Income Tax Appellate Tribunal - Mumbai
Ravi Real Estate Developers P.Ltd, ... vs Ito 9(3)(4), Mumbai on 18 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "F", MUMBAI
BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND
SHRI C.N. PRASAD, JUDICIAL MEMBER
ITA NO.1098/MUM/2015 (A.Y: 2003-04)
Ravi Real Estate Developers Pvt. Limited, v. ITO 9 (3) (4)
Laxmi Palace, 76, Mathurdas Road Mumbai
Kandiwali West
Mumbai - 67
PAN : AAACR 2191 Q
(Appellant) (Respondent)
Assessee by : Shri Naresh Jain
Department by : Ms. Pooja Swaroop
Date of Hearing : 22.06.2017
Date of Pronouncement : 18.08.2017
ORDER
PER C.N. PRASAD (JM)
1. This appeal is filed by the assessee against the order of the Commissioner of Income-tax (Appeals)-21, Mumbai in sustaining the penalty levied u/s 271(1)(c) of the Act. Assessee in its appeal raised additional ground of appeal as under: -
"that the Ld. AO erred in law in issuing notice U/s 274 without mentioning the limb of section 271 under which penalty is proposed to be levied, and as such, the notice issued without application of mind is bad in law and liable to be quashed and that the proceedings are void-ab-initio."2
ITA NO.1098/MUM/2015 (A.Y: 2003-04) Ravi Real Estate Developers Pvt Ltd.
2. Learned Counsel for the assessee submits that additional ground raised is purely a legal ground and goes root of the matter as to the jurisdiction of the Assessing Officer to levy penalty itself, therefore should be admitted. He placed reliance on the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [229 ITR 383] in support of his contention. The Ld.DR strongly objected for admission of the additional ground.
3. On hearing the both the parties we admit the additional ground filed by the assessee since the very jurisdiction of the Assessing Officer in levying the penalty is questioned.
4. The Learned Counsel for the assessee submits that there is non- application of mind by the Assessing Officer in initiating the penalty proceedings against the assessee. He submits that the Assessing Officer is not clear in his mind against which charge he is imposing penalty. Therefore, he submits that in the absence of any specific charge/non striking of the limb in the penalty notice the Assessing Officer failed to specify the charge being made against the assessee u/s 271(1)(c) of the Act. The Learned Counsel for the assessee strongly placed reliance on the decision of the Coordinate Bench of this Tribunal in the case of Meherjee Cassinath Holdings Private Limited v. ACIT in ITA.No.2555/Mum/2012 dated 28.04.2017, wherein the Coordinate Bench after considering the decisions of various Coordinate Benches of the Tribunal, the decisions of the Karnataka High Court in the case of M/s. SSA's emerald Meadows, Manjunatha Cotton and Ginning Factory & 3 ITA NO.1098/MUM/2015 (A.Y: 2003-04) Ravi Real Estate Developers Pvt Ltd.
Others, the decision of the Apex Court in the case of Dilip N. Shroff and recent decision of the Bombay High Court in the case of Samson Perinchery, the Coordinate Bench held that non striking of the relevant clause in the notice clearly brings out the diffidence on the part of the Assessing Officer, there is no clear and crystalized charge being conveyed to the assessee u/s 271(1)(c) and therefore no penalty could be imposed u/s 271(1)(c) of the Act. Ld.DR vehemently supported the orders of the authorities below.
5. Ld.DR vehemently supported the orders of the authorities below.
Further a detailed submission was made by the Ld.DR in support of her contentions that satisfaction has been properly recorded for initiation of penalty proceedings and various case laws have been relied upon in support of her contentions that the Assessing Officer has levied penalty with the authority and there is no defect in the notice issued u/s 271(1)(c) of the Act and in any case the defect is curable under 292B of the Act.
6. We have heard the rival submissions perused the orders of the authorities below. We have perused the penalty notice issued u/s 274 r/w 271(1)(c) and also the Assessment Order passed u/s 143(3) of the Act.
It is abundantly clear from these that the Assessing Officer failed to strike of the relevant limb in initiating the penalty proceedings, charge is not made clear. Similar situation was considered by the Coordinate Bench in the case of Meherjee Cassinath Holdings Private Limited v. ACIT (supra) and the implication of non-striking of the relevant portion of the notice and 4 ITA NO.1098/MUM/2015 (A.Y: 2003-04) Ravi Real Estate Developers Pvt Ltd.
not specifying the charge while imposing the penalty u/s 271(1)(c). It was held that if there is no specific charge mentioned by the Assessing Officer for imposing of penalty, the penalty cannot be sustained. While holding so the Coordinate Bench 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 Pal, 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 5 ITA NO.1098/MUM/2015 (A.Y: 2003-04) Ravi Real Estate Developers Pvt Ltd.
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):-
"83. It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that thesome postulates that inappropriate words and paragraphs were to be deleted, but the some 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 to Meherjee Cassinath Holdings Pvt. Ltd.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 5CC 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 Id. 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 Id. 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-
6ITA NO.1098/MUM/2015 (A.Y: 2003-04) Ravi Real Estate Developers Pvt Ltd.
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 Id. 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 the Hon'ble Bombay High Court also in the case of Shri Samson Perinchery, ITA Nos. 1154, 953,1097 & 1126 of 2014 dated 5.1 .2017(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 Id. 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 (Born.) 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 Id. CIT-DR and find that a similar issue had come up before our coordinate Bench in the case of Dr. Santa Milimd 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 Dump N. Shroff (supra) and Dharrnendra Textile Processors, 306 1TR 277 (SC) deduced as under :-
''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 AD at the time of issuing notice. In the case of Lakhdir Lalji (supra), the AD 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 lyer 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 AD did not specify the charge for which penalty proceedings were initiated and further he has issued a notice meant for calling the 7 ITA NO.1098/MUM/2015 (A.Y: 2003-04) Ravi Real Estate Developers Pvt Ltd.
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 AD, in our view, clearly show that the AD 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 AD 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 AD 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. Santa Milind Davare (supra), we hereby reject the aforesaid argument of the Id. 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 8 ITA NO.1098/MUM/2015 (A.Y: 2003-04) Ravi Real Estate Developers Pvt Ltd.
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 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. We hold so. Since the penalty has been deleted on the preliminary point, the other arguments raised by the appellant are not being dealt with.
7. We have also gone through the submissions made by the Ld.DR and find to have no much relevance to the contentions raised by the assessee, except the decisions referred to by the Ld.DR in the case of CIT v. Manjunath Cotton and Ginning Factory [359 ITR 565]; CIT v Smt. Kaushalya & others [216 ITR 660(Bom)]. These decisions have been considered by the Coordinate Bench in the case of Meherjee Cassinath Holdings Private Limited (supra). Therefore, we respectfully following the said decision of the Coordinate Bench hold that non-striking of one of the 9 ITA NO.1098/MUM/2015 (A.Y: 2003-04) Ravi Real Estate Developers Pvt Ltd.
limbs in the notice suffers from vice of non-application of the mind having regard to the ratio of the decision of the Hon'ble Supreme Court in the case of the Dilip N. Shroff (supra) and Bombay High Court in the case of Samson Perinchery (supra). Thus we delete the penalty levied u/s.
271(1)(c) of the Act on the preliminary point. The other arguments on merits raised by the Learned Counsel for the assessee are not being dealt with.
8. In the result the appeal of the assessee is allowed.
Order pronounced in the open court on the 18th August, 2017.
Sd/- Sd/-
(RAJENDRA) (C.N. PRASAD)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai / Dated 18/08/2017
VSSGB, SPS
Copy of the Order forwarded to:
1. The Appellant
2. The Respondent.
3. The CIT(A), Mumbai.
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.
//True Copy//
BY ORDER,
(Asstt. Registrar)
ITAT, Mum