Appeal Details
Counselvise Citation
[2017] 126 COUNSELVISE.COM (IT) 7696 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 2 month(s) 7 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-08-2017
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Next Hearing Date
09-08-2017
Assessment Year
1998-1999
Appeal Filed On
08-06-2015
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 876 /P U N/201 5 / ASSESSMENT YEAR : 1998 - 99 ASHOK SAHAKARI SAKHAR KARKHANA LTD., A/P. ASHOK NAGAR, TAL. - SHRIRAMPUR, DISTT. - AHMEDNAGAR PAN : AACCA3452B ....... / APPELLANT / V/S. ASSISTANT COMMISSIONER OF INCOME TAX, AHMEDNAGAR CIRCLE, AHMEDNAGAR / RESPONDENT ASSESSEE BY : S HRI S.N. DOSHI REVENUE BY : SHRI AJAY MODI / DATE OF HEARING : 09 - 08 - 2017 / DATE OF PRONOUNCEMENT : 16 - 0 8 - 2017 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 2, PUNE DATED 30 - 01 - 2015 FOR THE ASSESSMENT YEAR 1998 - 99 CONFIRMING LEVY OF PENALTY U/S. 271(1)(C) O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). 2 ITA NO . 876/PUN/2015, A.Y. 1998 - 99 2. THE ASSESSEE IN PRESENT APPEAL IS IN SECOND ROUND OF LITIGATION BEFORE THE TRIBUNAL. EARLIER, THE ASSESSEE HAD FILED APPEAL IN ITA NO. 886/PUN/2006 ASSAILING THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT ON ADDITION OF RS.3,90,51,618/ - . THE TRIBUNAL VIDE ORDER DATED 22 - 06 - 2011 SET ASIDE THE IMPUGNED ORDER AND REMITTED THE MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION. THE ASSESSING OFFICER IN PROCEEDINGS GIVING EFFECT TO THE ORDER OF TRIBUNAL AGAIN LEVIED PENALTY OF RS. 1.40 CRORES ON CONCEALED INCOME OF RS.3,90,51,618/ - . AGGRIEVED BY ORDER DATED 28 - 03 - 2013 PASSED U/S. 271(1)(C) R.W.S. 254, THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE FIRST APPELLATE AUTHORITY REJECTED THE CONTENTIONS O F ASSESSEE AND CONFIRMED THE LEVY OF PENALTY. NOW, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL ASSAILING LEVY OF PENALTY RS.1.40 CRORES U/S. 271(1)(C) R.W. EXPLANATION 1 OF THE ACT. THE ASSESSEE APART FROM CHALLENGING LEVY OF PENALTY ON MERITS H AS RAISED ADDITIONAL GROUND OF APPEAL CHALLENGING THE VALIDITY OF NOTICE ISSUED U/S. 274 R.W.S. 271(1)(C) OF THE ACT. THE ADDITIONAL GROUND RAISED BY THE ASSESSEE READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, REFERRING TO THE SATISF ACTION RECORDED IN THE ASSESSMENT ORDER AND THE CHARGE ON WHICH PENALTY IS LEVIED AND FURTHER REFERRING TO NOTICE U/S. 274 R.W.S. 271(1)(C) THERE EXISTS VAGUENESS, AMBIGUITY AND NON APPLICATION OF MIND BY ASSESSING OFFICER THAT VITIATES THE VALIDITY OF THE PENALTY ORDER. 3. SHRI S.N. DOSHI APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER MADE ADDITIONS/DISALLOWANCES ON EIGHT COUNTS. HOWEVER, THE PENALTY HAS BEEN LEVIED IN RE SPECT OF ADDITION ON ACCOUNT OF EXCESS EXPENDITURE DEBITED TO PROFIT AND LOSS ACCOUNT RS.3,90,51,618/ - . WHILE 3 ITA NO . 876/PUN/2015, A.Y. 1998 - 99 RECORDING SATISFACTION FOR LEVY OF PENALTY , THE ASSESSING OFFICER HELD THAT PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT ARE INITIATED FOR CONCEALMENT OF INCOME AND FILING OF INACCURATE PARTICULARS OF INCOME. THEREAFTER, NOTICE U/S. 274 R.W.S. 271(1)(C) WAS ISSUED ON 23 - 01 - 2001 WHEREIN IT HAS BEEN MENTIONED THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME O R FURNISHED INACCURATE PARTICULARS OF INCOME . THE IRRELEVANT LIMB OR THE CHARGE HAS NOT BEEN DELETED BY THE ASSESSING OFFICER WHILE ISSUING NOTICE. THE LD. AR POINTED THAT WHILE RECORDING SATISFACTION THE ASSESSING OFFICER HAS USED THE WORD AND TO MENT ION BOTH THE CHARGES FOR LEVY OF PENALTY AS ENVISAGED U/S. 271(1)(C) OF THE ACT. WHEREAS IN THE NOTICE , BOTH THE CHARGES FOR LEVY OF PENALTY U/S. 271(1)(C) ARE MENTIONED WITH WORD OR . THEREAFTER, WHILE LEVYING PENALTY THE ASSESSING OFFICER HAS NOT SPEC IFICALLY MENTIONED THE CHARGE FOR LEVY OF PENALTY. THE ASSESSING OFFICER WHILE LEVYING PENALTY HAS CONCLUDED THAT THE ASSESSEE HAS DEFAULTED WITHIN THE MEANING OF SECTION 271(1)(C) R.W. EXPLANATION 1 OF THE ACT WITHOUT ANY REASONABLE CAUSE . THUS, THE A SSESSING OFFICER WAS NOT CLEAR IN HIS MIND WHILE RECORDING SATISFACTION AND THEREAFTER, WHILE ISSUING NOTICE WHETHER THE PENALTY IS TO BE LEVIED FOR CONCEALMENT OF INCOME AND/OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE LD. AR SUBMITTED THAT WHE RE SPECIFIC CHARGE FOR LEVY OF PENALTY IS NOT MENTIONED IN THE NOTICE ISSUED U/S. 274 R.W.S. 271(1)(C) AND THERE IS VAGUENESS IN THE RECORDING OF SATISFACTION , THE PENALTY PROCEEDINGS ARE LIABLE TO BE QUASHED. IN SUPPORT OF HIS SUBMISSIONS THE LD. AR PLAC ED RELIANCE ON THE FOLLOWING DECISIONS : I . COMMISSIONER OF INCOME TAX VS. SAMSON PERINCHERY, 392 ITR 04 (BOM.); II . KANHAIYALAL D. JAIN VS. ASSTT. COMMISSIONER OF INCOME TAX IN ITA NOS. 1201 TO 1205/PN/2014 FOR ASSESSMENT YEARS 2003 - 04 TO 2007 - 08 DECIDED ON 30 - 11 - 2016 (PUNE - TRIB.); 4 ITA NO . 876/PUN/2015, A.Y. 1998 - 99 III . NANDKISHOR TULSIDAS KATORE VS. ASSTT. COMMISSIONER OF INCOME TAX IN ITA NOS. 2174 TO 2180/PN/2014 FOR ASSESSMENT YEARS 2002 - 03 TO 2008 - 09 DECIDED ON 14 - 12 - 2016 (PUNE - TRIB.); IV . M/S. ZIKRULLAH ABBASALI CHAUDHARY VS. DY. COMMISSIONER OF INCOME TAX IN ITA NO. 490/PUN/2015 FOR ASSESSMENT YEAR 2005 - 06 DECIDED ON 03 - 03 - 2017 (PUNE - TRIB.). 4. ON THE OTHER HAND SHRI AJAY MODI REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER. THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER WHILE RECORDING SATISFACTION HAS INVOKED BOTH THE LIMBS FOR LEVY OF PENALTY AS THE ASSESSEE INTENTIONALLY FILED INACCURATE PARTICULARS OF INCOME RESULTING INTO CONCEALMENT OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. THE LD. DR PR AYED FOR REJECTING THE ADDITIONAL GROUND RAISED BY THE ASSESSEE CHALLENGING VALIDITY OF NOTICE. 5. W E HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW . THE ASSESSEE IN GROUNDS OF APPEAL HAS ASSAILED THE LEVY OF PENALTY U/S. 271(1)(C) ON MERITS. THE ASSESSEE HAS FILED ADDITIONAL GROUND OF APPEAL CHALLENGING THE VALIDITY OF NOTICE ISSUED U/S. 274 R.W.S. 271(1)(C) OF THE ACT. AS PER THE CONTENTIONS OF THE LD. AR OF THE A SSESSEE , THERE IS NO CONSISTENCY WITH REGARD TO CHARGE FOR LEVY OF PENALTY AT THE TIME OF RECORDING SATISFACTION AND AT THE TIME OF ISSUANCE OF NOTICE U/S. 274 R.W.S. 271(1)(C) OF THE ACT. 6. A PERUSAL OF THE ASSESSMENT ORDER SHOW THAT WHILE RECORDING SA TISFACTION FOR LEVY OF PENALTY U/S. 271(1)(C) , THE ASSESSING OFFICER HAS HELD AS UNDER : 5 ITA NO . 876/PUN/2015, A.Y. 1998 - 99 IN VIEW OF THE FACTS GIVEN ABOVE, I AM SATISFIED THAT THE ASSESSEE HAS INTENTIONALLY FILED THE INACCURATE PARTICULARS OF INCOME RESULTING NTO CONCEALMENT OF INCOME WI THIN THE MEANING OF SEC. 271(1)(C) R/W. SEC. 274 OF THE I.T. ACT, 1961. THEREFORE, AN AMOUNT OF RS.3,90,51,618/ - HAS BEEN ADDED TO THE TOTAL INCOME OF THE ASSESSEE SOCIETY WITH INITIATION OF PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE I.T. ACT FOR CONCEALME NT OF INCOME AND FILING OF INACCURATE PARTICULARS OF INCOME , AS DISCUSSED ABOVE. IN THE NOTICE ISSUED U/S. 274 R.W.S. 271(1)(C) OF THE ACT IT HAS BEEN MENTIONED : HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 7 . HOWEVER, WH ILE LEVYING PENALTY THE ASSESSING OFFICER HAS HELD : I AM THEREFORE CONVINCED THAT THE ASSESSEE HAS DEFAULTED WITHIN THE MEANING OF SECTION 271(1)(C) R.W. EXPLANATION 1 OF THE IT ACT, 1961 WITHOUT ANY REASONABLE CAUSE. THE PENALTY OF RS.1,40,00,000/ - IS LEVIED AS AGAINST THE MAXIMUM PENALTY OF RS.4,09,92,196/ - . 8 . A PERUSAL OF THE SATISFACTION RECORDED FOR INITIATING PENALTY PROCEEDINGS, THE REASONS FOR LEVY OF PENALTY MENTIONED IN THE NOTICE AND THE REASON GIVEN IN THE ORDER LEVYING PENALTY U/S. 271(1)(C) ARE NOT COHERENT. WHILE RECORDING REASONS FOR INITIATING PENALTY PROCEEDINGS AND THEREAFTER AT THE TIME OF ISSUANCE OF NOTICE FOR LEVY OF PENALTY VAGUENESS AND AMBIGUITY IN THE MIND OF ASSESSING OFFICER W ITH RESPECT TO CHARGE FOR LEVY OF PENALTY APPEARS WRIT LARGE. THE ASSESSING OFFICER IS NOT CONSISTENT IN SPECIFYING THE LIMB UNDER WHICH PENALTY IS TO BE LEVIED. WHILE RECORDING SATISFACTION THE ASSESSING OFFICER HAS USED CONJUNCTION AND TO MENTION BOT H THE LIMBS FOR INITIATING PENALTY PROCEEDINGS, WHEREAS, IN THE NOTICE ISSUED U/S. 274 THE ASSESSING OFFICER HAS USED CONJUNCTION OR TO MENTION BOTH THE LIMBS I.E. CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. 6 ITA NO . 876/PUN/2015, A.Y. 1998 - 99 9. THE HONBLE SU PREME COURT OF INDIA IN THE CASE OF T. ASHOK PAI VS. COMMISSIONER OF INCOME TAX REPORTED AS 292 ITR 11 HAS HELD THAT THE EXPRESSION C ONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME CONNOTE DIFFERENT MEANINGS AND CANNOT BE USED A S SUBSTITUTE TO EACH OTHER. 1 0 . THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MANJUNATHA COTTON AND GINNING FACTORY REPORTED AS 359 ITR 565 HAS HELD : 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 MAY 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 ASSESSEE 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 INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THO SE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY 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 SHOULD BE IMPOSE D 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 PROCE EDINGS 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 GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE THE BASI S 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 MATER IALS IN THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS 7 ITA NO . 876/PUN/2015, A.Y. 1998 - 99 PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. 1 1 . THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SAMSON PERINCHERY (SUPRA) HAS APPROVED THE PRINCIPLE LAID DOWN IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MANJUNATHA COTTON & GINNING FACTORY (SUPRA) AND DELETED THE LEVY OF PENALT Y WHERE THERE WAS INCONSISTENCY IN RECORDING OF SATISFACTION AND LEVY OF PENALTY. 12. IT IS APPARENT FROM THE DOCUMENTS ON RECORD THAT THERE IS INCONSISTENCY WITH RESPECT TO CHARGE FOR LEVY OF PENALTY AT ALL THE THREE STAGES I.E. (I) R ECORDING OF SATISFACTION; (II) I SSUANCE OF NOTICE; AND (III) L EVY OF PENALTY. 13. WE FIND MERIT IN THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. THERE IS AMBIGUITY IN RECORDING OF SATISFACTION AND NOTICE ISSUED FOR LEVY OF PENALTY U/S. 274 R.W.S. 271(1)(C) OF THE ACT. SINCE, THE CHARGE FOR LEVY OF PENALTY IS NOT EXPLICITLY CLEAR FROM THE NOTICE, THE SAME IS HELD TO BE BAD IN LAW AND HENCE, THE PENALTY PROCEEDINGS ARE LIABLE TO BE SET ASIDE ON THIS GROUND ALONE. SINCE, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE HAS BEEN ALLOWED, THE GROUNDS RAISED BY THE ASSESSEE CHALLENGING THE LEVY OF PENALTY ON MERITS HAVE BECOME ACADEMIC AND THUS, ARE NOT DEALT WITH. 8 ITA NO . 876/PUN/2015, A.Y. 1998 - 99 LEVY OF PENALTY BY ASSESSING OFFICER IN A MECHANICAL MANNER WITHOUT PROPER APPLICATION OF MIND IS FATAL. AMBIGUITY IN THE NOTICE ISSUED U/S. 274 R.W.S. 271(1)(C) WOULD ITSELF VI TIATE THE ENTIRE PENALTY PROCEEDINGS. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED IN THE AFORESAID TERMS. ORDER PRONOUNCED ON WEDNESDAY, THE 16 TH DAY OF AUGUST, 2017 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 16 TH AUGUST, 2017 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 2, PUNE 4. / THE CIT - I, PUNE 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE
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