Income Tax Appellate Tribunal - Bangalore
Sri Muninaga Reddy, vs Assistant Commissioner Of Income Tax, ... on 4 January, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL,
BANGALORE BENCH 'B'
BEFORE SHRI N.V VASUDEVAN, VICE PRESIDENT 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, 3rd B Main, 4th Cross,
3rd 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
ORDER
PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER :
This Misc. application filed by the assessee is in respect of the Tribunals order in ITA No.860/Bang/2012 dated 13/4/2015, wherein the 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 asst. was concluded u/s 143(3) of the Act vide order dated 24/12/2009 determining the assessee's 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 29/6/2010 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 assessee's appeal and thereby upheld the levy of penalty by the AO u/s 271(1)(c) of the Act amounting 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 upheld 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 Tribunal directed the AO to restrict the levy of penalty u/s 271(1)(c) of the Act to the difference between the assessed income and the income as returned by the assessee in the return of income for asst. year 2007- 08 in respect of which there is no dispute. At this stage no M.P was filed by the asssesse for asst. year 2007-08.
2.2 The co-ordinate bench, along with the assessee's 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 assessee's appeal against levy of penalty u/s 271(1)(c) of the Act for asst. year 2006-07 in ITA No.859/Bang/2012. The assessee 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 Tribunal, the assessee preferred an appeal before the Hon'ble Karnataka High Court in ITA No.251/Bang/2016 and the Hon'ble Court in its order dated 21/9/2016 held that 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. Manjunatha 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 2006-07. However, after the order of the Hon'ble High Court in the assessee's 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.24/Bang/2017 for asst. year 2007-
08. The Tribunal vide order dated 21/6/2017 dismissed the assessee's M.P for asst. year 2007-08 as not maintainable; being barred by limitation, as it is filed beyond the period of limitation as provided u/s 254(2) of the Act. The assessee carried the matter for asst. year 2007-08 in writ petition No.25553/2018 (T.IT) before the Hon'ble Karnataka High Court. The Hon'ble Court vide order dated 12/6/2018 allowed the assessee's Writ Petition, quashed the Tribunal's order 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 accordance with the observations of the Hon'ble Court in the case of CICT Vs. Manjunath cotton & 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 this regard, we have heard and carefully considered the rival contentions and submissions on record and the decision of the Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (Supra). The notice issued by the AO u/s 274 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 the inappropriate words and facts in the relevant paragraph of the notice; whereby it is not clear as to which default is committed by the assessee, i.e whether it is for furnishing of inaccurate particulars of income OR concealing particulars of income that the 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 that 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 furnishing of inaccurate particulars of income; is invalid and the consequential penalty proceedings/order are also not valid.
M.P No.24/B/17 4 The relevant portion of the aforesaid judgment of the Hon'b!e Karnataka High Court (Supra) at paras 59 to 61 are extracted hereunder:-
"59. As the provision stands, the penalty proceedings can be initiated on various ground set out 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 is 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-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 penalty oil as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271 (I)(c) c/a not exist as such he is not liable to pay 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 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 tax liability. As the said provisions have to be held to be standby 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 the 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 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 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 qua 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, penalty is to be imposed, it should be imposed only on the grounds on which he is ca/led 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 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 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 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 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 there is concealment of income or 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 Pal reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of M4NU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO IvL4RKETING reported in 171 Taxman 156, has held that penalty has to be clear as to the limb for which it is levied and the action being unclear penalty is not sustainable. Therefore, 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 M.P No.24/B/17 6 inaccurate particulars of income. The standard proforma 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 Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory (Supra) was followed by the Hon'b!e Karnataka High Court in the case of SSAS Emerald Meadows 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 said judgment of the Hon'ble High Court in the case of SSAS Emerald Meadows (Supra) has 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 Hon'ble Karnataka High Court in the cases of M/s Manjunatha Cotton & Ginning Factory (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 Act dated 24/12/2009 for initiating penalty proceedings for asst. year 2007-08 is invalid and consequently, the penalty proceedings conducted in pursuance thereof, are also invalid and we therefore delete the penalty levied u/s. 271(1)(c) of the Act for asst. year 2007-08.
4. In the result, Miscellaneous Petition filed by the assessee appeal for asst. year 2007-08 is allowed as indicated above.
Order pronounced in the open court on 4th 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. Registrar, ITAT, Bangalore
M.P No.24/B/17
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