BSC C&C JV, New Delhi V. ACIT, CIRCLE- 62(1), New Delhi

ITA 7296/DEL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3878 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 06-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVIKANT GUPTA
• Keywords: Depreciation; Opportunity of being heard; Principle of natural justice; Additional depreciation; Initiation of penalty proceedings; Difference of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI A BENCH, NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER, AND SHRI KULDIP SINGH , JUDICIAL MEMBER ITA NO. 7296 /DEL/201 7 [ASSESSMENT YEAR: 200 9 - 1 0 ] M/S BSCC & CJV VS. THE A .C.I.T 74, HEMKUNT COLONY , CIRCLE 6 2(1) OPP. NEHRU PLACE , NEW DELHI NEW DELHI PAN : A ADFBB 8115 G [APPELLANT] [RESPONDENT] DATE OF HEARING : 0 3 . 0 1 .201 8 DATE OF PRONOUNCEMENT : 30 . 01 .201 8 ASSESSEE BY : SHRI AJAY VOHRA, SR. ADV SHRI ROHIT JAIN, ADV MS. DEEPASHREE RAO, CA REVENUE BY : S HRI RAVI KANT GUPTA, SR. DR ORDER PER B.P. JAIN, ACCOUNTANT MEMBER, THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 08 . 12 .201 5 OF COMMISSI ONER OF INCOME TAX (APPEALS) - 25, DELHI AND RELATES TO ASSESSMENT YEAR 20 09 - 10. 2 ITA NO. 7296/DEL/2017 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE CIT (APPEALS) ERRED ON FACTS AND IN LAW IN NOT HOLDING THAT THE IMPUGNED ORDER DATED 14.09.2015 LEVYING P ENALTY OF RS.2,91.83.830 UNDER SECTION 271 (1)(C) OF THE INCOME - TAX ACT, 1961 THE ACT IS WITHOUT JURISDICTION, BAD IN LAW AND VOID - AB INITIO. 1 . 1 . THAT THE CIT (APPEALS) ERRED IN NOT APPRECIATING THAT THE IMPUGNED ORDER DATED 02.08.2 017, PASSED UNDER SECTION 271(1 )(C) WAS BARRED BY LIMITATION PRESCRIBED UNDER SECTION 275 OF THE ACT AND CONSEQUENTLY, BAD I N LAW. 1 . 2 . THAT THE CIT (APPEALS) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT SATISFACTION FOR INITIATING PENALTY WAS NOT DISCERNIBLE FROM THE ASSESSMENT ORDER, WHICH IS SINE QUA NON FOR ASSUMPTION OF JURISDICTION TO IMPOSE PENALTY. 1 . 3 . THAT THE CIT (APPEALS) ERRED IN NOT APPRECIATING THAT THE PENALTY IMPOSED WITHOUT ISSUANCE AND/ OR SERVICE OF A VALID NOTICE TO THE APPELLANT, IS ILLEGAL AND BAD IN LAW. 1 . 4 . THAT THE CIT (APPEALS) ERRED IN NOT APPRECIATING THAT THE ASSESSING OFFICER PROCEEDED TO PASS THE I MPUGNED PENALTY ORDER IN UNDUE HASTE, WITHOUT AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE APPELLANT. 3 ITA NO. 7296/DEL/2017 WITHOUT PREJUDICE: 2. THAT THE CIT (APPEALS) ERRED ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER OF IMPOSING PENALTY OF RS.2,91,83,830 UNDER SECTION 271(1 )(C) IN RESPECT OF DISALLOWANCE OF ADDITIONAL DEPRECIATION OF RS.8,58,60,045 CLAIMED UNDER SECTION 32(1 )(II)(A) OF THE ACT. 2 . 1 . THAT THE CIT (APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING PENALTY IMPOSED DESPITE THE FACT THAT THERE WAS NEITHER ANY CONCEALMENT NOR FURNISHING OF INACCURATE PARTICULARS OF ANY INCOME. 2 . 2 . 2 . 3 . THAT THE CIT (APPEALS) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT PENALTY WAS NOT LEVIABLE CONSIDERING THAT: (I) THE DISALLOWANCE WAS MADE/ SUSTAINED I N THE QUANTUM PROCEEDINGS, SIMPLY ON ACCOUNT OF BONA FIDE DIFFERENCE OF OPINION; (II) THE CLAIM MADE BY THE APPELLANT WAS PROPERLY EXPLAINED AND THE EXPLANATION FURNISHED WAS BONA FIDE; AND (III) ALL FACTS MATERIAL TO THE CLAIM WERE DULY DISCLOSED BY THE A PPELLANT . 3. BRIEF FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A JOINT VENTURE COMPANY WHICH FILED RETURN OF INCOME DECLARING INCOME OF RS. 55,69,73,660/ - . THE ASSESSEE - APPELLANT CLAIMED ADDITIONAL DEPRECATION AMOUNTI NG TO RS. 8,58,60,045/ - U/S 32(1 )( IIA) OF THE ACT. THE SAID CLAIM WAS DISALLOWED BY THE AO AND THE INCOME WAS ASSESSED AT RS. 64,34,83,710/ - . THE SAID DISALLOWANCE WAS CONFIRMED BY THE CIT(A) AND THIS TRIBUNAL. THE AO VIDE ORDER DATED 14.09.2015 LEVIED 4 ITA NO. 7296/DEL/2017 PENALTY OF RS. 2,91,83,830/ - U/S 271( L)(C) OF THE ACT. THE PENALTY WAS CONFIRMED BY THE IMPUGNED ORDER DATED 02.08.2017. 4. AT THE OUTSET, THE LD. AR SUBMITS THAT THE PENALTY PROCEEDINGS INITIATED VIDE NOTICE DATED 30.12.2011 AND 02.07.2015 DID NOT SPECIFICALLY MENTION AS TO WHETHER IT IS A CASE FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. HE SUBMITS THAT THE NOTICE DOES NOT SATISFY THE REQUIREMENTS OF LAW. IT IS FURTHER ARGUED THAT BECAUSE OF THE NOTICE BEING DEFECTIVE, THE ASSESSEE WAS NOT GIVEN A PROPER SHOW CAUSE IN THE PENALTY PROCEEDINGS. THE LD.AR RELIED UPON THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF T. ASHOK PAI VS. CIT 292 ITR 11, CIT VS. MANJUNATHA COTTON AND GINNING FACTORY 359 ITR 565, CIT VS SSA EMERALD MEADOWS 73 TAXMANN.COM 241 TO SUPP ORT HIS SUBMISSIONS. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS PASSED BY THE AO AND THE CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS CLEAR FROM THE NOTICES INITIATING PENALTY IN THE PRESENT CASE THAT THE AO DID NOT SPECIFICALLY MENTION THE CHARGE ON WHICH THE PROCEEDINGS U/S 271(1 )(C) OF THE ACT WERE INITIATED AGAINST THE ASSESSEE. THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT 5 ITA NO. 7296/DEL/2017 VS. MANJUNATHA COTTON AND GINNING FACTORY(SUPRA) HE L D THAT NON - STRIKING OF THE RELEVANT CLAUSE UNDER WHICH THE PENALTY IS SOUGHT TO BE IMPOSED WILL LEAD TO AN INFERENCE OF NON - APPLICATION OF MIND. 6. IN THE AFORESAID JUDGMENT IT WAS HELD AS UNDER: 59. AS THE PROVISION STANDS, THE PENALTY PROCEEDINGS CAN BE INITIATED ON VARIOUS GROUNDS 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. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORDER AND IF IT IS A CASE OF RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION 1 OR IN EXPLANATION 1(B), THEN THOUGH PENALTY PROCEEDINGS ARE IN THE NATURE OF CIVIL LIABILITY, IN FACT, IT IS PENAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENT IONED IN SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PENALTY ON HIM AS SECTION 274 MAKES IT CLEAR THAT THE ASSESSEE HAS ITA NO. 1812 & 1844/BANG/2013 PAGE 5 OF 8 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 271(1)(C) DO NOT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED 6 ITA NO. 7296/DEL/2017 FORM WHERE ALL THE GROUNDS MENTIONED IN SECT ION 271 ARE MENTIONED WOULD NOT SATISFY THE REQUIREMENT 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 PER CENT TO 300 PER CENT OF THE TAX LIABILITY. AS THE SAID PR OVISIONS HAVE TO BE HELD TO BE STRICTLY CONSTRUED', NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, THE PRINCIPLES OF NATURAL JUSTICE IS OFFENDED IF THE SHOW - CAUSE NOTICE IS VAGUE. ON THE BASIS OF SU CH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOT H THE OFFENCES AND IN SOME CASES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE 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 THE SATISFACTION OF THE EXISTENCE OF THE GROUNDS MENTIONED IN SECTION 271(1)(C) OF THE ACT WHEN IT IS A SINE QUA NON FOR INITI ATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBS TANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO ANSWER. IT IS NOT 7 ITA NO. 7296/DEL/2017 OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT THE AS SESSEE WAS CALLED UPON TO MEET. OTHERWISE, THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND THE PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS, ONCE THE PROCEEDINGS ARE INITIATE D ON ONE GROUND, THE PENALTY SHOULD 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. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE ITA NO. 1812 & 1844/BANG/2013 PAGE 6 OF 8 INFORMATION, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUE NT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE ACT TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS THAT TH ERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF INCOME ARE DIFFERENT. THUS, THE ASSESSING OFFICER WHILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION TH AT 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 PA L REPORTED IN [2007] 292 ITR 11 (SC) AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PA RTICULARS OF INCOME CARRY DIFFERENT 8 ITA NO. 7296/DEL/2017 CONNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF MANU ENGINEERING WORKS REPORTED IN [1980] 122 ITR 306 (GUJ) AND THE DELHI HIGH COURT IN THE CASE OF CIT V. VIRGO MARKETING P. LTD. REPORTED IN [2008] 171 TAXMAN 156, HA S HELD THAT LEVY OF PENALTY 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 CONCEALMENT, THEN THE NOTICE HAS T O B E APPROPRIATELY MARKED. SIMIL AR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE STANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON - APPLICATION OF MIND. 7 . EVEN THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF NATIONAL TEXTILES VS. CIT 249 ITR 125 HELD IN FAVOR OF THE ASSESSEE ON THE AFORESAID ISSUE. THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SSA EMERALD MEADOWS (SUPRA) DISMISSED THE APPEAL OF TH E REVENUE ON THIS ISSUE BY FOLLOWING THE JUDGMENT RENDERED IN THE CASE OF MANJUNATHA COTTON. AGAINST THE SAID JUDGMENT, THE REVENUE PREFERRED SLP BEFORE THE HON'BLE APEX COURT, WHICH TOO WAS DISMISSED BY ORDER DATED 05.08.2016 BY HOLDING THAT THERE WAS NO MERIT IN THE PETITION. IN THE AFORESAID SCENARIO, IT CANNOT BE SAID THAT THE NON - STRIKING OF THE RELEVANT CLAUSE WHILE INITIATING PENALTY PROCEEDINGS IS A MERE IRREGULARITY RATHER THE SAME IS AN ILLEGALITY WHICH VITIATES THE 9 ITA NO. 7296/DEL/2017 PROCEEDINGS AS SUCH. IN VIEW THEREOF, WE DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY LEVIED ON THE ASSESSEE . 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO. 7296 /DEL/201 7 IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 3 0 . 01.2018 . SD/ - SD/ - [ KULDIP SINGH ] [B.P. JAIN] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 0 T H JANUARY, 2018 VL/ COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI