Sri Muninaga Reddy, V. Assistant Commissioner of income tax, Bangalore

MA 24/BANG/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8254 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 4 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 04-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 30-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SIDDAPPAJ
• Assessee Lawyers: VANI H
• Keywords: Principle of natural justice; Period of limitation; Initiation of penalty proceedings
• Section: 271(1)(c); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI N.V VASUDEVAN, VICE PRESI DENT AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER M.P NO.24/BANG/2017 (IN ITA NO.860/BANG/2012) (ASST. YEAR 2007-08) SHRI MUNINAGA REDDY, S/O LATE MINISWAMY REDDY, R/AT NO.45, 3 RD B MAIN, 4 TH CROSS, 3 RD BLOCK, KALYAN NAGAR, BENGALURU .APPELLANT VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-6(1), BENGALURU. . RESPONDENT APPELLANT BY : MS. VANI H, ADVOCATE RESPONDENT BY : SHRI SIDDAPPAJ, ADDL. CIT DATE OF HEARING : 21-12-2018 DATE OF PRONOUNCEMENT : 04 -01-2019 O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER : THIS MISC. APPLICATION FILED BY THE ASSESSE E IS IN RESPECT OF THE TRIBUNALS ORDER IN ITA NO.860/BANG/2012 DATED 13/4/2015, WHEREIN TH E LEVY OF PENALTY U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) ON THE ASSESSEE FOR ASST. YEAR 2007-08 WAS PARTLY UPHELD. 2. BRIEFLY STATED, THE FACTS OF THE MATTER ARE AS UNDER:- 2.1 FOR THE ASST. YEAR 2007-08, THE ORDER OF ASS T. WAS CONCLUDED U/S 143(3) OF THE ACT VIDE ORDER DATED 24/12/2009 DETERMINING THE ASSESSE ES INCOME AT RS.1,14,93,587/- M.P NO.24/B/17 2 WHEREIN THE ASSESSING OFFICER (AO) SIMULTANEOUSLY INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT BY ISSUE OF NOTICE U/S 274 R.W.S 271 OF THE ACT OF EVEN DATE. SUBSEQUENTLY, THE AO PASSED AN ORDER DATED 29/6/201 0 IMPOSING PENALTY OF RS.38,12,640/- U/S 271(1)(C) OF THE ACT. ON APPEAL , THE CIT(A)-III, BANGALORE VIDE ORDER DATED 2/3/2012 DISMISSED THE ASSESSEES APPEA L AND THEREBY UPHELD THE LEVY OF PENALTY BY THE AO U/S 271(1)(C) OF THE ACT AMOUNTIN G TO RS.38,12,640/-. ON FURTHER APPEAL BY THE ASSESSEE, A CO-ORDINTE BENCH OF THIS TRIBUNAL IN ITS ORDER IN ITA NO.860/BANG/2012 DATED 13/1/2015 IN PRINCIPLE UPHEL D THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT IN THE CASE ON HAND. HOWEVER, OBSERVING THAT THE AO HAD LEVIED THE PENALTY ON THE ENTIRE ASSESSED INCOME, THE TRIB UNAL DIRECTED THE AO TO RESTRICT THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT TO THE DIF FERENCE BETWEEN THE ASSESSED INCOME AND THE INCOME AS RETURNED BY THE ASSESSEE IN THE R ETURN OF INCOME FOR ASST. YEAR 2007- 08 IN RESPECT OF WHICH THERE IS NO DISPUTE. AT THI S STAGE NO M.P WAS FILED BY THE ASSSESSE FOR ASST. YEAR 2007-08. 2.2 THE CO-ORDINATE BENCH, ALONG WITH THE ASSES SEES APPEAL FOR ASST. YEAR 2007-08, IN THE SAME ORDER IN ITA NO.860/BANG/2012 DATED 13/ 1/2015, ALSO HEARD AND DISMISSED THE ASSESSEES APPEAL AGAINST LEVY OF PEN ALTY U/S 271(1)(C) OF THE ACT FOR ASST. YEAR 2006-07 IN ITA NO.859/BANG/2012. THE AS SESSEE FILED AN M.P NO.62/BANG/2015 BEFORE THE TRIBUNAL FOR ASST. YEAR 2006-07 WHICH WAS REJECTED VIDE ORDER DATED 20/1/2016. AGAINST THIS ORDER OF THE T RIBUNAL, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE HONBLE KARNATAKA HIGH COURT IN ITA NO.251/BANG/2016 AND THE HONBLE COURT IN ITS ORDER DATED 21/9/2016 HELD TH AT THE NOTICE ISSUED IN PENALTY PROCEEDINGS US/S 271(1)(C) OF THE ACT OUGHT TO HAVE BEEN EXAMINED AND CONSIDERED IN THE LIGHT OF ITS DECISION IN THE CASE CIT VS. MANJU NATHA COTTON & GINNING FACTORY (2013) 359 ITR 565 (KAR). 2.3 THE FACTS FOR ASST. YEAR 2007-08 IN THE CASE ON HAND , FOR WHICH NO APPEAL WAS FILED, WERE IDENTICAL TO THAT OF ASST, YEAR 2006-0 7. HOWEVER, AFTER THE ORDER OF THE HONBLE HIGH COURT IN THE ASSESSEES OWN CASE FOR ASST. YEAR 2006-07 DATED M.P NO.24/B/17 3 21/9/2016, THE ASSESSEE THEN CHOSE TO FILE M.P NO.2 4/BANG/2017 FOR ASST. YEAR 2007- 08. THE TRIBUNAL VIDE ORDER DATED 21/6/2017 DISMIS SED THE ASSESSEES M.P FOR ASST. YEAR 2007-08 AS NOT MAINTAINABLE; BEING BARRED BY L IMITATION, AS IT IS FILED BEYOND THE PERIOD OF LIMITATION AS PROVIDED U/S 254(2) OF TH E ACT. THE ASSESSEE CARRIED THE MATTER FOR ASST. YEAR 2007-08 IN WRIT PETITION NO.2 5553/2018 (T.IT) BEFORE THE HONBLE KARNATAKA HIGH COURT. THE HONBLE COURT VIDE ORDER DATED 12/6/2018 ALLOWED THE ASSESSEES WRIT PETITION, QUASHED THE TRIBUNALS O RDER IN M.P NO.24/BANG/2017 DATED 21/6/2017, CONDONED THE DELAY IN FILING THE M.P AND REMANDED THE MATTER TO THE FILE OF THE ITAT TO DECIDE THE ISSUE ON MERITS IN ACCORDANC E WITH THE OBSERVATIONS OF THE HONBLE COURT IN THE CASE OF CICT VS. MANJUNATH COT TON & GINNING FACTORY (SUPRA). 3.1 THE M.P NO.24/BANG/2017 FOR ASST. YEAR 2007- 08 IS NOW BEFORE US FOR CONSIDERATION ON MERITS AS PER THE ORDER OF THE HON BLE KARNATAKA HIGH COURT IN WRIT PETITION NO.2553/2018 (T.IT) DT. 12/6/2018. IN TH IS REGARD, WE HAVE HEARD AND CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND SUBM ISSIONS ON RECORD AND THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY (SUPRA). THE NOTICE ISSUED BY THE AO U/S 2 74 R.WS 271 OF THE ACT FOR INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT FOR ASST. YEAR 2007-08 DATED 24/12/2009. (COPY OF THE AFORESAID NOTICE PLACED ON RECORD) HAS ALSO BEEN CAREFULLY PERUSED AND WE FIND THAT THE AO HAS NOT DELETED TH E INAPPROPRIATE WORDS AND FACTS IN THE RELEVANT PARAGRAPH OF THE NOTICE; WHEREBY IT I S NOT CLEAR AS TO WHICH DEFAULT IS COMMITTED BY THE ASSESSEE, I.E WHETHER IT IS FOR F URNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALING PARTICULARS OF INCOME THAT TH E PENALTY U/S 271(1)(C) OF THE ACT IS SOUGHT TO BE LEVIED. 3.2 THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF M/S MANJUNATHA COTTON & GINNING FACTORY IN (359 ITR 565) (KAR) HAS HELD THA T A NOTICE ISSUED U/S 274 R.WS 271 OF THE ACT WITHOUT SPECIFYING THE NATURE OF DEFAULT ; I.E. WHETHER THE NOTICE IS ISSUED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISH ING OF INACCURATE PARTICULARS OF INCOME; IS INVALID AND THE CONSEQUENTIAL PENALTY PR OCEEDINGS/ORDER ARE ALSO NOT VALID. M.P NO.24/B/17 4 THE RELEVANT PORTION OF THE AFORESAID JUDGMENT OF T HE HON'B!E KARNATAKA HIGH COURT (SUPRA) AT PARAS 59 TO 61 ARE EXTRACTED HEREUNDER:- '59. AS THE PROVISION STANDS, THE PENALTY PROCEEDIN GS CAN BE INITIATED ON VARIOUS GROUND SET OUT THEREIN, IF THE ORDER PASSED BY THE AUTHORITY CATEGORICALLY RECORDS A FINDING RE GARDING THE EXISTENCE OF ANY SAID GROUNDS MENTIONED THEREIN AND THEN PENALTY PROCEEDINGS IS INITIATED, IN THE NOTICE TO BE ISSUED UNDER SECTION 274, THEY COULD CONVENIENTLY REFER TO THE S AID ORDER WHICH CONTAINS THE SATISFACTION OF THE AUTHORITY WH ICH HAS PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORDER AND IF I T IS A CASE OF RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATI ON-I 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 ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PEN ALTY OIL AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OPPOR TUNITY TO MEET THE CASE OF THE DEPARTMENT AND SHOW THAT THE C ONDITIONS STIPULATED IN SECTION 271 (I)(C) C/A NOT EXIST AS S UCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTME NT SENDING A PRINTED FARM WHERE ALL THE GROUND MENTIONED IN SECT ION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASSESSEE NOT REBUTTING THE INIT IAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 100% TO 300% OF TAX LIABILITY. AS THE SAID PROVISIO NS HAVE TO BE HELD TO BE STANDBY CONSTRUED NOTICE ISSUED UNDER SE CTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPE CIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDE D IF THE SHOW CAUSE NOTICE IS VAGUE. ON THE BASIS OF SUCH PROCEED INGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, TH AT 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 TH E OFFENCES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING H IM GUILTY FOR M.P NO.24/B/17 5 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 QU A NON FOR INITIATION 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 THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PEN ALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSED ONLY ON THE GROUNDS O N WHICH HE IS CA/LED UPON TO ANSWER. IT IS NOT OPEN TO THE AUT HORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE G ROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWI SE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLE S OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROC EEDINGS ARE INITIATED ON ONE GROUND, 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 WHI CH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS N OT 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 OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE AC T TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COU RSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOME UNDER CLA USE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF I NCOME 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 INACCURA TE PARTICULARS. THE APEX COURT IN THE CASE OF ASHOK PAL REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CO NNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF M4NU ENGINEER ING REPORTED IN 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO IVL4RKETING REPORTED IN 171 TAXMAN 156, HAS H ELD THAT PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHI CH IT IS LEVIED AND THE ACTION BEING UNCLEAR PENALTY IS NOT SUSTAIN ABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO I NVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS T O BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNI SHING M.P NO.24/B/17 6 INACCURATE PARTICULARS OF INCOME. THE STANDARD PROF ORMA WITHOUT STRIKING OF. THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON-APPLICATION OF MIND.' 3.3 THE AFORESAID VIEW TAKEN BY THE HON'BLE KARNA TAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA) WAS FOL LOWED BY THE HON'B!E KARNATAKA HIGH COURT IN THE CASE OF SSAS EMERALD ME ADOWS IN ITA NO.380 OF 2015 DATED 23/11/2015; WHEREIN THE HON'BLE COURT UPHELD THE ORDER OF CO-ORDINATE BENCH OF THIS TRIBUNAL, CANCELLING THE PENALTY LEVIED ON THE BASIS OF THE DEFECTIVE NOTICE ISSUED BY THE AO. REVENUE'S SLP FILED AGAINST HE SA ID JUDGMENT OF THE HON'BLE HIGH COURT IN THE CASE OF SSAS EMERALD MEADOWS (SUPRA) H AS ALSO BEEN DISMISSED BY THE HON'BLE APEX COURT IN CC/1485/2016 DATED 5/8/2016. 3.4 RESPECTFULLY FOLLOWING THE JUDGMENTS OF THE HO N'BLE KARNATAKA HIGH COURT IN THE CASES OF M/S MANJUNATHA COTTON & GINNING FACTOR Y (359 ITR 565) (KAR) AND SSAS EMERALD MEADOWS IN ITA NO.380 OF 2015 DATED 23 /11/2015, WE HOLD THAT THE NOTICE ISSUED BY THE AO U/S 274 R.W.S 271 OF THE AC T DATED 24/12/2009 FOR INITIATING PENALTY PROCEEDINGS FOR ASST. YEAR 2007-08 IS INVAL ID AND CONSEQUENTLY, THE PENALTY PROCEEDINGS CONDUCTED IN PURSUANCE THEREOF, ARE ALS O INVALID AND WE THEREFORE DELETE THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT FOR AS ST. YEAR 2007-08. 4. IN THE RESULT, MISCELLANEOUS PETITION FILED BY T HE ASSESSEE APPEAL FOR ASST. YEAR 2007-08 IS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JANUARY, 2019 . SD/- SD/- (N.V VASUDEVAN) (JASON P BOAZ) VICE PRESIDENT ACCOUNTATN MEMBER BANGALORE DATED : 4 /01/2019 VMS M.P NO.24/B/17 7 COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGI STRAR, ITAT, BANGALORE M.P NO.24/B/17 8 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR. P. S... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT.. 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. ..