Income Tax Appellate Tribunal - Hyderabad
Shanta Sriram Constructions Pvt.Ltd., ... vs Dcit, Circle-3(1), Hyderabad, ... on 15 March, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "B", HYDERABAD
BEFORE V. DURGA RAO, JUDICIAL MEMBER
AND
SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER
ITA No. 158/Hyd/2016
Assessment Year: 2009-10
Shanta Sriram Infra & Vs. DCIT,
Constructions Pvt Ltd., Circle-3(1),
Hyderabad. Hyderabad.
PAN: AADCS 4180 M
(Appellant) (Respondent)
Assessee by: Sri S. Rama Rao
Revenue by: Smt. M. Narmada, DR
Date of hearing: 05/03/2019
Date of pronouncement: 15/03/2019
ORDER
PER V. DURGA RAO, J.M.:
This appeal filed by the assessee is directed against the order of the CIT(A)-3, Hyderabad dated 21/09/2015 for the assessment year 2009-10. In this appeal, the assessee has raised the following grounds of appeal:-
"1. The order of the Ld. CIT(A) is erroneous both on facts and in law.
2. The Ld. CIT(A) erred in confirming the action of the Assessing Officer in holding that there is concealment of income of Rs. 91,26,000/- and further erred in confirming levy of penalty of Rs. 32 lakhs u/s 271(1)(c) of the Act.2
3. The Ld. CIT(A) ought to have held that there is neither concealment of income nor furnishing of inaccurate particulars of income and hence penalty is not leviable."
Additional grounds of appeal:
4. The initiation of proceedings u/s 271(1)© of the Income Tax Act is not valid as the Assessing Officer did not strike off the inappropriate portion of the notice. The Assessing Officer ought to have struct off the inappropriate portion and indicated to the appellant the applicable portion in the notice."
2. Brief facts of the case are that the assessee-company is engaged in the construction activity and civil contract works. There was a search and seizure operation conducted u/s 132 of the act at the residential premises of Sri Maddi Narasaiah and Sri Maddi Lingaiah, Directors of the company on 25/03/2010 and survey u/s 133A was conducted at the office premises of the assessee-company. During the course of search proceedings, a cash receipt dated 27/11/2008 duly signed on stamp paper by Sri Suveer Reddy and Sri Shankar Lal Yadav Acknowledging an amount of Rs. 91,26,000/- was found and impounded from the premises of the assessee-company. In his sworn statement, Sri M. Narasaiah, Director, stated that he has taken an advance stamp receipt to arrange funds, but no ash was paid to them. On being asked, Sri Shankar Lal Yadav and Sri Suveer Reddy refued to have received the amount mentioned in the cash receipt. However, the A.O. could not rely upon the statements, as the cash receipt with revenue stamps clearly show that payment was made and accordingly 3 an amount of Rs. 91,26,000/- was estimated as undisclosed income of the company and added to the income returned and initiated penalty proceedings. Subsequently, the A.O. has issued a letter to the assessee why the penalty proceedings cannot be initiated. In reply, it was submitted before the A.O. that the appeal is pending before the ITAT and therefore, requested to keep the proceedings in abeyance till the disposal of the appeal. Subsequently, another letter dated 09/10/2014 was issued asking the assessee why the penalty proceedings u/s 271(1)© should not be finalized. In response, the assessee has filed a detailed letter dated 20/10/2014 before the A.O. The A.O. by considering the assessee's reply, observed that the assessee failed to discharge its prima facie duty of showing that no transaction had actually taken place and came to a conclusion that the assessee had made payments to Sri Suveer Reddy and Shri Shankar Lal Yadav amounting to Rs. 91,26,000/- and penalty was levied.
3. On appeal, CIT(A) confirmed the decision of the A.O. On being aggrieved, assessee is in appeal before the Tribunal by raising the above mentioned grounds of appeal / additional grounds of appeal.
4. Learned Counsel for the Assessee submitted that the notice issued by the assessee is vague and it is clear whether the it is for 'concealment of income' or for 'furnishing of inaccurate particulars of income'. It is further submitted that the additional ground raised by the assessee is 4 purely legal in nature and therefore, the same may be admitted in the light of the judgment of Supreme Court in the case of NTPC Ltd (229 ITR 323).
5. On the other hand, Learned Departmental Representative strongly relied on the orders of the Revenue Authorities. He submitted that the assessee has not raised a ny objection in respect of striking of applicable limb in the notice and therefore, the additional cannot be raised at this stage and the same may be dismissed.
6. We have heard both the parties and perused the material available on record. In so far as t he admitting of additional ground raised by the assessee is concerned, since it is purely legal in nature, respectfully following the judgment of the Hon'ble Apex Court in the case of NTPC (supra), we admit the ground is admitted. As per the Learned Counse l for the Assessee, the notice issued by the A.O. dated 30/12/2011 is vague and not clear and therefore, the same has to be quashed. For the sake of convenience, the notice is extracted as under:
"have concealed the particulars of income furnished, inaccurate particulars of such income."
7. From the above, it is clear that the A.O. is not clear whether the assessee has 'concealed the income' or 'furnished inaccurate 5 particulars of income'. Under these circumstances, the coordinate Bench of the Tribunal at Visakhapatnam in the case of M/s. Chilukuri Housing Projects Pvt. Ltd vs. ACIT (ITA No. 243/VIZ/2018, dated 25/01/2019) wherein the Tribunal by following the judgment of the Hon'ble jurisdictional High Court in the case of Principal Commissioner of Income Tax vs. Smt. Baisetty Revathi (I.T.T.A. No.664 of 2016) dated 13.07.2017 and also the judgment of the Hon'ble Supreme Court in the case CIT & Anr. V. M/s SSA's Emerald Meadows in CC No. 11485/2016, dt. 5-8-2016] has quashed the notice issued by the A.O. For the sake of convenience, the relevant portion from the said Tribunal's order (supra) is extracted as under:
"8. We have heard both the sides, perused the material available on record and orders of the authorities below.
9. The only issue for adjudication before us is whether the notice issued by the Assessing Officer dated 28/02/2014 is valid or not. For the sake of convenience, the notice is extracted as under:-
"Whereas in the course of proceedings before me for the Assessment Year 2011-12, it appears to me that you:
xxxxx xxxx * have concealed the particulars of your income or furnished inaccurate particulars of such income."
10. From the above, it is not clear whether Assessing Officer has initiated penalty proceedings for concealment of particulars of income or for furnished inaccurate particulars. Therefore, the notice issued by the Assessing Officer is a vague notice and is liable to be quashed in the light of the decision of the Hon'ble Jurisdictional High Court in the case of Smt. Baisetty Revathi (supra) and also the decision of the Hon'ble Supreme Court in the case of SSA's Emerald Meadows (supra). The coordinate bench of the Visakhapatnam tribunal in the case of Konchada Sreeram Vs. ITO in ITA No. 388/VIZ/2015, by order dated 06/10/2017 has considered the validity of notice by following the above referred to judgments and held that notice issued by the Assessing Officer is not a valid notice and accordingly quashed. For the sake of convenience, the relevant portion of the order is extracted as under:-
6
6. We have heard both the parties and perused the material placed on record. In this case, the assessee has not filed the return of income.
The department has conducted the survey u/s 133A and completed the assessment u/s 143(3) on total income of Rs.15,43,041/- and initiated penalty proceedings u/s 271(1)©. The fact is that long term capital gains for sale of the property have come to the notice of the assessing officer because of the efforts made by the department. Therefore, the AO has initiated the penalty proceedings u/s 271(1)© and issued show cause notice in the printed proforma of penalty. The AO has issued the penalty notice which reads as under :
"WHEREAS in the course of the proceeding before me for the Asst. Year 2007-08 it appears to me that you have concealed the particulars of your some or furnished inaccurate particulars of such income."
6.1. From the notice issued by the AO, it is observed that the assessing officer had issued the notice for concealment of income or for furnishing of inaccurate particulars. As per the notice, the assessing officer was not sure of which limb of the offence he sought the explanation from the assessee, whether it was for the concealment of income or for furnishing of inaccurate particulars. As per the decision of the Hon'ble Jurisdictional High Court cited, for starting the penalty proceedings, the condition precedent is that the assessing officer must be satisfied that a person has either concealed the particulars of his income or furnished inaccurate particulars of such income. The person who is accused of the conditions mentioned in Section 271 should be made aware of the grounds on which imposition of penalty is proposed as he has a right to contest such proceedings and should have the full opportunity to meet the case of the revenue so as to show that the conditions stipulated in Section 271(1)© do not exist and that he is not liable to pay the penalty. The Hon'ble High Court of Karnataka in the case law cited held that the practice of the revenue in sending the printed form where all the grounds mentioned in 271(1)© are mentioned would not satisfy the requirement of law when the consequence of the assessee not rebutting the initial presumption is serious in nature and has to pay the penalty ranging from 100% to 300% of the tax liability. As the provisions of section 271(1)© have to be strictly construed, the Hon'ble High court of Karnataka mandated that the notice issued should be set out the grounds which the assessee has to meet specifically, otherwise the principles of natural justice would be offended as the show cause notice would be vague. On the similar facts, Hon'ble Supreme Court dismissed the SLP in the case of SSA's Emerald Meadows (2016) 73 Taxman.com 248(SC). Ld. DR's argument that the case is distinguishable on facts is not acceptable since the Ld. DR relied on the passing observation of the Hon'ble High Court of AP. In the assessee's case, the issue is the defective notice u/s 271(1)© but not the penalty order. Unless the notice issued u/s 271(1)© is valid the penalty order cannot be held to be valid. The assessing officer did not strike off the irrelevant column in the notice and made known the assessee whether the penalty was initiated for the concealment of income or for furnishing the inaccurate particulars. In the assessment order also the AO simply recorded that the penalty proceedings u/s 271(1)© are 7 initiated separately. Neither in the assessment order nor in the penalty notice, the assessing officer has put the assessee on notice for which offence, the penalty u/s 271 was initiated. Therefore, the case is squarely covered by the decision of the Hon'ble Jurisdictional High Court of cited (supra) wherein the Hon'ble high court held as under:
"On principle, when penalty proceedings are sought to be initiated by the revenue under Section 271(1)© of the Act of 1961, the specific ground which forms the foundation therefore has to be spelt out in clear terms Otherwise, on ssessee would not have proper opportunity to put forth his defence. When the proceedings are penal in nature resulting in imposition of penalty ranging from 100% to 300% of the tax liability, the charge must be unequivocal and unambiguous. When the charge is either concealment of particulars of income or furnishing of inaccurate particulars thereof , the revenue must specify as to which one of the two is sought to be pressed into service and cannot be permitted to club both by interjecting an 'or' between the two, as in the present case. This ambiguity in the show-cause notice is further compounded presently by the confused finding of the Assessing Officer that he was satisfied that the assessee was guilty of both.
We are therefore of the opinion that the order under appeal does not brook interference on any ground. We find no question of law, much less a substantial one, arising for consideration warranting admission of this appeal."
6.2. On the similar facts, the Coordinate Bench of ITAT, Visakhapatnam in ITA No.229/Viz/2015 in the case of Narayana Reddy Enterprises, following the order of the Coordinate Bench in the case of Smt. Makina Annapurna Vs. ITO, Visakhapatnam in ITA Nos.604 & 605/Vizag/2014 dated 2.2.2017 held that non-striking of the irrelevant column renders the notice issued u/s 271 as invalid. Respectfully, following the decision of the Hon'ble AP High Court cited supra and the decision of this Tribunal cited (supra), we hold that the notice issued u/s 271 is invalid and consequent penalty imposed by the AO is cancelled. "
11. We therefore, respectfully following the decision of the Hon'ble Supreme Court in the case of SSA's Emerald Meadows (supra) and also the decision of Hon'ble Jurisdictional High Court in the case of Smt. Baisetty Revathi (supra) and also the decision of the coordinate bench of the tribunal in t he case of Konchada Sreeram (supra), we hold that the notice issued under section 271 read with section 274 is invalid and, therefore penalty imposed by the Assessing Officer is cancelled."
8. Respectfully following the decision of the Jurisdictional High Court (AP & Telangana) in the case of Baisetty Revat hi (supra) and also following the decision of the Hon'ble Supreme 8 Court in the case of M/s. SSA's Emerald Meadows (supra) and also following the decision of the Coordinate Bench at Visakhapatnam in the case of M/s. Chilukuri Housing Projects Pvt. Ltd (supra), we hold that the notice issued u/s 274 r.w.s 271(1)© of the IT Act, 1961 dated 30/12/2011 is invalid and consequent penalty imposed by the A.O. is cancelled. Thus, grounds of appeal filed by the assessee are allowed.
9. In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 15 th March, 2019.
Sd/- Sd/-
(S. RIFAUR RAHMAN) (V. DURGA RAO)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, Dated: 15 th March, 2019
OKK
Copy to:-
1) Sri S. Rama Rao, Advocate, Flat No.102, Shriya's Elegance, 3 -
6-643, Street No.9, Himayatnagar, Hyderabad -500029.
2) DCIT, Circle-3(1), Income Tax Towers, AC Guards, Hyderabad.
3) The CIT(A)-3, Hyderabad 4) The Pr. CIT-3, Hyderabad 5) The DR, ITAT, Hyderabad 6) Guard File