Unipatch Rubber Ltd, New Delhi V. ACIT Circle-27(1), New Delhi

ITA 8006/DEL/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8411 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 03-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH SINGH
• Keywords: Principle of natural justice; Question of law; Initiation of penalty proceedings
• Section: 271(1)(c); 143(3); 274; 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B: NEW DELHI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER I.T.A. NO. 8006/DEL/2019 ASSESSMENT YEAR: 2009-10 UNIPATCH RUBBER LTD., VS. ACIT, CIRCLE 27(1), 10, KHEMKA HOUSE, COMMUNITY CENTRE, NEW DELHI. SAKET, SOUTH DELHI, NEW DELHI. PAN: AAACU 0325P (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI K. SAMPATH, ADVOCATE& SHRI V. RAJA KUMAR, ADVOCATE DEPARTMENT BY: SH. JAGDISH SINGH, SR. DR DATE OF HEARING: 16/01/2020 DATE OF PRONOUNCEMENT: 21/01/2020 ORDER PER K. NARASIMHA CHARY, JM CHALLENGING THE ORDER DATED 16.08.2019 IN APPEAL NO . 10199/18- 19 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-9, NEW DELHI (LD. CIT(A)), FOR ASSESSMENT YEAR 2009-10, UNIPATCH RUBBER LTD. (THE ASSESSEE), PREFERRED THIS APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND SELLING OF TYRE AND TUBE REPAIR P ATCHES AND ALLIED PRODUCTS AND TRADING IN SHARES AND DEBENTURES OF CO MPANIES AND UNITS OF 2 MUTUAL FUNDS. FOR THE ASSESSMENT YEAR 2009-10, IT H AD FILED ITS RETURN OF INCOME ON 29/9/2009 DECLARING A LOSS OF RS.2,66,37, 173/-, BUT THE LEARNED ASSESSING OFFICER COMPLETED THE ASSESSMENT BY ORDER DATED 28/12/2011 PASSED UNDER SECTION 143(3) OF THE INCOM E TAX ACT, 1961 (FOR SHORT THE ACT) AT AN INCOME OF RS.66,97,200/-. IN APPEAL, ASSESSEE DID NOT GET ANY RELIEF AND THEREFORE, ASSESSEE PREFERRE D APPEAL TO THE TRIBUNAL, WHICH BY ORDER DATED 19.04.2016 HAS SET A SIDE THE FIRST ISSUE OF PROVISION FOR CONTINGENCY WITH A DIRECTION TO LD. A O TO VERIFY THE ASSESSEES CLAIM THAT AMOUNT OF RS.10,43,388/-WAS D EBITED TO P&L ACCOUNT, AND CONSEQUENTLY THE INCOME OF THE ASSESSE E WAS ASSESSED AT A LOSS OF RS. 50,72,314/-. 3. LEARNED ASSESSING OFFICER INITIATED PROCEEDINGS OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND BY ORDER DATED 29/ 6/2018 CONCLUDED THEM WITH THE LEVY OF PENALTY OF RS.2,41,86,544/-. AGGRIEVED BY SUCH PENALTY ASSESSEE PREFERRED APPEAL BEFORE THE LD. CI T(A), WHO BY WAY OF IMPUGNED ORDER REJECTED THE CONTENTION OF THE ASSES SEE THAT THE LEVY OF PENALTY WAS TIME-BARRED AND GAVE RELIEF TO THE ASSE SSEE TO THE EXTENT OF PENALTY LEVIED ON ACCOUNT OF RENT EQUALISATION RESE RVE. LD. CIT(A) CONFIRMED THE PENALTY ON OTHER COUNTS. 4. ASSESSEE THEREFORE PREFERRED THIS APPEAL CHALLEN GING THE LEVY OF PENALTY ON SEVERAL COUNTS, NAMELY, THAT IT IS BARRE D BY LIMITATION; THAT THE LEVY WAS WITHOUT RECORDING PROPER SATISFACTION; THA T THE LEVY WAS FOR A DIFFERENT LAPSE; AND IT WAS ALSO RESISTED ON MERITS . MAIN PLANK OF 3 ARGUMENT OF THE LD. AR IS IN RESPECT OF THE SATISFA CTION BASING ONTHE DECISIONS OF THE HONBLE KARNATAKA HIGH COURT IN TH E CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 IT R 565, COMMISSIONER OF INCOME TAX V. SSAS EMERALD MEADOWS (2016) 73 TAXMAN.COM 241 (KAR) AND ALSO THE DECISION OF THE H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF LD. PCIT VS. SAHARA INDIA LIFE INSURANCE CO LTD IN ITA NO. 475 AND BATCH OF 2019, LD. AR SUBMITTED THA T THE PENALTY CANNOT BE SUSTAINED. 5. PER CONTRA, PLACING ON THE DECISION OF THE HONB LE MADRAS HIGH COURT IN THE CASE OF SUNDARAM FINANCE LTD VS. CIT ( 2018) 403 ITR 407 (MADRAS), LD. DR SUBMITTED THAT THE ASSESSEE UNDERS TOOD THE PURPORT OF THE NOTICE AND WITHOUT RAISING ANY OBJECTION WHATSO EVER THEY HAVE PARTICIPATED IN THE PENALTY PROCEEDINGS AS WELL AS THE PROCEEDINGS BEFORE THE LD. CIT(A) AND, THEREFORE, NO PREJUDICE WAS CAU SED TO THE CASE OF THE ASSESSEE. SHE THEREFORE, PRAYED TO DISMISS THE APPE AL. 6. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. IT COULD BE SEEN FROM THE ASSE SSMENT ORDER THAT THE LEARNED ASSESSING OFFICER PROPOSED THE PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT FOR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. WHEN IT CAME TO THE NOTICE ISSUED UNDER SECTION 274 READ WITH SECTION 271 OF THE ACT, SUCH A NOTICE DOES NOT SPECIFY, NAM ELY, WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURA TE PARTICULARS THEREOF, THE ASSESSEE HAD TO DEFEND ITSELF. ORDER UNDER SECT ION 271(1)(C) OF THE ACT NARRATES AT MANY PLACES THAT THE PENALTY WAS LE VIABLE FOR FURNISHING OF INACCURATE PARTICULARS THEREOF BUT AT THE END IT ST ATED THAT IN VIEW OF THE DISCUSSION MADE IN THE PENALTY ORDER AND AFTER CONS IDERING THE FACTS AND 4 CIRCUMSTANCES OF THE CASE, IT WAS CLEAR THAT THE AS SESSEE WAS LIABLE TO PENALTY UNDER SECTION 271(1)( C ) OF THE ACT FOR CO NCEALMENT OF INCOME. IN THIS FACT SITUATION WE SHALL REFER TO THE DECISIONS RELIED UPON BY THE LD. AR. 7. IN THE CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY, 359 ITR 565 (KAR) ,VIDE PARAGRAPH 60, THE HONBLE KARNATAKA HIGH COUR T HAS HELD AS FOLLOWS :- 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, T HAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INAC CURATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CASES THERE M AY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES T HE INITIATION OF THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE O FFENCES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING HIM G UILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROU NDS MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INI TIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONF INED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECI FICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOU LD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO ANSWER . IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY T O IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDI NGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY W OULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAIN ED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PE NALTY 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 INFORMATION, FACTS AND MATERIALS I N THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION 5 OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHI CH, WHEN PASSED, WAS NOT SUSTAINABLE. 8. IN COMMISSIONER OF INCOME TAX V. SSAS EMERALD M EADOWS (2016) 73 TAXMAN.COM 241 (KAR) THE HONBLE KARNATAKA HIGH COURT CONSIDERED THE QUESTION OF LAW AS TO,- WHETHER, OMISSION IF ASSESSING OFFICER TO EXPLICITL Y 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 PROVED BEYOND REASONABLE DOUBT THAT THE ASSESSEE HAD CONCEALED IN COME IN THE FACTS AND CIRCUMSTANCES OF THE CASE? 9. AND THE HONBE HIGH COURT ANSWERED THE SAME IN F AVOUR OF THE ASSESSEE OBSERVING THAT: THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY THE AS SESSEE HOLDING THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SE CTION 274 READ WITH SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE 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 B EEN INITIATED I.E., WHETHER FOR CONCEALMENT OF PARTICULARS OF INC OME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE TRIBUNAL, WHILE ALLOWING THE APPEAL OF THE ASSESSEE, HAS RELIED ON THE DECIS ION OF THE DIVISION BENCH OF THIS COURT RENDERED IN THE CASE O F COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565. IN OUR VIEW, SINCE THE MATTER IS COVERED BY JUDGMENT OF THE DIVISION BENCH OF THIS COURT, WE ARE OF THE OPINION, NO SUBSTANTIAL QUESTION OF L AW ARISES IN THIS APPEAL FOR DETERMINATION BY THIS COURT. THE APPEAL IS ACCORDINGLY DISMISSED. 10. THE SPECIAL LEAVE PETITION FILED BY THE REVENUE CHALLENGING THE AFORESAID JUDGEMENT OF THE HIGH COURT WAS DISMISSED BY THE HONBLE SUPREME COURT HOLDING: 6 WE DO NOT FIND ANY MERIT IN THIS PETITION. THE SPEC IAL LEAVE PETITION IS, ACCORDINGLY, DISMISSED. 11. IN PCIT VS. SAHARA INDIA LIFE INSURANCE COMPANY LIMITED CASE ITA NO 475/2019 AND BATCH ORDER DATED 02/08/2019, HONB LE DELHI HIGH COURT, UPHELD THE VIEW TAKEN BY THE TRIBUNAL BASING ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MAN JUNATHA COTTON AND GINNING FACTORY (SUPRA) AND SSAS EMERALD MEADOWS ( SUPRA) WHEREIN IT WAS HELD THAT THE NOTICE ISSUED BY THE LEARNED ASSE SSING OFFICER WOULD BE BAD IN LAW IF IT DID NOT SPECIFY UNDER WHICH LIMB O F SECTION 271(1)(C) OF THE ACT THE PENALTY PROCEEDINGS HAD BEEN INITIATED I.E ., WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISH ING OF INACCURATE PARTICULARS THEREOF. RELEVANT OBSERVATIONS OF THE HONBLE HIGH COURT READ THAT,- 21. THE RESPONDENT HAD CHALLENGING THE UPHOLDING O F THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT, WHICH WAS ACCEPTED BY THE ITAT. IT FOLLOWED THE DECISION OF K ARNATAKA HIGH COURT IN CIT V. MANJUNATHA COTTON & GINNING FACTORY 359 ITR 565 (KAR) AND OBSERVED 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. W HETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISH ING OF INACCURATE PARTICULARS OF INCOME. THE KARNATAKA HIG H COURT HAD FOLLOWED THE ABOVE JUDGEMENT IN THE SUBSEQUENT ORDE R IN COMMISSIONER 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 IN 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. 12. IT IS, THEREFORE, CLEAR THAT FOR THE AO TO ASSU ME JURISDICTION U/S 271(1)(C), PROPER NOTICE IS NECESSARY AND THE DEFEC T IN NOTICE U/S 274 OF THE ACT VITIATES THE ASSUMPTION OF JURISDICTION BY THE LEARNED ASSESSING 7 OFFICER TO LEVY ANY PENALTY. IN THIS CASE, FACTS ST ATED SUPRA, CLEARLY ESTABLISH THAT THE NOTICE ISSUED UNDER SECTION 274 READ WITH 271 OF THE ACT IS DEFECTIVE AND, THEREFORE, WE FIND IT DIFFICU LT TO HOLD THAT THE LEARNED AO RIGHTLY ASSUMED JURISDICTION TO PASS THE ORDER L EVYING THE PENALTY. AS A CONSEQUENCE OF OUR FINDINGS ABOVE, WE DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY IN QUESTION. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JANUARY, 2020. SD/- SD/- (PRASHANT MAHARISHI) (K.NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21/01/2020 . *AKS/- COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI