 ISSUED UNDER SECTION 274 R.W.S 271 OF THE INCOME TAX ACT, 1961 [ HEREINAFTER REFERRED TO AS 'THE ACT] IS VOID AB INITIO AS THE SAME IS NOT DISCERNABLE WHETHER THE PENALTY PROCEEDINGS ARE INITIATED FOR CONCEALMENT O F INCOME OR FAMISHING OF INACCURATE PARTICULARS OF INCOME. HENCE, THE NOT ICES ISSUED UNDER SECTION 274 R.W.S 271 OF THE ACT AND THE SUBSEQUENT PENALTY ORDER PASSED UNDER SECTION 271(L)(C) OF THE AC! ARE BAD I N LAW AND THE SAME MAY BE QUASHED. II. THE PENALTY ORDER DATED 31.03.2017 PASSE D UNDER SECTION 271(1 )(C) OF THE ACT IS BAD IN LAW AS THE PENALTY HAS BE EN LEVIED ON THE BASIS OF BOTH THE LIMBS WHICH IS NOT PERMISSIBLE AS PER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT, THUS, THE PENALTY ORDER PASSE D UNDER SECTION 271(L)FC) OF THE ACT IS BAD IN LAW AND THE SAME MAY BE DELETED. LEVY OF CONCEALMENT PENALTY ON DENIAL OF SET OFF OF BUSINESS LOSS AGAINST SALARY INCOME UNJUSTIFIED - RS.2,73,256/- I. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE A.O. IN LEVYING CONCEALMENT PENALTY OF RS.2,73,256/- ON DENIAL OF B ENEFIT OF SET OFF BUSINESS LOSS AGAINST SALARY INCOME WITHOUT APPRECI ATING THE FACT AND CIRCUMSTANCES OF THE CASE. THE APPELLANT, THEREFORE , PRAYS THAT LEVY OF CONCEALMENT PENALTY UNDER SECTION 271(L) OF THE AC T ON THE ABOVE DISALLOWANCE IS NOT AT ALL JUSTIFIED AND THE SAME M AY BE DELETED. II. THE LD, CIT(A) FAILED TO APPRECIATE THAT THE LD . A.O. HAS DENIED THE SET OFF OF BUSINESS LOSS AGAINST SALARY INCOME MERELY O N THE BASIS OF DIFFERENCE OF OPINION ON THE SAME SET OF FACTS. THU S, THE APPELLANT HAS NEITHER CONCEALED ANY PARTICULARS OF HIS INCOME NOR FURNISHED ANY INACCURATE PARTICULARS OF INCOME. THE APPELLANT, TH EREFORE, PRAYS THAT LEVY OF CONCEALMENT PENALTY AMOUNTING TO RS.2,73,25 6/- IS UNJUSTIFIED AND THE SAME MAY BE DELETED. III. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE A PPELLANT HAS GIVEN BONAFIDE EXPLANATION WITH RESPECT TO SET OFF OF BUSINESS LOS S AGAINST SALARY INCOME; WHICH HAS NOT BEEN FOUND TO BE FALSE. THUS, LEVY OF CONCEALMENT PENALTY AMOUNTING TO RS,2,73,256/- IS U NJUSTIFIED AND THE SAME MAY BE DELETED. IV. WITHOUT PREJUDICE TO ABOVE, THE EXCESS OF ASSES SED INCOME OF RS.48,05,572/- OVER RETURNED INCOME OF RS.43,90,290 /- IS RS.4,15,2907- ONLY WHEREAS THE LD. A.O . HAS LEVIED PENALTY ON ASSESSED INCOME OF RS.8,34,324/- WITHOUT CONSIDERIN G THE ORDER PASSED BY LD. CIT(A) IN QUANTUM PROCEEDINGS. THUS, THE A.O. WHILE LEVYING THE PENALTY HAS IGNORED THE EXPLANATION 4 T O SECTION 271(L)(C) OF THE ACT HENCE, LEVY OF CONCEALMENT PENALTY OF R. S.2,73,256/- IS UNJUSTIFIED AND THE SAME MAY BE DELETED. ITA NO.7224/MUM/2018 MADHAV NARAYAN BHATKULY 3 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, RES CIND OR AMEND ANY OF THE ABOVE GROUNDS OF APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED ITS RETURN OF INCOME FOR THE AY 2009-10 ON 30/07/2009, DECLARING TOTAL INCOME AT RS. 43,90,280/-. THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) OF THE I.T.ACT, 1961 ON 25/11/2011, DETERMIN ING THE TOTAL INCOME AT RS. 48,05,570/- AFTER MAKING DISALLOWANCE S OF BROUGHT FORWARD BUSINESS LOSS AGAINST INCOME UNDER THE HEAD INCOME FROM SALARY. THEREAFTER, THE LD. AO HAS INITIATED PENALT Y PROCEEDINGS U/S 271(1)(C) OF THE I.T.ACT, 1961 AND AFTER CONSIDERIN G RELEVANT SUBMISSIONS OF THE ASSESSE LEVIED PENALTY OF RS. 2, 73,256/-, WHICH IS EQUAL TO 100% OF THE TAX SOUGHT TO BE EVADED. THE A SSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUT HORITY, BUT COULD NOT SUCCEED. THE LD. CIT(A), FOR THE DETAILED REASONS R ECORDED IN HIS APPELLATE ORDER, DATED 27/11/2018, DISMISSED APPEAL FILED BY THE ASSESSEE AND CONFIRMED PENALTY LEVIED ON DISALLOWAN CES OF SET OFF OF BROUGHT FORWARD BUSINESS LOSS AGAINST INCOME ASSE SSABLE UNDER THE HEAD SALARIES. AGGRIEVED BY THE LD.CIT(A) ORDE R, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE L D.CIT(A) WAS ERRED IN CONFIRMED PENALTY LEVIED U/S 271(1)(C) WI THOUT CONSIDERING THE FACT THE LD. AO HAS NOT RECORDED ANY SATISFACTI ON BEFORE INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C), WHETHER SAID PENALTY PROCEEDINGS HAS BEEN INITIATED FOR CONCEALMENT OF P ARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE LD. AR, FURTHER SUBMITTED THAT IF, YOU GO THROUGH THE A SSESSMENT ORDER PASSED BY THE LD. AO, IT IS VERY CLEAR FROM THE ASS ESSMENT ORDER THAT ITA NO.7224/MUM/2018 MADHAV NARAYAN BHATKULY 4 THE LD. AO HAS NOT ARRIVED AT SATISFACTION BEFORE I NITIATION OF PENALTY PROCEEDINGS , WHICH IS EVIDENT FROM THE FACT THAT T HE LD. AO HAS MERELY STATED THAT PENALTY PROCEEDINGS U/S 271(1)(C ) OF THE ACT, ARE SEPARATELY INITIATED . THIS LAPSE CONTINUED, EVEN I N NOTICE ISSUED U/S 274 R.W.S. 271 OF THE I.T.ACT, 1961, DATED 25/11/20 11 AND 20/03/2017, WHERE THE LD. AO HAS ISSUED PRINTED NOT ICE WITHOUT STRIKING OFF IN APPLICABLE PORTION IN THE NOTICE. F ROM THIS, IT IS VERY CLEAR THAT THE SATISFACTION OF THE LD. AO IS NOT D ISCERNABLE, WHETHER THE PENALTY PROCEEDINGS ARE INITIATED FOR CONCEALM ENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. FUR THER, EVEN IN PENALTY ORDER, THE LD. AO HAS CLEARLY NOT SPECIFIED ABOUT THE LIMB UNDER WHICH PENALTY IS PROPOSED TO BE LEVIED ,WHICH IS EVIDENT FROM THE FACT THAT THE LD. AO HAS CLEARLY STATED THAT TH E ASSESSEE HAS CONCEALED HIS INCOME AND SUBMITTED INACCURATE PART ICULARS OF INCOME. ANY PENALTY PROCEEDINGS INITIATED CONSEQUEN T TO INVALID NOTICE IS VOID AB-INITIO AND CONSEQUENTLY, THE PENALTY LEVIED U/S 271(1)(C) OF THE I.T.ACT, 1961 CANNOT BE SUSTAINED. 5. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTI NG ORDER OF THE LD.CIT(A) SUBMITTED THAT IT IS A CLEAR CASE OF CONC EALMENT OF PARTICULARS OF INCOME, BECAUSE THE ASSESSEE HAS CL AIMED INELIGIBLE BROUGHT FORWARD BUSINESS LOSS AGAINST INCOME ASSESS ABLE UNDER THE HEAD INCOME FROM SALARY, EVEN THOUGH THE PROVISION OF SECTION 71(2A) CLEARLY BARRED SUCH CLAIM BY ANY PERSON. TH E LD. AO, AS WELL AS THE LD.CIT(A) HAD RECORDED CATEGORICALLY FINDING S TO ARRIVE AT CLEAR FINDING THAT IT IS A PIT CASE FOR LEVY OF PEN ALTY FOR CONCEALMENT OF PARTICULARS OF INCOME AND HENCE, THERE IS NO REA SON TO INTERFERE WITH ORDER OF THE LD.CIT(A). ITA NO.7224/MUM/2018 MADHAV NARAYAN BHATKULY 5 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. IT IS AN ADMITTED POSITION OF LAW THAT BEF ORE INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C), THE LD. AO SHALL ARRIVE AT A CLEAR SATISFACTION AS TO WHETHER, SUCH PENALTY PROCEEDING S ARE BEING INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. IF, THE LD. AO HA S NOT RECORDS CLEAR SATISFACTION AS REQUIRED UNDER THE LAW, EITHER IN A SSESSMENT PROCEEDINGS OR AT THE TIME OF ISSUING SHOW CAUSE NO TICE U/S 274 R.W. 271(1)(C), THEN THE WHOLE PENALTY PROCEEDINGS, CONS EQUENT TO INCORRECT SATISFACTION OR FOR NON SATISFACTION BECO MES VOID AB-INITIO FURTHER, IT IS ALSO A SETTLED POSITION OF LAW THAT THE LD. AO HAS TO CATEGORICALLY SPECIFY THE LIMB UNDER WHICH, THE PEN ALTY PROCEEDINGS HAS BEEN INITIATED. IF PENALTY PROCEEDINGS, IS INI TIATED FOR ONE LIMB AND LEVIED FOR DIFFERENT LIMB, THEN THE WHOLE PENA LTY PROCEEDINGS, BECOMES INVALID AND VOID AB-INITIO . THIS LEGAL PROPOSITION IS SUPPORTED BY THE DECISION OF HONBLE E BOMBAY HIGH COURT, IN THE CASE OF CIT VS SAMSON PERINCHERY IN ITA NO. 1154/MU M/2015, DATED 05/12/2017. THIS LEGAL PROPOSITION IS FURTHER SUPPORTED BY THE DECISION OF HONBLE SUPREME COURT, IN THE CASE OF CIT VS M/S SSAS EMERALD MEADOWS (2016) 242 TAXMANN 180 (SC) , WHERE THE HONBLE SUPREME COURT HAS UPHELD THE DECISION OF HO NBLE KARNATAKA HIGH COURT, IN THE CASE OF CIT VS. MANJUN ATHA COTTON & GINNING FACTORY (2013) 359 ITR 565. IN THIS CASE, O N PERUSAL OF ASSESSMENT ORDER, AS WELL AS PENALTY ORDER , IT IS VERY CLEAR FROM THE RECORDS THAT THE LD. AO HAS NOT ARRIVED AT CLEAR SA TISFACTION AS REQUIRED UNDER THE ACT, EVEN IN ASSESSMENT ORDER AN D SAID LAPSES IS CONTINUED IN SHOW CAUSE NOTICE ISSUED US 274 R.W.S. 271(1)(C) OF THE I.T.ACT, 1961. FURTHER, EVEN IN PENALTY ORDER, THE LD. AO HAS NOT ITA NO.7224/MUM/2018 MADHAV NARAYAN BHATKULY 6 ARRIVED AT CLEAR SATISFACTION, WHICH IS EVIDENT FRO M THE FACT THAT HE HAS CONCLUDED HIS PENALTY PROCEEDINGS AND LEVIED PE NALTY U/S 271(1)(C) ON BOTH LIMBS. FROM THE ABOVE, IT IS VERY CLEAR THAT THE SATISFACTION REQUIRED TO BE RECORDED BEFORE INITIAT ION OF PENALTY PROCEEDINGS U/S 271(1)(C) IS NOT DISCERNABLE, WHETH ER THE PENALTY PROCEEDINGS ARE INITIATED FOR CONCEALMENT OF PARTI CULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, EIT HER IN ASSESSMENT ORDER OR IN THE SHOW CAUSE NOTICE ISSUED FOR LEVYIN G PENALTY. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE P ENALTY PROCEEDINGS INITIATED U/S 271(1)(C) OF THE ACT, CON SEQUENT TO VAGUE NOTICE IS VOID AB INITIO AND LIABLE TO BE QUASHED. THEREFORE, WE DIRECT THE LD. AO TO DELETE PENALTY IMPOSED U /S 271(1)(C) OF THE I.T.ACT, 1961 7. IN THE RESULT, APPEAL FILED BY THE ASSESSE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 /01 /2020 SD/- (SAKTIJIT DEY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 22/01/2020 THIRUMALESH SR.PS 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. GUARD FILE. //TRUE COPY//