SUPERSONIC TURNERS PVT. LTD., Jaipur V. ACIT, Jaipur

ITA 744/JPR/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2027 (ITAT-JAIPUR)
• Duration Of Justice: 4 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 23-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Keywords: Opportunity of being heard; Principle of natural justice; Initiation of penalty proceedings; Reasonable cause; Wrong claim
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH HKKXPUN] YS[KK LNL; ,O JH DQY HKKJR] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, J.M VK;DJ VIHY LA-@ ITA NO. 744/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 . M/S SUPERSONIC TURNERS PVT. LTD. F-393-A, ROAD NO. 9-F-2, VKI AREA, JAIPUR (RAJ.) CUKE VS. THE ACIT, CIRCLE-4, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AADCS 5144 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI SATISH GUPTA (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 19.09.2017 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 25/09/2017. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT (A)- II, JAIPUR DATED 08.08.2013 PERTAINING TO ASSESSMEN T YEAR 2006-07. THE ASSESSEE HAS RAISED THE FOLLOWING AMENDED GROUNDS O F APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. LOWER AUTHORITIES GROSSLY ERRED IN CONFIRMING OF RS. 666468/- U/S 271 (1)(C) OF THE ACT. 2. ON THE FACTS & CIRCUMSTANCES OF THE CASE LD. CIT (A) GROSSLY ERRED IN HOLDING THAT EVEN BONAFIDE WRONG CLAIM ARE LIABL E FOR PENALTY. HE ALSO ERRED IN NOT CONSIDERING THE DECISION OF HO NBLE SUPREME COURT IN THE CASE OF M/S RELIANCE PETRO PRODUCTS LT D. 3. ON THE FACTS & CIRCUMSTANCES OF THE CASE LD. AO GROSSLY ERRED IN IMPOSING THE PENALTY WITHOUT EVEN MENTIONING WHETHE R THE PENALTY PROCEEDINGS ARE INITIATED FOR CONCEALMENT O F PARTICULARS OF 2 ITA NO. 744/JP/2013. M/S SUPERSONIC TURNERS PVT. LTD., JAIPUR. INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. NO SUCH LAPSE WAS EVEN MENTIONED IN THE NOTICE ISSUED. 2. BRIEFLY STATED THE FACTS ARE THAT THE CASE OF THE A SSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT UNDER SE CTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT), WAS FRAMED VIDE ORDER DATED 26/12/2008. THE ASSESSING OFFICER WHIL E FRAMING THE ASSESSMENT MADE VARIOUS DISALLOWANCES IN RESPECT OF INTEREST P AID FOR INTEREST FREE LOANS, INTEREST PAID AT HIGHER INTEREST RATE, DISALLOWANCE OF SUNDRY BALANCE WRITTEN OFF, DISALLOWANCE OF EMPLOYEES CONTRIBUTION AND ALS O MADE TRADING ADDITION. THE ASSESSING OFFICER COMPUTED INCOME AT RS. 2,01,7 4,280/- AGAINST THE INCOME DECLARED AT RS. 1,66,49,983/-. THE ASSESSING OFFICER INITIATED PENALTY U/S 271(1)(C) SEPARATELY. SUBSEQUENTLY, THE ASSESS ING OFFICER IMPOSED THE PENALTY OF RS. 7,60,716/- IN RESPECT OF ADDITION OF RS. 22,60,000/-. AGGRIEVED BY THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE LD . CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS, SUSTAINED THE PENALTY. 3. NOW, THE ASSESSEE IS IN FURTHER APPEAL. 4. LD. COUNSEL FOR THE ASSESSEE, AT THE TIME OF HEA RING, SUBMITTED THAT GROUND NO. 3 MAY BE ADJUDICATED FIRST, AS IT GOES T O LEGALITY OF THE PENALTY PROCEEDINGS. 4.1 GROUND NO. 3 OF ASSESSEES APPEAL READS AS UNDE R:- 3 ITA NO. 744/JP/2013. M/S SUPERSONIC TURNERS PVT. LTD., JAIPUR. 3. ON THE FACTS & CIRCUMSTANCES OF THE CASE LD. AO GROSSLY ERRED IN IMPOSING THE PENALTY WITHOUT EVEN MENTIONING WHETHE R THE PENALTY PROCEEDINGS ARE INITIATED FOR CONCEALMENT O F PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. NO SUCH LAPSE WAS EVEN MENTIONED IN THE NOTICE ISSUED. 4.2 LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE ASSESSMENT ORDER WHERE THE ASSESSING OFFICER HAS STATED AS UND ER:- PENALTY U/S 271(1)(C) IS INITIATED SEPARATELY. 4.3 LD. COUNSEL, FURTHER, DREW OUR ATTENTION TO THE NOTICE DATED 26.12.2008, ISSUED BY THE ASSESSING OFFICER, SAME I S REPRODUCED AS UNDER:- NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF T HE INCOME TAX ACT, 1961 TO, M/S SUPERSONIC TURNERS PVT. LTD. F-393-A, ROAD NO. 9-F-2, VKI AREA, JAIPUR. WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE ASSESSMENT YEAR .. APPEARS TO ME THAT YOU:- HAVE WITHOUT REASONABLE CAUSE FAILED TO FURNISH ME RETURN OF INCOME WHICH YOU WERE REQUIRED IN FURNISH BY A NOTICE GIVE N UNDER SECTION 22(1)/22(2)/34 OF THE INCOME-TAX ACT, 1922 OR WHICH YOU WERE REQUIRED TO FURNISH UNDER SECTION 139(1) OR BY A NOTICE GIVEN UNDER SEC TION 139(2)/148 OF THE INCOME-TAX ACT, 1961, NO.DATED.OR HAVE WITHOU T REASONABLE CAUSE FAILED TO FURNISH IT WITHIN THE TIME ALLOWED AND TH E MANNER REQUIRED BY THE SAID SECTION 139(1) OR BY SUCH NOTICE. 271(1)(B):- 4 ITA NO. 744/JP/2013. M/S SUPERSONIC TURNERS PVT. LTD., JAIPUR. HAVE WITHOUT REASONABLE CAUSE FAILED TO COMPLY WITH A NOTICE UNDER SECTION 22(4)/23(2) OF THE INCOME-TAX ACT, 1922 OR UNDER SECTION 142(1)/143(2) OF THE INCOME-TAX ACT, 1961. NO..DATED. 271(1)(C):- HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR FU RNISHED INACCURATE PARTICULARS OF SUCH INCOME. YOU ARE HEREBY REQUESTED TO APPEAR BEFORE ME AT 11. 00 A.M/P.M ON 22.01.2009 YOU SHOULD NOT BE MADE UNDER SECTION 271 OF THE INC OME-TAX ACT, 1961. IF YOU DO NOT WISH TO AVAIL YOURSELF OF THIS OPPORTUNITY OF BEING HEARD IN PERSON OF THROUGH AUTHORIZED REPRESENTATIVES YOU MA Y SHOW CAUSE IN WRITING ON OR BEFORE THE SAID DATE WHICH WILL BE CONSIDERED BE FORE ANY SUCH ORDER IS MADE UNDER SECTION 271. SD/ (SANJIV) ADDL. COMMISSIONER OF INCOME-TAX RANGE-4, JAIPUR. IN THIS BACKGROUND LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT THERE IS NO SPECIFIC CHARGE AGAINST ASSESSEE. HE SUBMITTED THA T THE RATIO OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MANJUNATHA COTTON & GINNING FACTORY (2013) 35 TAXMA NN.COM 250 (KARNATAKA). LD. COUNSEL FURTHER REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. 4.4 ON THE CONTRARY, LD. D/R OPPOSED THE SUBMISSION S AND SUBMITTED THAT IN ASSESSMENT ORDER THE ASSESSING OFFICER HAS DULY MADE SATISFACTION IN RESPECT OF WRONG CLAIM OF DEDUCTION ON ACCOUNT OF W RITE OFF THE ADVANCE GIVEN TO M/S SHRIRAM KAIYUAN MACHINE TOOLS LTD., DELHI. 5 ITA NO. 744/JP/2013. M/S SUPERSONIC TURNERS PVT. LTD., JAIPUR. 4.5 IN REJOINDER LD. AUTHORIZED REPRESENTATIVES SUB MITTED THAT HERE ALSO THE ASSESSING OFFICER HAS NOT MADE ANY SPECIFIC OBS ERVATIONS WHETHER THE ASSESSEE IS GUILTY OF FURNISHING INACCURATE PARTIC ULARS OR CONCEALMENT OF PARTICULARS OF INCOME. 4.6 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE NOTICE U/S 271(1) (C) OF T HE ACT DOES NOT SPECIFY ANY SPECIFIC CHARGE. HONBLE KARNATAKA HIGH COURT IN T HE CASE OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA) AFTER EXAMINING TH E LENGTH IN RESPECT OF INITIATION AND LEGALITY OF THE PENALTY PROCEEDING C ONCLUDED AS UNDER:- CONCLUSION 6.3 IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EMER GES IS AS UNDER:- (A) PENALTY UNDER SECTION 271(L)(C) IS A CIVIL LIA BILITY. (B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSI NG PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. (C) WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIE NT FOR ATTRACTING CIVIL LIABILITY. (D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 2 71(L)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271 . (E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISC ERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORIT Y OR REVISIONAL AUTHORITY. (F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(L)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & 6 ITA NO. 744/JP/2013. M/S SUPERSONIC TURNERS PVT. LTD., JAIPUR. (B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WH ICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALMENT BECAUSE OF DEEMING PROVISION . (G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE AS SESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDINGS UNDER SE CTION 271(L)(C) IS A SINE QUA NON FOR THE ASSESSMENT OFFICER TO INITIATE THE PROC EEDINGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SECTION 1(B). (H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND THE COMMISSIONER. (I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. (J) IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. (K) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORD ER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TAX AND INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE P ENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSME NT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILITY CAME T O BE ADMITTED AND IF NOT IT WOULD HAVE ESCAPED FROM TAX NET AND AS OPINED BY TH E ASSESSING OFFICER IN THE ASSESSMENT ORDER. (L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPL ANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PROVE THAT T HE EXPLANATION OFFERED IS NOT BONAFIDE, AN ORDER IMPOSING PENALTY COULD BE PA SSED. (M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAV E BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. 7 ITA NO. 744/JP/2013. M/S SUPERSONIC TURNERS PVT. LTD., JAIPUR. (N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. (O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY S ATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDING S, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY PR OCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE AS SESSING AUTHORITY. (P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPEC IFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(L)(C), I.E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORRECT PARTICULARS OF INCOM E (Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTI ONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. (R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE H AS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDE D. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASS ESSEE. (S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AN D FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. (T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE A SSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EM ANATE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEPENDENT AND SEPARATE ASPEC T OF THE PROCEEDINGS. (U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEED INGS INSOFAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORREC T PARTICULARS' WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PE NALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE A SSESSMENT OR REASSESSMENT CANNOT BE DECLARED AS INVALID IN THE P ENALTY PROCEEDINGS. 8 ITA NO. 744/JP/2013. M/S SUPERSONIC TURNERS PVT. LTD., JAIPUR. 4.7 LD. D/R HAS HEAVILY PLACED RELIANCE ON THE ASSE SSMENT ORDER BUT WE ARE IN AGREEMENT TO THE CONTENTION OF THE LD. COUNS EL FOR THE ASSESSEE THAT EVEN IN ASSESSMENT ORDER THERE IS NO WHISPER OF CON CEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS. 4.8 UNDER THESE FACTS, RESPECTFULLY FOLLOWINGS THE RATIO LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT. WE HOLD THAT INITIAT ION OF PROCEEDINGS U/S 271(1)(C) OF THE ACT IS CONTRARY TO THE LAW LAID DO WN BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY (SUPRA). THE HONBLE JURISDICTIONAL HIGH COURT IN T HE CASE OF SHEVETA CONSTRUCTION COMPANY PVT. LTD. VS. ITO IN DB INCOME TAX APPEAL NO. 534/2008 HAS ALSO FOLLOWED RATIO LAID DOWN BY THE HONBLE HI GH COURT OF KARNATAKA. THEREFORE, THE PENALTY ORDER CANNOT BE S USTAINED WE ACCORDINGLY QUASH THE IMPUGNED PENALTY ORDER BEING ILLEGAL AND UNJUSTIFIED. GROUND NO. 3 IS ALLOWED IN RESPECT OF GROUND NO. 1 & 2 SINCE WE HAVE ALREADY QUASHED THE PENALTY ORDER GROUND NO. 1 & 2 BECOME INFRUCTUOUS. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 744/JP/2013 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON MONDAY, THE 25 TH D AY OF SEPTEMBER 2017 . SD/- SD/- HKKXPUN ( DQY HKKJR ) ( BHAGCHAND ) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER 9 ITA NO. 744/JP/2013. M/S SUPERSONIC TURNERS PVT. LTD., JAIPUR. JAIPUR DATED:- 25/09/2017. POOJA/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S SUPERSONIC TURNERS PVT. LTD., JAIPUR. 2. THE RESPONDENT- THE ACIT, CIRCLE-4, JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 744/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR