Income Tax Appellate Tribunal - Mumbai
Dcit 8(3)(1), Mumbai vs Times Global Broadcasting Co.Ltd, ... on 21 June, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH "E", MUMBAI
BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND
SHRI PAWAN SINGH, JUDICIAL MEMBER
ITA No. 7186/Mum/2014 (Assessment Year- 2010-11)
DCIT, Circle-8(3)1, M/s Times Global Broadcasting Co.
Room No. 615, 6th Floor, Ltd. 1st, Floor, Trade House,
Aayakar Bhavan, M.K. Road, Vs. Kamla Mill Compound,
Mumbai-400020. Lower Parel, Mumbai-400013
PAN: AAACCT2259F
(Appellant) (Respondent)
Cross Objection No. 102/Mum/2016(Assessment Year 2010-11)
M/s Times Global Broadcasting Co. DCIT, Circle-8(3)1,
Ltd. 1st, Floor, Trade House, Room No. 615, 6th Floor,
Kamla Mill Compound, Vs. Aayakar Bhavan, M.K. Road,
Lower Parel, Mumbai-400013 Mumbai-400020.
PAN: AAACCT2259F
(Appellant) (Respondent)
Assessee by Shri Sanjay Bahadur (CIT-
:
DR)
Revenue by : Mr. S. Venkatraman (AR)
Date of hearing : 21.06.2017
Date of Pronouncement : 21.06.2017
Order Under Section 254(1) of Income Tax Act
PER PAWAN SINGH, JUDICIAL MEMBER:
1. This appeal by Revenue u/s. 253 of the Income-tax Act (the Act) is directed against the order of ld. Commissioner of Income Tax (Appeals)-13 [the ITA No.7186/M/2014 & C.O. 102/M/16- M/s Times Global Broadcasting Co. Ltd. CIT(A)], Mumbai dated 30.09.2014 for the Assessment Year 2010-11. The assessee also filed Cross Objection (C.O.). The Revenue has raised the following grounds of appeal:
(i) The Learned CIT(A) has erred on facts and in law in deleting penalty levied u/s 271(1)(c) of the Act of Rs.4,05,52,210/- by the Assessing Officer without properly appreciating the factual and legal matrix of the case as clearly brought out by the Assessing Officer in the order imposing penalty.
(ii) The Learned CIT(A) has erred on law and on facts in not appreciating that assessee was not able to give satisfactory explanation for claim of doubtful debt at Rs. 1156.19 Lakhs and therefore ratio decendi of decision of Supreme Court in the case of Mak Data Pvt Ltd. vs. CIT(2013) 40 SCD 925 as reported in Civil Appeal No.9772 of 2013 clearly applies.
2. The assessee in its C.O. raised the following Ground of appeal:
1. On the facts and in the circumstances of the case and in law, Assessee submits that the Ld. Assessing Officer has not recorded his satisfaction as prescribed and required by Section 271 (1) r/w Section 271 (1B) of the Act in the Assessment Order and, consequently, the penalty proceedings and the penalty order are, therefore, illegal, bad in law and ought to becancelled.
2. On the facts and in the circumstances of the case and in law, Assessee submits 'that the penalty notice is defective as it no where indicates the circumstances for the initiation of the penalty proceedings and consequently the penalty proceedings and the penalty order are, therefore, illegal, bad in law and ought to be cancelled.
3. On the facts and in the circumstances of the case and in law, Assessee submits that the penalty order passed by the Assessing Officer under Sec.271 (1)(c) of the Income Tax Act, 1961, is beyond the period of limitation prescribed under Section 275(1)(c) of the said Act and is, therefore, illegal, bad in law and ought to be cancelled.
3. The perusal of C.O. reveals that objections were filed 18 days beyond the prescribed period of limitation. The assessee has filed an application for condonation of delay along with the affidavit of N.K. Anand, Managing Director of the assessee-company. In the application, the assessee contended that assessee received a notice on revenue appeal on 25.05.2016, 2 ITA No.7186/M/2014 & C.O. 102/M/16- M/s Times Global Broadcasting Co. Ltd. therefore, the assessee was required to file C.O. on or before 25.06.2016.
However, the same could be filed only on 13th July 2016. Thus, there was delay of 18 days in filing C.O. It was further contended that the partner in the office of Chartered Accountant (CA)-Firm which was handling the tax matter of the assessee was abroad and on his return the C.O. could be finalized. It was argued that the delay was neither intentional nor deliberate.
The assessee has good case on merit and would suffer in case the delay is not condoned. On the other hand, the ld. CIT-DR for the Revenue not opposed the ground for condonation of delay. Considering the contention of both the parties, the delay is condoned.
4. The facts related to the grounds of appeal are that assessee filed return of income for relevant AY on 28.09.2010 declaring loss of Rs.
1,41,72,07,967/.The assessment was completed on 31.01.2013 u/s 143(3) of the Act. The Assessing Officer (AO) while framing the assessment disallowed the provision for doubtful debts of Rs. 1156.19 Lakhs.
Subsequently , the assessee file paper return for the AY under consideration on 18.04.2012, in its revised return, the assessee added back the provision of doubtful debt amounting to Rs. 1156.19 lakhs showing the loss at Rs.
1,30,15,88,720/-. The AO observed that assessee was required to file only e-return/revised return. No paper return could be filed by corporate assessee.
Thus, assessee failed to file revised return. Besides the doubtful debts, the 3 ITA No.7186/M/2014 & C.O. 102/M/16- M/s Times Global Broadcasting Co. Ltd. AO made the disallowance of donation of Rs. 3,13,568/- Legal & Professional Fees of Rs. 33,73,730/- and initiated the penalty. The AO issued notice u/s 274 r.ws. 271(1)(c) of the Act on 01.02.2013, the notice was contested by assessee. The contention raised in the reply was not accepted by AO and levied the penalty @ 100% on the tax sought to be evaded. The AO worked out the penalty of Rs. 4,05,52,210/- in its order dated 30.07.2013. On appeal before the ld. CIT(A), the penalty was deleted.
Thus, aggrieved by the order of ld. CIT(A), the Revenue has filed the present appeal before us. On service of notice of appeal by the Revenue, the assessee has filed the C.O.
5. We have heard both the parties on appeal as well as on C.O. and perused the material available on record. In support of C.O., the ld. Authorized Representative (AR) of the assessee argued that while issuing notice u/s 274 r.w.s. 271(1)(c) of the Act. The AO has not struck out the relevant portion of the notice. Therefore, a notice of penalty is illegal and deserves to be set-
aside. It was further argued that though the assessee has good case on merit.
As the ld. CIT(A) deleted the penalty on merit. In support of his submission, the ld. AR of the assessee relied upon the decision of Hon'ble Bombay High Court in CIT vs. CIT vs. Shri Samson Perinchery [ITA 1154,953,1097 and 1226/Mum-2014] dated 05.01.2017 and the decision of this Bench in Meherjee Cassinath Holdings Private Ltd. vs. ACIT [ITA 2555/Mum/2012].
4 ITA No.7186/M/2014 & C.O. 102/M/16- M/s Times Global Broadcasting Co. Ltd.It was further argued that he relied on a recent decision of this bench in Meherjee Cassinath Holding Pvt. Ltd. vs. ACIT. On the other hand, ld. DR for the Revenue supported the order of authorities below.
6. We have considered the rival submission of the parties and have gone through the order of authorities below. We have also gone through the notice u/s 274 r.w.s. 271(1)(c) of the Act (copy of which is at page no. 41 of PB).
This bench while considering with almost similar contention in case of Meherjee Cassinath Holding Pvt. Ltd.(supra) held as under:
"8. We have carefully considered the rival submissions. Sec. 271(1)(c) of the Act empowers the Assessing Officer to impose penalty to the extent specified if, in the course of any proceedings under the Act, he is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. In other words, what Sec. 271(1)(c) of the Act postulates is that the penalty can be levied on the existence of any of the two situations, namely, for concealing the particulars of income or for furnishing inaccurate particulars of income. Therefore, it is obvious from the phraseology of Sec. 271(1)(c) of the Act that the imposition of penalty is invited only when the conditions prescribed u/s 271(1)(c) of the Act exist. It is also a well accepted proposition that 'concealment of the particulars of income' and 'furnishing of inaccurate particulars of income' referred to in Sec. 271(1)(c) of the Act denote different connotations. In fact, this distinction has been appreciated even at the level of Hon'ble Supreme Court not only in the case of Dilip N. Shroff (supra) but also in the case of T. Ashok Pai, 292 ITR 11 (SC). Therefore, if the two expressions, namely 'concealment of the particulars of income' and 'furnishing of inaccurate particulars of income' have different connotations, it is imperative for the assessee to be made aware as to which of the two is being put against him for the purpose of levy of penalty u/s 271(1)(c) of the Act, so that the assessee can defend accordingly. It is in this background that one has to appreciate the preliminary plea of assessee, which is based on the manner in which the notice u/s 274 r.w.s. 271(1)(c) of the Act dated 10.12.2010 has been issued to the assessee- company. A copy of the said notice has been placed on record and the learned representative canvassed that the same has been issued by the Assessing Officer in a standard proforma, without striking out the irrelevant clause. In other words, the notice refers to both the limbs of Sec. 271(1)(c) of the Act, namely concealment of the particulars of income as well as furnishing of inaccurate particulars of income. Quite clearly, non-striking- off of the irrelevant limb in the said notice does not convey to the assessee as to which of the two charges it has to respond. The aforesaid infirmity in the notice has been sought to be demonstrated as a reflection of non-application of mind by the Assessing Officer, and in support, reference has been made to the following specific discussion in the order of Hon'ble Supreme Court in the case of Dilip N. Shroff (supra):-5 ITA No.7186/M/2014 & C.O. 102/M/16- M/s Times Global Broadcasting Co. Ltd.
"83. It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed 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.
84. The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice. (See Malabar Industrial Co. Ltd. v. CIT [2000] 2 SCC 718]"
9. Factually speaking, the aforesaid plea of assessee is borne out of record and having regard to the parity of reasoning laid down by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra), the notice in the instant case does suffer from the vice of non-application of mind by the Assessing Officer. In fact, a similar proposition was also enunciated by the Hon'ble Karnataka High Court in the case of M/s. SSA's Emerald Meadows (supra) and against such a judgment, the Special Leave Petition filed by the Revenue has since been dismissed by the Hon'ble Supreme Court vide order dated 5.8.2016, a copy of which is also placed on record.
10. In fact, at the time of hearing, the ld. CIT-DR has not disputed the factual matrix, but sought to point out that there is due application of mind by the Assessing Officer which can be demonstrated from the discussion in the assessment order, wherein after discussing the reasons for the disallowance, he has recorded a satisfaction that penalty proceedings are initiated u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income. In our considered opinion, the attempt of the ld. CIT-DR to demonstrate application of mind by the Assessing Officer is no defence inasmuch as the Hon'ble Supreme Court has approved the factum of non-striking off of the irrelevant clause in the notice as reflective of non- application of mind by the Assessing Officer. Since the factual matrix in the present case conforms to the proposition laid down by the Hon'ble Supreme Court, we proceed to reject the arguments advanced by the ld. CIT-DR based on the observations of the Assessing Officer in the assessment order. Further, it is also noticeable that such proposition has been considered by (supra) and the decision of the Tribunal holding levy of penalty in such circumstances being bad, has been approved.
11. Apart from the aforesaid, the ld. CIT-DR made an argument based on the decision of the Hon'ble Bombay High Court in the case of Smt. Kaushalya & Others, 216 ITR 660 (Bom.) to canvass support for his plea that non-striking off of the irrelevant portion of notice would not invalidate the imposition of penalty u/s 271(1)(c) of the Act. We have carefully considered the said argument set-up by the ld. CIT-DR and find that a similar issue had come up before our coordinate Bench in the case of Dr. Sarita Milind Davare (supra). Our coordinate Bench, after considering the judgment of the Hon'ble Bombay High Court in the case of Smt. Kaushalya & Ors., (supra) as also the judgments of the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) and Dharmendra Textile Processors, 306 ITR 277 (SC) deduced as under :-
6 ITA No.7186/M/2014 & C.O. 102/M/16- M/s Times Global Broadcasting Co. Ltd."12. A combined reading of the decision rendered by Hon'ble Bombay High Court in the case of Smt. B Kaushalya and Others (supra) and the decision rendered by Hon'ble Supreme Court in the case of Dilip N Shroff (supra) would make it clear that there should be application of mind on the part of the AO at the time of issuing notice. In the case of Lakhdir Lalji (supra), the AO issued notice u/s 274 for concealment of particulars of income but levied penalty for furnishing inaccurate particulars of income. The Hon'ble Gujarat High Court quashed the penalty since the basis for the penalty proceedings disappeared when it was held that there was no suppression of income. The Hon'ble Kerala High Court has struck down the penalty imposed in the case of N.N.Subramania Iyer Vs. Union of India (supra), when there is no indication in the notice for what contravention the petitioner was called upon to show cause why a penalty should not be imposed. In the instant case, the AO did not specify the charge for which penalty proceedings were initiated and further he has issued a notice meant for calling the assessee to furnish the return of income. Hence, in the instant case, the assessing officer did not specify the charge for which the penalty proceedings were initiated and also issued an incorrect notice. Both the acts of the AO, in our view, clearly show that the AO did not apply his mind when he issued notice to the assessee and he was not sure as to what purpose the notice was issued. The Hon'ble Bombay High Court has discussed about non-application of mind in the case of Kaushalya (supra) and observed as under:-
"....The notice clearly demonstrated non-application of mind on the part of the Inspecting Assistant Commissioner. The vagueness and ambiguity in the notice had also prejudiced the right of reasonable opportunity of the assessee since he did not know what exact charge he had to face. In this back ground, quashing of the penalty proceedings for the assessment year 1967-68 seems to be fully justified."
In the instant case also, we are of the view that the AO has issued a notice, that too incorrect one, in a routine manner. Further the notice did not specify the charge for which the penalty notice was issued. Hence, in our view, the AO has failed to apply his mind at the time of issuing penalty notice to the assessee."
12. The aforesaid discussion clearly brings out as to the reasons why the parity of reasoning laid down by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) is to prevail. Following the decision of our coordinate Bench in the case of Dr. Sarita Milind Davare (supra), we hereby reject the aforesaid argument of the ld. CIT-DR.
13. Apart from the aforesaid discussion, we may also refer to the one more seminal feature of this case which would demonstrate the importance of non-striking off of irrelevant clause in the notice by the Assessing Officer. As noted earlier, in the assessment order dated 10.12.2010 the Assessing Officer records that the penalty proceedings u/s 271(1)(c) of the Act are to be initiated for furnishing of inaccurate particulars of income. However, in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act of even date, both the limbs of Sec. 271(1)(c) of the Act are reproduced in the proforma notice and the irrelevant clause has not been struck-off. Quite clearly, the observation of the Assessing Officer in the assessment order and non-striking off of the irrelevant clause in the notice clearly brings out the diffidence on the part of Assessing Officer and there is no clear and crystallised charge being conveyed to the assessee u/s 271(1)(c), which has to be met by him. As noted by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra), the quasi-criminal proceedings u/s 271(1)(c) of the Act ought to comply with the principles of natural justice, and in the present 7 ITA No.7186/M/2014 & C.O. 102/M/16- M/s Times Global Broadcasting Co. Ltd. case, considering the observations of the Assessing Officer in the assessment order alongside his action of non-striking off of the irrelevant clause in the notice shows that the charge being made against the assessee qua Sec. 271(1)(c) of the Act is not firm and, therefore, the proceedings suffer from non-compliance with principles of natural justice inasmuch as the Assessing Officer is himself unsure and assessee is not made aware as to which of the two limbs of Sec. 271(1)(c) of the Act he has to respond.
14. Therefore, in view of the aforesaid discussion, in our view, the notice issued by the Assessing Officer u/s 274 r.w.s. 271(1)(c) of the Act dated 10.12.2010 is untenable as it suffers from the vice of non- application of mind having regard to the ratio of the judgment of the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) as well as the judgment of the Hon'ble Bombay High Court in the case of Shri Samson Perinchery (supra). Thus, on this count itself the penalty imposed u/s 271(1)(c) of the Act is liable to be deleted."
7. Considering the decision of this bench referred above, in our view a notice issued by AO u/s 274 r.w.s. 271 of the Act dated 05.03.2004 suffered from non-application of mind having regard to the ratio of Hon'ble Apex Court in case of Dilip N. Shroff Vs. JCIT [(161 Taxman 218 (SC)] as well as the decision of Hon'ble Bombay High Court in case of Shri Samson Perinchery Vs. ACIT [ITA 1154, 953, 1097 and 1226/Mum/2014] dated 05.01.2017. Thus, on the legal ground, the penalty levied u/s 271(1)(c) of the Act is to be deleted. We order accordingly. Hence, the legal argument raised by ld. AR of the assessee is allowed. Considering the above legal and factual discussion, the C.O. raised by assessee is allowed. As we have allowed the C.O. of assessee. Thus, the discussion on various grounds raised by Revenue has become academic.
8. In the result, C.O. of assessee is allowed and appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 21st day of June 2017.
Sd/- Sd/-
(G.S. PANNU) (PAWAN SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai; Dated 21/06/2017
S.K.PS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
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ITA No.7186/M/2014 & C.O. 102/M/16- M/s Times Global Broadcasting Co. Ltd.
3. The CIT(A), Mumbai.
4. CIT
5. DR, ITAT, Mumbai
6. Guard file. BY ORDER,
स या पत त //True Copy/
(Asstt.Registrar)
ITAT, Mumbai
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