B.D. MUNDRA & SONS, Kota V. DEPUTY COMMISSIONER OF INCOME TAX, Kota

ITA 826/JPR/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7191 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 03-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SINGH
• Assessee Lawyers: C M BIRLA
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 271(1)(c); 43B; 143(3); 274; 27

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC H A JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRA M SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 826/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2008-09 B. D. MUNDRA & SONS, C-150, ROAD NO. 05, IPIA KOTA CUKE VS. DCIT, CENTRAL, KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAAHB7882D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI C. M. BIRLA (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI JAI SINGH (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 09/10/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 25/10/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-2, UDAIPUR DATED 18.03.2019 WHEREIN THE ASSESSEE HAS C HALLENGED THE ACTION OF THE LD CIT(A) IN CONFIRMING THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED HIS RETURN OF INCOME DISCLOSING TOTAL INCOME OF RS. 7,27,980/- AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT DETERMINING TOTAL I NCOME AT RS. 66,50,460/- AFTER MAKING VARIOUS DISALLOWANCE/A DDITIONS TO THE INCOME. THE MATTER WAS TAKEN IN APPEAL BEFORE THE LD. CIT(A) AN D THEREAFTER BEFORE THE TRIBUNAL WHEREIN THE CO-ORDINATE BENCH VIDE ITS ORD ER DATED 27.10.2016 HAS ALLOWED PART RELIEF TO THE ASSESSEE. THEREAFTER, T HE AO LEVIED PENALTY AMOUNTING TO RS. 11,00,844/- VIDE HIS ORDER DATED 2 9.06.2017. AGAINST THE ITA NO. 826/JP/2019 B. D . MUNDRA & SONS, KOTA VS. DCIT, KOTA 2 SAID ORDER, THE ASSESSEE CARRIED THE MATTER IN APPE AL BEFORE THE LD. CIT(A) AND LD. CIT(A) HAS DELETED PENALTY ON CERTAIN ISSUES AN D SUSTAINED THE LEVY OF PENALTY ON THREE ISSUES NAMELY DISALLOWANCE OF DISC OUNT CLAIMED BY THE ASSESSEE AMOUNTING TO RS. 18,05,716/-, THE DISALLOW ANCE OF TRAVELLING EXPENSES AMOUNTING TO RS. 64,468/- AND DISALLOWANCE OF UNPA ID VAT U/S 43B OF THE ACT. AGAINST THE SAID ORDER, THE ASSESSEE IS IN APPEAL B EFORE US. 3. THE 1 ST GROUND OF APPEAL TAKEN BY THE ASSESSEE READS AS UN DER:- 1. THAT NEITHER IN ASSESSMENT ORDER THERE IS SATIS FACTION OF LEARNED AO AS TO CONCEALING PARTICULARS OF INCOME OR FURNIS HING INACCURATE PARTICULARS OF INCOME NOR THERE IS SUCH REFLECTION IN NOTICE U/S 271(1)(C). AS SUCH FOUNDATION FOR INITIATION OF PENALTY U/S 27 1(1)(C) BEING VAGUE THE PENALTY CONFIRMED BY HONBLE CIT(A) AT RS. 9,65,680 /- U/S 271(1)(C) IS BAD IN EYE OF LAW WHICH NEEDS DELETION. RELIANCE IN THIS REGARD IS MADE ON SHEVETA CONSTRUCTION CO. (P) LTD. VS. ITO WARD 3 (4) JAIPUR, THE JURISDICTIONAL HIGH COURT. 4. THE LD. AR SUBMITTED THAT WHILE COMPLETING THE A SSESSMENT, THE AO IN HIS ORDER U/S 143(3) DATED 31.12.2010 HAD MADE DISA LLOWANCES/ ADDITIONS OF RS.59,22,481/- WHICH IS SPREAD IN 11 PAGES UNDER 17 HEADS. HOWEVER WHILE MAKING ADDITIONS/ DISALLOWANCES, NOWHERE HE HAS REC ORDED SATISFACTION FOR INITIATING PENALTY U/S 271(1)(C) AND IN END OF ASSE SSMENT ORDER, THE AO SIMPLY MENTIONED 'PENALTY PROCEEDINGS IS BEING INIT IATED U/S 271(1)(C).' HERE ALSO HE IS NOT CLEAR FOR WHICH OUT OF THE TWO LIMBS ? EVEN IN NOTICE U/S 271(1)(C) DATED 31.12.2010, THERE IS NO SPECIFICATI ON WHETHER IT IS BEING ISSUED FOR CONCEALING PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. AS THE AO HAS FAILED TO SPEC IFY EXPLICITLY IN ASSESSMENT ORDER AS WELL AS NOTICE U/S 271(1)(C) THAT FOR WHIC H OUT OF THE TWO LIMBS, HE IS INITIATING PENAL PROCEEDINGS U/S 271(1)(C), PENA LTY U/S 271(1)(C) IS NOT ITA NO. 826/JP/2019 B. D . MUNDRA & SONS, KOTA VS. DCIT, KOTA 3 LEVIABLE. RELIANCE IN THIS REGARD IS MADE ON DECISI ON OF JURISDICTIONAL HIGH COURT IN SHEVATA CONSTRUCTION COMPANY VS ITO, WARD 3 (4), JAIPUR (RAJ.) WHICH HAS BEEN FOLLOWED BY HON'BLE ITAT, JAIPUR IN GULAM FAROOQ ANSARI VS ITO (2018) 194 TTJ (JP) 719, JAI AMBEY ASSOCIATES, JAIPUR VS ITO, WARD 3(1), JAIPUR (ITA NO. 801/JP/2016 TW (MAY 2018), AN D PREM KUMAR SANGHI VS DCIT CIRCLE 2, JAIPUR (ITA NO. 291/JP/2018). 5. IT WAS FURTHER SUBMITTED THAT THE LD CIT(A) RELY ING DECISION ON THE DECISION OF HON'BLE MUMBAI HIGH COURT IN THE CASE O F KAUSHALYA DEVI 216 ITR 660, REJECTED THEIR SUBMISSIONS AND SUSTAINED PENAL TY OF RS.965,680/-. IT WAS SUBMITTED THAT DECISION OF HON'BLE JURISDICTIONAL H IGH COURT IS DATED 06.12.2016 WHEREIN AFTER DISCUSSING RATIO OF DECISI ON OF HON'BLE APEX COURT IN DILIP N. SHROFF AND HON'BLE AP HIGH COURT IN CHE NNAKERAVA PHARUMACEUTICALS IN DETAIL, THE HON'BLE RAJASTHAN H IGH COURT HAS HELD THAT IN ABSENCE OF SPECIFIC CHARGE PENALTY U/S 271(1)(C) IS NOT LEVIABLE. 6. THE LD. DR IS HEARD WHO HAS SUPPORTED THE FINDIN GS OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE PENALTY HAS BEEN VALIDLY INITIATED BY THE ASSESSING OFFICER AND THE GROUND SO TAKEN BY THE AS SESSEE HAS RIGHTLY BEEN REJECTED BY THE LD. CIT(A). 7. WE NOW REFER TO THE DECISION OF THE HONBLE RAJASTH AN HIGH COURT IN CASE OF SHEVETA CONSTRUCTION CO. PVT. LTD. VS. ITO (IN DB NO. 534/2008 VIDE ORDER DATED 06.12.2016) WHEREIN IT WAS HELD AS UNDER:- 4. FROM THE ORDER OF ASSESSMENT, THE ASSESSING OF FICER HAS USED THE LANGUAGE AS UNDER:- PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) FOR CO NCEALMENT OF INCOME/FURNISHING OF INACCURATE PARTICULARS OF INCO ME HAVE BEEN INITIATED SEPARATELY. ITA NO. 826/JP/2019 B. D . MUNDRA & SONS, KOTA VS. DCIT, KOTA 4 5. COUNSEL FOR THE APPELLANT RELIED UPON THE DECISI ON OF ANDHRA PRADESH HIGH COURT IN CAE OF CHENNAKESAVA PHARMACEU TICALS VS. COMMISSIONER OF INCOME TAX REPORTED IN (2012) 349 I TR 196, WHEREIN IT HAS BEEN HELD AS UNDER:- 'IN RELIANCE PETRO PRODUCTS PVT.LTD'S CASE (1 SUPRA ), THE SUPREME COURT ALSO HELD THAT IMPOSITION OF PENALTY IS UNWARRANTED WHEN THERE IS NO FINDING IN THE ASSESSM ENT ORDER THAT DETAILS SUPPLIED BY THE ASSESSEE WERE FOUND TO BE FALSE. THIS INDICATES THAT THE VIEW TAKEN BY THE DELHI HIG H COURT IN RAM COMMERCIAL ENTERPRISES LTD.'S CASE (6 SUPRA ) W HICH HAS BEEN APPROVED IN DILIP N. SHROFF'S CASE (10 SUPRA) CONTINUES TO BE VALID AND THIS PART OF THE JUDGMENT IN DIIIP N. SHROFF'S CASE (10 SUPRA) HAS NOT BEEN OVER RULED AND CONTINUES TO BE GOOD LAW. MOREOVER THE DECISION OF THE DELHI HIGH COURT IN RAM COMMERCIAL ENTERPRISES (6 SUPRA)WAS ALSO FOLLOWED B Y THE SAME HIGH COURT IN COMMISSIONER OF INCOME TAX V. M.K.SHA RMA(9 SUPRA) AND SLP(C) NO.17591 OF 2008 FILED AGAINST TH E SAID DECISION WAS DISMISSED BY THE SUPREME COURT ON 18.7 .2008. APPLYING THE ABOVE PRINCIPLE THAT THE ASSESSING OFF ICER SHOULD RECORD IN THE ASSESSMENT ORDER HIS SATISFACTION THA T THE ASSESSEE HAD EITHER CONCEALED THE INCOME OR FURNISH ED INACCURATE PARTICULARS OF INCOME IN HIS RETURN BEFO RE IMPOSING PENALTY, WE NOTICED THAT IN THE ASSESSMENT ORDERS P ASSED BY THE ASSESSING OFFICER FOR THE ASSESSMENT ORDERS PAS SED BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 198283 (W HICH IS THE SUBJECT MATTER OF I.T.T.A NO. 29 OF 2000) AND FOR T HE ASSESSMENT YEAR 198384 (WHICH IS SUBJECT MATTER OF I.T.T.A. NO. 33 OF 2000), NO SUCH SATISFACTION IS RECORDED. ITA NO. 826/JP/2019 B. D . MUNDRA & SONS, KOTA VS. DCIT, KOTA 5 6. ANOTHER DECISION OF SUPREME COURT IN CASE OF DIL IP N. SHOOFF VS. JOINT COMMISSIONER OF INCOME TAX & ANR. (2007) 291 ITR 519 (SC) IT HAS BEEN HELD AS UNDER:- IT IS OF SOME SIGNIFICANCE THAT IN THE STANDARD PR OFORMA USED BY THE ASSESSING OFFICER IN ISSUING A NOTICE DESPIT E THE FACT THAT THE SAME POSTULATES THAT INAPPROPRIATE WORDS AND PA RAGRAPHS WERE TO BE DELETED, BUT THE SAME HAD NOT BEEN DONE. THUS, THE ASSESSING OFFICER HIMSELF WAS NOT SURE AS TO WHETHE R HE HAD PROCEEDED ON THIS BASIS THAT THE ASSESSEE HAD CONCE ALED HIS INCOME OR HE HAD FURNISHED INACCURATE PARTICULARS. EVEN BEFORE US, THE LEARNED ADDITIONAL SOLICITOR GENERAL WHILE PLACING THE ORDER OF ASSESSMENT LAID EMPHASIS THAT HE HAD DEALT WITH BOTH THE SITUATIONS. THE IMPUGNED ORDER, THEREFORE, SUFFERS FROM NON-APP LICATION OF MIND. IT WAS ALSO BOUND TO COMPLY WITH THE PRINCIPL ES OF NATURAL JUSTICE. THE INCOME TAX OFFICER HAD MERELY HELD THAT THE ASS ESSEE IS GUILTY OF FURNISHING OF INACCURATE PARTICULARS AND NOT OF CONCEALMENT OF INCOME; WHICH FINDING WAS ARRIVED AT ALSO BY THE COMMISSIONER OF INCOME TAX AND THE INCOME TAX A PPELLATE TRIBUNAL. IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, THERE ARE ENOUGH MATERIAL TO SHOW THAT THE ACTION ON THE PART OF THE APPELLANT MAY NOT BE SAID TO BE SUCH WHICH WOULD AT TRACT THE PENAL PROVISION UNDER S. 271(1)(C). FOR THE REASONS AFOREMENTIONED, THE IMPUGNED JUDGMENT CANNOT BE SUS TAINED. ITA NO. 826/JP/2019 B. D . MUNDRA & SONS, KOTA VS. DCIT, KOTA 6 7. HE CONTENDED THAT WHILE CONCLUDING THE ASSESSMEN T ORDER THE OFFICER MUST BE CLEAR WHETHER IT IS THE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE DETAIL. HE CANNOT HAVE BOT H THE THINGS. 7.1 HOWEVER, MR. SINGHI APPEARING FOR THE DEPARTMEN T SUBMITS THAT A PERUSAL OF THE ORDER OF PENALTY MAKES IT AMPLY CL EAR THAT BOTH THE THINGS ARE FULFILLED. IN THAT VIEW OF THE MATTER TH E VIEW TAKEN BY THE TRIBUNAL IS REQUIRED TO BE ACCEPTED. 8. WE HAVE HEARD MR. PRAKUL KHURANA AND MR. ANUROO P SINGHI. 9. TAKING INTO CONSIDERATION THE DECISION OF THE AN DHRA PRADESH HIGH COURT WHICH VIRTUALLY CONSIDERED THE SUBSEQUENT LAW AND THE LAW WHICH WAS PREVAILING ON THE DATE THE DECISION WAS RENDERE D ON 27.08.2012. IN VIEW OF THE OBSERVATIONS MADE IN THE SAID JUDGMENT, WE ARE OF THE OPINION THAT THE CONTENTION RAISED BY THE APPELLANT IS REQUIRED TO BE ACCEPTED AND IN THE FINDING OF ASSESSING OFFICER IN THE ASSESSMENT ORDER IT IS HELD THAT THE AO HAS TO GIVE A NOTICE AS TO W HETHER HE PROPOSES TO LEVY PENALTY FOR CONCEALMENT OF INCOME OR FURNISHIN G INACCURATE PARTICULARS. HE CANNOT HAVE BOTH THE CONDITIONS AND IF IT IS SO HE HAS TO SAY SO IN THE NOTICE AND RECORD A FINDING IN THE PE NALTY ORDER. 10. IN THAT VIEW OF THE MATTER, THE ISSUE IS ANSWER ED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. THE APPEAL IS ACCORDINGLY ALLOWED. 8. IN THE INSTANCE CASE, THE PENALTY PROCEEDINGS H AVE BEEN INITIATED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE SHOW C AUSE NOTICE ISSUED BY THE ASSESSING OFFICER U/S 274 READ WITH 271(1)(C) DATED 31.12.2010 READS AS UNDER:- DATE-31.12.2010 ITA NO. 826/JP/2019 B. D . MUNDRA & SONS, KOTA VS. DCIT, KOTA 7 TO, M/S B.D. MUNDRA & SONS, C-150, IPIA, KOTA WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE ASSESSMENT YEAR 2008- 09 IT APPEARS TO ME THAT YOU:- HAVE CONCEALED THE PARTICULARS OF YOURS INCOME OR HAVE FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. YOU ARE HEREBY REQUESTED TO APPEAR BEFORE ME AT 12 :30 P.M ON 20.01.2011 IN MY OFFICE AT C.R. BUILDING, RAWAT BHA TA ROAD, KOTA AND SHOW CAUSE WHY AN ORDER IMPOSING A PENALTY SHOULD NOT BE MADE U/S 271 OF THE I.T. ACT, 1961. IF YOU DO NOT WISH TO AVAIL YOURSELF OF THIS OPPORTUNITY OF BEING HEARD IN PERSON OR THROUGH AN AUTHORIZED REPRESENTA TIVE YOU MAY SHOW CAUSE IN WRITING ON OR BEFORE THE SAID DATE WHICH WILL BE CONSIDERED BEFORE ANY SUCH ORDER IS MADE U/S 271. (PREM PRAKASH MEENA) ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-1, KOTA 9. WE THUS FIND THAT THE ASSESSING OFFICER IN THE AFORESAID SHOW-CAUSE NOTICE DATED 31.12.2010 HAS INITIATED THE PENALTY P ROCEEDINGS FOR CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME AND SUBSEQUENTLY, WHILE PASSING THE PENALTY ORDER, THE ASSESSING OFFICER HAS LEVIED PENALTY FOR FURNISHING INACCURATE PARTICULAR S OF INCOME. WE THEREFORE FIND THAT THOUGH THE ASSESSING OFFICER HAS NOT INIT IATED THE PENALTY ON A SPECIFIC CHARGE, HOWEVER, WHILE LEVYING THE PENALTY , THE ASSESSING OFFICER HAS LEVIED THE PENALTY FOR FURNISHING OF INACCURATE PAR TICULARS OF INCOME. AT THE SAME TIME, IT IS ALSO NOTED ON PERUSAL OF THE PENAL TY ORDER THAT THE FINDING SO GIVEN IS NOT SPECIFIC TO THREE SEPARATE DISALLOWANC ES AND THE ASSESSING OFFICER HAS MERELY GONE BY THE ORDER OF THE TRIBUNAL IN THE QUANTUM PROCEEDINGS ITA NO. 826/JP/2019 B. D . MUNDRA & SONS, KOTA VS. DCIT, KOTA 8 WHERE ADDITIONS HAVE BEEN SUSTAINED AND HAS NOT GIV EN ANY SPECIFIC FINDING AS TO HOW THE DISALLOWANCES SO MADE AND SUSTAINED RESU LTS IN FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN CASE OF SHWET A CONSTRUCTION (SUPRA), THE HONBLE RAJASTHAN HIGH COURT HAS HELD THAT THE ASSE SSING OFFICER HAS TO GIVE A SPECIFIC NOTICE WHILE INITIATING THE PENALTY PROC EEDINGS ITSELF. IN THE INSTANT CASE, THE SHOW-CAUSE NOTICE IS NOT SPECIFIC AS TO T HE CHARGE FOR LEVY OF PENALTY WHICH SHOWS NON-APPLICATION OF MIND BY THE ASSESSING OFFICER AND HENCE, RESPECTFULLY FOLLOWING THE DECISION OF THE H ONBLE RAJASTHAN HIGH COURT, THE CONSEQUENT PENALTY ORDER CANNOT BE SUSTA INED. IN THE RESULT, THE PENALTY SO LEVIED BY THE ASSESSING OFFICER IS DIREC TED TO BE DELETED. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25/10/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 25/10/2019 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- B. D. MUNDRA & SONS, KOTA 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CENTRAL, KOTA 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 826/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR