R PANNERSELVAM, CHENNAI V. ACIT NON CORPORATE CIRCLE 2 , CHENNAI

ITA 789/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5945 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 06-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Opportunity of being heard; Principle of natural justice; Question of law; Reasonable cause
• Section: 271(1)(c); 148; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NOS.789, 790, 791, 792, & 793/CHNY/2018 / ASSESSMENT YEARS : 2003-04, 2005-06, 2006-07 , 2007-08 AND 2008-09. SHRI. R. PANNERSELVAM, NO.43, ROHINI VASANTHAM, SARANGAPANI STREET, T. NAGAR, CHENNAI 600 017. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 2, CHENNAI. [PAN AAGPP 5343K ] ./ I.T.A. NOS.794, 795, 796, 797 AND 798/CHNY/2018. / ASSESSMENT YEARS : 2003-04, 2004-05, 2005-06 , 2006-07 A ND 2008-09. R. PANNERSELVAM (HUF) NO.43, ROHINI VASANTHAM, SARANGAPANI STREET, T. NAGAR, CHENNAI 600 017. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 2, CHENNAI. [PAN AAAHR 0200H] ( / APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI. S. SRIDHAR, ADVOCATE /RESPONDENT BY : SHRI. AR.V. SREENIVASAN, JCIT. / DATE OF HEARING : 21 - 1 - 2019 / DATE OF PRONOUNCEMENT : - 01 - 201 9 / O R D E R PER BENCH. EXCEPT ITA NOS.793 AND 798/CHNY/2018, OTHER APP EALS FILED BY THE ASSESSES HAVE COMMON GROUNDS AND ITA NOS.789-798/18. :- 2 -: CHALLENGES THE VALIDITY OF THE PENALTY LEVIED U/S. 271(1) (C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . 2. LD. COUNSEL FOR THE ASSESSEES SUBMITTED THAT THE PE NALTY LEVIED U/S.271(1) (C) OF THE ACT COULD NOT BE SUSTA INED SINCE NOTICE ISSUED TO THE ASSESSEE U/S. 274 R.W.S. 271 OF THE ACT WAS VAGUE. ACCORDING TO HIM, NOTICE U/S.274 R.W.S. 271 OF THE ACT FOR THE IMPUGNED ASSESSMENT YEARS, DID NOT SPECIFY THE REAS ON WHY PENALTY PROCEEDINGS WERE INITIATED. AS PER THE LD. AUTHORISED REPRESENTATIVE, NOTICE DID NOT SAY WHETHER ASSESSEE S HAD CONCEALED PARTICULARS OF INCOME OR HAD FURNISHED AN Y INACCURATE PARTICULARS OF INCOME. CONTENTION OF THE LD. AUTHOR ISED REPRESENTATIVE, WAS THAT A NOTICE WHICH DID NOT SHO W THE DEFAULT WHICH ASSESSEE THE WAS REQUIRED TO EXPLAIN, WAS AN INVALID ONE. RELIANCE WAS PLACED ON THE JUDGMENTS OF HONBLE KAR NATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 AND THAT OF CIT VS. SSAS EMER ALD MEADOWS (ITA NO.380/2015, DATED 23.11.2015). LD. AUTHORISED REPRESENTATIVE ALSO POINTED OUT THAT THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF SSAS EMERALD M EADOWS (SUPRA) STOOD AFFIRMED BY THE HONBLE APEX COURT IN CC NO.11485 OF 2017 DATED 05.08.2016. LD. AR SUBMITTED THAT IN A SIMILAR CASE THIS TRIBUNAL IN M/S. ORIGINAL KERALA JEWELLERS VS . DCIT ( IN ITA ITA NOS.789-798/18. :- 3 -: NOS. 2987 & 2988/CHNY/2017, DATED 05.03.2018) HAD Q UASHED LEVY OF PENALTY FOR VAGUENESS IN THE NOTICE RELYING ON THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565. FURTHER, ACCORDING TO HIM, APPEAL OF THE DEPARTMENT AGAINST THE SAID DEC ISION WAS DISMISSED BY THE HONBLE JURISDICTIONAL HIGH COURT IN T.C. (APPEAL) NO.717 OF 2018, DATED 18.12.2018. 3. ON THE OTHER HAND, LD DR SUPPORTING THE ORDERS OF T HE LOWER AUTHORITIES SUBMITTED THAT ASSESSES WERE GUILTY OF BOTH FURNISHING OF INACCURATE PARTICULARS AS WELL AS CONCEALMENT OF IN COME. ACCORDING TO HER, THE NOTICE U/S.274 R.W.S. 271 OF THE ACT DID N OT SUFFER ANY INFIRMITY. AS PER THE LD. DR, THE LD. ASSESSING OFF ICER HAD INTENTIONALLY NOT SCORED OF ANY PORTION FROM SUCH NOTICE SINCE AS SESSEE WAS GUILTY OF BOTH THE OFFENCES. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. VALIDITY OF A NOTI CES ISSUED UNDER SECTION 274 R.W.S. 271 OF THE ACT GOES TO THE ROOT OF THE JURISDICTION TO LEVY A PENALTY UNDER SECTION 271 (1) (C) OF THE ACT AND CAN THEREFORE BE CONSIDERED AT ANY STAGE OF THE APPELLATE PROCEED INGS. NOTICE ISSUED TO THE ASSESSEE UNDER THESE SECTIONS, FOR ALL THE Y EARS ARE TYPICALLY WORDED FOR BOTH THE ASSESSEES AND THAT FOR ASSESSME NT YEAR 2006-07, IN THE CASE OF R. PANNERSELVAM (HUF) IS REPRODUCED HEREUNDER:- ITA NOS.789-798/18. :- 4 -: NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF T HE INCOME- TAX ACT, 1961 (NOTICE U/S 271(1)(C) PAN AAAHR 0200H OFFICE OF THE ASSISTAN T COMMISSIONER OF INCOME TAX, CIRCLE II, CHENNAI 600 034. DATED 30.12.2011. TO R. PANNERSELVAM (HUF) NO.43, ROHINI VASANTHAM, SARANGAPANI STREET, T. NAGAR, CHENNAI 600 017. WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE ASSESSMENT YEAR 2006 -07, IT APPEARS TO ME THAT YOU: HAVE WITHOUT REASONABLE CAUSE FAILED TO FURNISH ME RETURN OF INCOME WHICH YOU ARE REQUIRED TO FURNISH BY 0 NOTICE GIVEN UNDER SECTION 22( 1)/22(2)/34 OF THE INCOME-TAX ACT. 1922 OR WHICH YOU ARE REQUIRED TO FURNISH UNDE R SECTION 139 (1) OR BY A NOTICE GIVEN UNDER SECTION 139(2)/SECTION 148 OF THE INCOM E-TAX ACT. 1961 NO DATED. OR HOVE WITHOUT REASONABLE CAUSE FAILED TO FURNISH IT WITHIN THE TIME ALLOWED AND THE MANNER REQUIRED BY THE SAID SE CTION 139( 1) OR BY SUCH NOTICE. HAVE WITHOUT REASONABLE CAUSE FOILED TO COMPLY WIT H A NOTICE UNDER SECTION 22(4)/23(2) OF THE INCOME-TAX ACT, 1922 OR UNDER SE CTION 142( 1)/143(2) OF THE INCOME TAX ACT. 1961. HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR FU RNISHED INACCURATE PARTICULARS OF SUCH INCOME. YOU ARE HEREBY REQUESTED TO APPEAL BEFORE ME AT MY OFFICE ON 01.02.2011 AT 11.00 A.M AND SHOW CAUSE WHY AN ORDER IMPOSING A PENALTY ON YOU SHOULD NOT BE MADE UNDER SECTION 271 OF THE INCOME-TAX ACT. 1961. IF Y OU DO NOT WISH TO AVAIL THIS OPPORTUNITY OF BEING HEARD IN PERSON OR THROUGH AUT HORISED REPRESENTATIVE, YOU MAY SHOW CAUSE IN WRITING ON OR BEFORE THAT DATE WHEN S HALL BE CONSIDERED BEFORE ANY SUCH ORDER IS MADE UNDER SECTION 271 (1) ( C) OF TH E ACT. SD/- (V. VIDHYADHAR, IRS) ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE II, CHENNAI ITA NOS.789-798/18. :- 5 -: CONTENTION OF THE LD. DR IS THAT ASSESSEES WERE GUI LTY OF BOTH CONCEALMENT OF INCOME AS WELL AS FURNISHING OF INAC CURATE PARTICULARS OF INCOME. HOWEVER, A READING OF THE ABOVE NOTICE C LEARLY SHOW THAT THE WORD USED FOR LINKING THE TWO PORTIONS IS OR AND NOT AND. AN ASSESSEE IN OUR OPINION HAS EVERY RIGHT TO KNOW WHI CH ALLEGED DEFAULT HE HAS TO EXPLAIN. IF IT IS BOTH, IT IS NECESSARY T O MENTION SO, IN THE NOTICE. WITHOUT KNOWING WHAT IS DEFAULT FOR WHICH H E IS BEING CHARGED, AN ASSESSEE CANNOT GIVE EXPLANATION. IN A SIMILAR S ITUATION HONBLE KARNATAKA HIGH COURT IN THE CASE OF SSAS EMERALD M EADOWS (SUPRA), RELYING ON ITS OWN JUDGMENT IN THE CASE OF MANJUNAT HA COTTON AND GINNING FACTORY (SUPRA) HELD AS UNDER AT PARA 2 TO 4 OF ITS JUDGMENT. 2. THIS APPEAL HAS BEEN FILED RAISING THE FOLLOWI NG SUBSTANTIAL QUESTIONS OF LAW: (1) WHETHER, OMISSION IF ASSESSING OFFICER TO EXPLI CITLY MENTION THAT PENALTY PROCEEDINGS ARE BEING INITIATED FOR FURNISH ING OF INACCURATE PARTICULARS OR THAT FOR CONCEALMENT OF INCOME MAKES THE PENALTY ORDER LIABLE FOR CANCELLATION EVEN WHEN IT HAS BEEN PROVE D BEYOND REASONABLE DOUBT THAT THE ASSESSEE HAD CONCEALED IN COME IN THE FACTS AND CIRCUMSTANCES OF THE CASE? (2) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN LAW IN HOLDING THAT THE P ENALTY NOTICE UNDER SECTION 274 R.W.S. 271(1)(C) IS BAD IN LAW AND INVA LID DESPITE THE AMENDMENT OF SECTION 271(1B) WITH RETROSPECTIVE EF FECT AND BY VIRTUE OF THE AMENDMENT, THE ASSESSING OFFICER HAS INITIATED THE PENALTY BY PROPERLY RECORDING THE SATISFACTION FOR THE SAME? (3) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN DECIDING THE APPEALS AGAI NST THE REVENUE ON THE BASIS OF NOTICE ISSUED UNDER SECTION 274 WITHOU T TAKING INTO CONSIDERATION THE ASSESSMENT ORDER WHEN THE ASSESSI NG OFFICER HAS SPECIFIED THAT THE ASSESSEE HAS CONCEALED PARTICULA RS OF INCOME? 3. THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY THE 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 ITA NOS.789-798/18. :- 6 -: ALLOWING THE APPEAL OF THE ASSESSEE, HAS RELIED ON THE DECISION OF THE DIVISION BENCH OF THIS COURT RENDERED IN THE CASE OF CIT 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. IN THE EARLIER CASE OF MANJUNATHA COTTON AND GINNI NG FACTORY (SUPRA) THEIR LORDSHIP HAD OBSERVED AS UNDER:- NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECIF ICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C) , I.E., WHETHER IT I S FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORRECT PARTICULARS OF INCOM E. SENDING PRINTED FORM WHERE ALL THE GROUNDS MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY THE REQUIREMENT OF LAW ; THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS T O MEET SPECIFICALLY. OTHERWISE, THE PRINCIPLES OF NATURAL JUSTICE ARE OF FENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASS ESSEE ; ) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AND FINDING THE ASS ESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW ; PENALTY PROCEEDINGS ARE DISTIN CT FROM THE ASSESSMENT PROCEEDINGS : THOUGH PROCEEDINGS FOR IMPOSITION OF PENALTY EMANATE FROM PROCEEDINGS OF ASSESSMENT, THEY ARE INDEPENDENT AND A SEPARATE ASPECT OF THE PROCEEDINGS ; THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS IN SO FAR 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 PROCEEDINGS ON THE 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 INVALID IN THE PENALTY PROCEEDIN GS. VIEW TAKEN BY THE HONBLE KARNATAKA HIGH COURT IN THE ABOVE JUDGMENT WAS INDIRECTLY AFFIRMED BY THE HONBLE APE X COURT, WHEN IT DISMISSED AN SLP FILED BY THE REVENUE AGAINST THE J UDGMENT IN THE CASE OF SSAS EMERALD MEADOWS (SUPRA), SPECIFICALLY OBSERVING THAT THERE WAS NO MERITS IN THE PETITION FILED BY THE RE VENUE. WE FURTHER ITA NOS.789-798/18. :- 7 -: FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ORIGINAL KERALA JEWELLERS (SURPA) HAD HELD AS UNDER:- 3. THE TRIBUNAL BY THE IMPUGNED ORDER SET ASIDE T HE PENALTY IMPOSED ON THE ASSESSEE ON THE GROUND THAT THE NOTI CE ISSUED TO THE ASSESSEE AT THE VERY COMMENCEMENT OF THE PEN ALTY PROCEEDINGS IS VITIATED AND NOT SUSTAINABLE IN THE EYE OF LAW. 4. THE TRIBUNAL REFERRED TO AND RELIED UPON THE DECISION OF THE DIVISON BENCH OF THE HIGH COURT OF KARNATAKA IN CIT V. MANJUNATHA COTTON AND GINNNG FACTORY [REPORTED IN ( 2013) 359 ITR 565]. THE DIVISION BENCH AFTER ANALYZING THE SUBJECT IN AN ELABORATE MANNER AND RELATING TO SEVERAL DECISIONS OF THE HONBLE SUPREME COURT HELD THAT MERELY BECAUSE THE ASSESSEE AGREED FOR ADDITION AND WHEN THE ASSESSEE PAID THE TAX AND THE INTEREST THEREOF IN THE ABSENCE OF ANY MATERIAL ON RECORD TO SHOW THE CONCEALMENT OF INCOME, IT CANNOT BE INFERR ED THAT THE SAID ADDITION IS ON ACCOUNT OF CONCEALMENT, SO AS TO LEVY PENALTY UNDER SECTION 271(1) OF THE ACT. 5. WE FIND NO ERROR IN THE ORDER PASSED BY THE TRI BUNAL ESPECIALLY WHEN IT IS ADMITTED THAT THE DECISION IN CIT VS. MANJUNATHA COTTON AND GINNING FACTORY HAS ATTAINED FINALITY. THUS, FOR THE ABOVE REASONS, THE APPEAL FILED BY TH E REVENUE IS DISMISSED AND THE SUBSTANTIAL QUESTIONS OF LAW ARE ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. THEIR LORDSHIP HAS UPHELD THE DECISION OF THIS TRIB UNAL IN THE CASE OF ORIGINAL KERALA JEWELLERS (SURPA) WHICH HAS BEEN RE LIED ON BY THE LD. AR. IN THE CIRCUMSTANCES, PENALTY LEVIED ON THE A SSESSEES FOR THE IMPUGNED ASSESSMENT YEARS ARE SET ASIDE. APPEALS O F THE ASSESSEES IN ITA 789, 790,791, 792, 794, 795, 796 AND 797/CHNY/2 018 ARE ALLOWED. 5. THIS LEAVES US WITH APPEALS OF THE ASSESSEEES NUMBE RED AS ITA NOS.793 AND 798/CHNY/2018 FOR ASSESSMENT YEARS 2008-09. ASSESSEES IN THESE APPEALS IS AGGRIEVED ON ORDERS PASSED BY THE LD. ITA NOS.789-798/18. :- 8 -: ASSESSING OFFICER U/S.154 OF THE ACT FOR IMPOSING I NTEREST U/S.234A OF THE ACT WHICH WAS CONFIRMED BY THE LD. CIT(A). 6. LD. COUNSEL FOR THE ASSESSEES SUBMITTED THAT LD. AO HAD ISSUED NOTICE ON 09.11.2016, WHICH WERE SERVED ON THE ASSESSEES ON 10.11.2016. AS PER THE LD. AR, ORDER U/S.154 OF TH E ACT WAS PASSED ON 21.11.2016 WITHOUT GIVING SUFFICIENT TIME TO THE AS SESSEES FOR GIVING A REPLY TO THE NOTICE. ACCORDING TO HIM, THERE WERE ERRORS IN COMPUTING INTEREST U/S.234A OF THE ACT, WHICH COULD NOT BE E XPLAINED BY THE ASSESSEE DUE TO LACK OF PROPER OPPORTUNITY. 7. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. IT IS AN ADMITTE D POSITION THAT SHOW CAUSE NOTICE U/S.154 OF THE ACT WAS SERVED ON THE A SSESSEES ON 10.11.2016 AND THE ORDER U/S.154 OF THE ACT WAS PAS SED ON 21.11.2016. THERE WAS HARDLY 11 DAYS BETWEEN DATE OF RECEIPT OF SHOW CAUSE NOTICE AND THE DATE OF ISSUE OF ORDER. WE THEREFORE FIND MUCH STRENGTH IN THE ARGUMENT OF THE ASSESSEES THAT THEY WERE NOT GIVEN SUFFICIENT TIME FOR REPLYING TO THE NOTICE. IN THE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE QUESTION OF LEVY OF INTEREST U/S.234A OF THE ACT REQUIRES A FRESH LOOK BY THE LD. AO. ORDER S OF THE LOWER ITA NOS.789-798/18. :- 9 -: AUTHORITIES ARE SET ASIDE AND THE MATTER IS REMITTE D BACK TO THE FILE OF THE LD. AO FOR CONSIDERATION AFRESH IN ACCORDANCE W ITH LAW. 9. TO SUMMARIZE THE RESULTS, APPEALS OF THE ASSESSES IN ITA NOS.789, 790, 791, 792, 794, 795, 796 AND 797/CHNY/ 2018 ARE ALLOWED, WHEREAS APPEALS OF THE ASSESSES IN ITA NOS .793 AND 798/CHNY/2018 ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON , THE DAY OF JANUARY, 2019, AT CHENNAI. ( DUVVURU RL REDDY ) / JUDICIAL MEMBER (ABRAHAM P. GEORGE ) / ACCOUNTANT MEMBER / CHENNAI / DATED: JANUARY, 2019 KV / COPY TO: 1 . / APPELLANT 4. / CIT 2. / RESPONDENT 5. / DR 3. ( ) / CIT(A) 6. / GF