PRAKASH CHANDRA KAPOOR, MUMBAI V. ACIT CC -42, MUMBAI

ITA 873/MUM/2016

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5252 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 22-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARTIKIYEN
• Keywords: Principle of natural justice; Initiation of penalty proceedings; Condonation of delay
• Section: 271(1)(c); 201; 274; 27

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE HONBLE SHRI R. C. SHARMA, AM & HONBLE SHRI SANDEEP GOSAIN, JM ./ I.T.A. NO . 873 & 874 /MUM/2016 ( / ASSESSMENT YEAR: 2008 - 09 & 2006 - 07 ) PRAKASH CHANDRA KAPOOR PALLONJI MANSION, FLAT NO. 6/D, CUFFE PARADE, MUMBAI - 400 021 / VS. ACIT CC - 42 AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 ./ ./ PAN/GIR NO. A BAPK6775D ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI ANUJ KISNADWALA / RESPONDENTBY : SHRI ABI RAMA KARTIKIYEN / DATE OF HEARING : 03/10 /201 8 / DATE OF PRONOUNCEMENT : 10/10/2018 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISS I ONER OF INCOME TAX - 49 , MUMBAI DATED 15.10.15 FOR AY 2007 - 08 & 2006 - 07 RESPECTIVELY. 2 I.T.A. NO. 873 & 874/MUM/2016 PRAKASH CHANDRA KAPOOR 2. SINCE ALL TH E ISSUES INVOLVED IN THESE TWO APPEALS ARE COMMON, THEREFORE, THEY HAVE BEEN CLUBBED, HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 3 . AT THE VERY OUTSET, LD. AR APPEARING ON BEHALF OF THE ASSESSEE DRAWN OUR ATTENTION TOWARDS LETTERS DATED 03.10.18 ALONGWITH AFFIDAVIT WHICH RELATES TO CONDONATION OF DELAY IN FILING APPEALS BEFORE HONBLE ITAT. LD. AR SUBMITTED THAT THE PRESENT APPEALS COULD NOT BE FILED WITHIN TIME BECAUSE OF THE REASONS MENTIONED IN AFFIDAVIT AND THUS THERE WAS A DELA Y OF 68 DAYS IN FILING THE PRESENT BOTH APPEALS. 4 . ON THE OTHER HAND, LD. DR REQUESTED FOR DISMISSAL OF THE SAID APPLICATION. 5 . WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES ON THE APPLICATIONS FOR SEEKING CONDONATION OF DELAY AND WHILE TAKING INTO CONSIDERATION THE CONTENTS OF APPLICATION FILED BY THE ASSESSEE, SUPPORTING AFFIDAVIT, WHEREBY THE ASSESSEE HAS 3 I.T.A. NO. 873 & 874/MUM/2016 PRAKASH CHANDRA KAPOOR MENTIONED THE REASONS IN DETAIL FOR NOT FILING THE APPEAL WITHIN LIMITATION, THEREFORE KEEPING IN VIEW THE REASONS MENTIONED IN THE AFFIDAVIT AN D FOLLOWING THE PRINCIPLES LAID DOWN BY HONBLE SUPREME COURT IN CASE OF LAND ACQUISITION COLLECTOR VRS. MSTKITZI, AIR 1987 S.C. 1353 /(1987) 167 ITR 471 (SC), WE CONDONE THE DELAY OF 68 DAYS IN FILING BOTH THE APPEALS. RESULTANTLY, THESE APPLICATIONS ARE ALLOWED AND APPEALS ARE ADMITTED TO BE HEARD ON MERITS. ITA NO. 873/MUM/2016 (AY 20 08 - 09) 6. FIRST OF ALL WE TAKE UP ASSESSEES APPEAL IN ITA NO. 873/MUM/2018 FOR ASSESSMENT YEAR 2008 - 09 AS LEAD CASE. 7 . THE SOLITARY GROUND RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN CONFIRMING THE PENALTY U/S 271(1)(C) OF THE I.T. ACT. 4 I.T.A. NO. 873 & 874/MUM/2016 PRAKASH CHANDRA KAPOOR 8 . LD. AR APART FROM ADDRESSING THE ARGUMENTS ON MERITS HAD ALSO CHALLENGED THE LEGALITY OF THE NOTICE ISSU ED U NDER SECTION 274 R.W.S. 271 OF THE ACT FOR INITIATING OF THE PENALTY PROCEEDINGS UNDER SECTION 27 1(1)(C) OF THE ACT FOR A.Y. 2008 - 09 . A PERUSAL OF THE NOTICE ISSUED UNDER SECTION 274 R.W.S. 271 OF THE ACT REVEALS THAT THE AO HAS NOT DELETED THE INAPPR OPRIATE WORDS AND PARTS OF THE NOTICE, WHEREBY IT IS NOT CLEAR AS TO THE DEFAULT COMMITTED BY THE ASSESSEE, I.E. WHETHER IT IS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME THAT THE PENALTY UNDER SECTION 271(1)(C) O F THE ACT IS SOUGHT TO BE LEVIED. IN THIS REGARD, WE FIND THAT THE HON'BLE HIGH COURT OF KARNATAKA IN ITS ORDER IN THE CASE OF M/S MANJUNATAH COTTON & GINNING FACTORY IN ITA NO. 2546 OF 2005 DATED 13.12.2012 , RELIED ON BY THE ASSESSEE, HAS HELD THAT SUCH A NOTICE, AS HAS ALSO BEEN ISSUED IN THE CASE ON HAND, IS INVALID AND THE CONSEQUENTIAL PENALTY PROCEEDINGS ARE ALSO NOT VALID. THE RELEVANT PORTION OF THEIR LORDSHIPS JUDGEMENT AT PARAS 59 TO 62 THEREOF ARE EXTRACTED HEREUNDER FOR REFERENCE: - 5 I.T.A. NO. 873 & 874/MUM/2016 PRAKASH CHANDRA KAPOOR 59. AS THE PROVISION STANDS, THE PENALTY PROCEEDINGS CAN BE INITIATED ON VARIOUS GROUND SET 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 I S 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 A CCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PENALTY ON HIM AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OPPORTUNITY T O 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 6 ITA NO.7602/MUM/2014(AY - 2005 - 06) TCFC FINANCE LTD. PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED FARM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF 6 I.T.A. NO. 873 & 874/MUM/2016 PRAKASH CHANDRA KAPOOR LAW WHEN THE CONSEQUENCES OF THE ASSESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 100% TO 300% OF THE TAX LIABILI TY. AS THE SAID PROVISIONS HAVE TO BE HELD TO BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED IF THE SHOW CAUSE NOTICE IS VAGUE. ON TH E BASIS OF SUCH 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 MA Y ATTRACT BOTH 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 AS SESSEE 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 SATISFACTION OF THE EXISTENCE OF THE GROUNDS MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIAT ION 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 7 I.T.A. NO. 873 & 874/MUM/2016 PRAKASH CHANDRA KAPOOR THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTA NTIATE 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 OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GRO UND, 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 PEN ALTY MUST BE DETERMINED WITH REFERENCE TO THE 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 SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE 7 ITA NO.7602/MUM/2014(AY - 2005 - 06) TCFC FINANCE LTD. 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 THE RE IS CONCEALMENT OF INCOME OR 8 I.T.A. NO. 873 & 874/MUM/2016 PRAKASH CHANDRA KAPOOR 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 THAT 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 PAI REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF I NCOME CARRY DIFFERENT CONNOTATIONS, THE GUJARAT HIGH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO MARKETING REPORTED IN 171 TAXMAN 156, HAS HELD THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE L IMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NOT SUSTAINABLE. THOM, WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNISHING I NACCURATE PARTICULARS OF INCOME. THE STANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON - APPLICATION OF MIND. 9 . THE CONCLUSION DRAWN THEREIN BY THEIR LORDSHIPS AT PARA 63 THEREOF AND PARTICULARLY AT P) TO S) THEREOF ARE AS UNDER: 9 I.T.A. NO. 873 & 874/MUM/2016 PRAKASH CHANDRA KAPOOR 63 . A) . P)NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECIFICALLY STATE THE GROUND MENTIONED IN SECTION 271(1)(C), I.E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORRECT PARTICULARS OF INCOME. Q)SENDING PRINTED FORM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERW ISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. S) TAKING UP OF PENALTY PROCEEDINGS ON THE LIMB AND FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. 10 . IT MAY BE MENTIONED THAT IN THIS REGARD, NO CONTRARY DECISION OF THE HON'BLE APEX COURT OR THE HON'BLE BOMBAY HIGH COURT HAS BEEN BROUGHT TO OUR NOTICE OR PLACED BEFORE US FOR CONSIDERATION. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE KARNATAKA HIG H COURT IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY REPORTED IN (2013) 359 ITR 565 10 I.T.A. NO. 873 & 874/MUM/2016 PRAKASH CHANDRA KAPOOR (KAR), DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VRS SAMSON PERINCHERY DATED 05.01.2017, WE HOLD THAT THE NOTICE ISSUED UNDER SECTION 274 R.W.S. 271 OF THE ACT DATED 14.03.14 FOR A.Y. 2008 - 09 FOR INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT IN THE CASE ON HAND IS INVALID AND CONSEQUENTLY, THE PENALTY PROCEEDINGS ARE ALSO INVALID. SINCE THE VERY BASIS FOR THE LEVY OF PENALTY UNDER SEC TION 271(1)(C) OF THE ACT HAS BEEN HELD TO BE INVALID, WE ARE OF THE VIEW THAT THE OTHER GROUNDS OF APPEAL , RAISED BY THE ASSESSEE AGAINST THE MERITS OF THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT REQUIRE NO ADJUDICATION AT THIS STAGE. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 11 . SINCE THE ISSUE RAISED IN OTHER APPEAL FILED BY THE ASSESSEE IN ITA NO. 874/MUM /2016 FOR AY 2006 - 07 IS SIMILAR, THEREFORE FOLLOWING THE DECISION IN ITA NO. 873/MUM/2016 FOR AY 2008 - 09 AS MENTIONED A BOVE, WE ALLOW THIS APPEAL FILED BY THE ASSESSEE. 11 I.T.A. NO. 873 & 874/MUM/2016 PRAKASH CHANDRA KAPOOR 12 . IN THE NET RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE IN ITA NO. 873 & 874/MUM/2016 ARE ALLOWED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH OCT. , 201 8 SD/ - SD/ - ( R. C. SHARMA ) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 10 . 10 .201 8 SR.PS . DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI