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Income Tax Appellate Tribunal, H BENCH, MUMBAI
ITA Nos. 5648-5651/Mum/2011 Assessment Year 2002-2003 (Assessment Year: 2002-03) Mrs. Madhu H. Gandhi, 802, Citadel, 18-B, L.D. Ruparel Marg, Malabar Hill, Mumbai - 400020 ……………. Appellant [PAN: ADGPG6361H] Vs Dy. Commissioner of Income Tax, Central Circle 1, Aayakar Bhavan, M.K. Road, Mumbai - 400020 ……………. Respondent Appearances For the Appellant/Assessee : Ms. Aarti Sathe, Ms. Aasawari Kadam For the Respondent/Department : Shri Girish Dave, Special Counsel Shri Chetan Kacha Date of conclusion of hearing : 02.12.2022 Date of pronouncement of order : 07.02.2023 O R D E R
Per Rahul Chaudhary, Judicial Member:
This is batch of 4 appeals pertaining to the Assessment Year 2002-03 preferred by four different assessees, namely Mr. Hasmukh I. Gandhi as legal heir of Late Shri Nirav Gandhi, Mr. Hasmukh I Gandhi, Mr. Chintan H. Gandhi and Ms. Madhu H. Gandhi. In all the four appeals the assessee has challenged the order passed by the Learned Commissioner of Income Tax (Appeals)-36, Mumbai [hereinafter referred to as ‗the CIT(A)‘] dismissing the appeal of the assessee against the order levying penalty under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‗the Act‘).
These appeals were heard together as they involved identical issues. Both the sides agreed that since the facts involved all the four appeals are identical be taken as -5651/Mum/2011 Assessment Year 2002-2003 lead matter. Accordingly, we would first take up the appeal arising from order, dated 16.06.2011, passed by the CIT(A) dismissing appeal preferred by Mr. Hasmukh I. Gandhi as legal heir of Late Shri Nirav Gandhi against the order, dated 11.03.2011, levying penalty under Section 271(1)(c) of the Act. (Assessment Year 2002-03)
The Assessee has raised the following grounds of appeal: ―1. The learned CIT(Appeals) has erred in law and on the facts of the case in sustaining the penalty u/s 271(1)(c) Rs. 22,52,856/-―.
4. The Assessee has also raised additional ground vide letter dated 06.03.2018 which read as under: ―1. The learned CIT(Appeals) has erred in law and on the facts of the case in sustaining the order of the assessing officer levying penalty u/s 271(1)(c) without appreciating the fact that the show cause notice issued by the assessing officer is bad in law since the assessing officer not deleted the relevant paras i.e. ―whether the assessee has concealed the particulars of income‖ or ―whether the assessee has furnished inaccurate particulars of income.‖
5. When the appeal was taken up for hearing, the Ld. Authorised Representative for the Assessee, inviting our attention to the additional ground raised by the Assessee, vide letter dated 06.03.2018. With the consent of both the sides we have heard the Ld. Authorised Representative for the Assessee and the Ld. Counsel for the Revenue on the admission of the additional ground as well as on merits.
The Ld. Authorised Representative for the Assessee submitted that the adjudication of the additional ground does not require enquiry into facts which are not already on record and therefore, the same be admitted. She further submitted that the additional -5651/Mum/2011 Assessment Year 2002-2003 ground raised by the Assessee was legal in nature and therefore, the Assessee was permitted to raise this ground as an additional ground in the appeal before the Tribunal.
Opposing the request for admission of the additional ground, the Ld. Counsel for the Revenue, taking us through the chronology of events contained in Note/Synopsis, dated 28.08.2021, submitted that the additional ground has been raised belatedly in March, 2018 after the expiry of almost seven years from the date of filing of the appeal. The Assessee has failed to furnish reasons for such abnormal delay in raising the additional ground. He submitted that if the additional ground is admitted, the same would defeat the very purpose of the limitation prescribed by Section 253 of the Act. He further pointed out that the Assessee had not even enclosed copy of the relevant documents being (a) the notice, dated 30.12.2009, issued under Section 271(1)(c) read with Section 274 of the Act, and (b) the reply filed by the Assessee on 31.01.2011 in response to the show cause notice.
In rejoinder, the Ld. Authorised Representative for the Assessee referred to written response, dated 30.09.2021, to the Note/Synopsis, dated 28.08.2021 filed by Learned Counsel for the Revenue and contended that no limitation was prescribed under the provisions of the Act for raising the additional ground before the Tribunal. In support of her contentions she relied upon the judgment of the Hon‘ble Supreme Court in the case of National Thermal Power Company Ltd. vs. CIT : [1998] 229 ITR 283. She further submitted that first penalty notice, dated 30.12.2009, and reply dated 31.01.2011 filed by the Assessee in response to the second penalty notice, dated 25.01.2011, have been placed on record as Annexure-A and Annexure-B to the written response, -5651/Mum/2011 Assessment Year 2002-2003 dated 30.09.2021, whereas the second notice, dated 25.01.2011 was already on record. In view of the aforesaid, she submitted that the additional ground be admitted. She submitted that on merits the issue raised in the additional ground stands decided in favour of the Assessee by the full bench judgment of the Hon‘ble Bombay High Court in the case of Mohd. Farhan A Shaikh Vs. DCIT, Central Circle-1, Belgaum reported in 434 ITR 1 (Bombay). She also relied upon the judgment of Hon‘ble Karnataka High Court in the case of CIT vs. Manjunath Cotton and Ginning Factory : [2013] 359 ITR 565.
Countering the submissions advanced by the Ld. Authorised Representative for the Assessee on merits, the Ld. Counsel for the Revenue referred to his Note/Synopsis, dated 28.08.2021, and submitted that the Assessing Officer had all along held that the Assessee had concealed particulars of income and therefore, the case of the Assessee is clearly distinguishable on facts from the cases decided on this issue which have been cited on behalf of the Assessee.
We have considered the rival submissions and perused the material on record. It is admitted position that the appeal was filed by the Assessee within limitation. The additional ground has been raised during the pendency of appeal though after a period of almost seven years from the date of filing of the appeal. The additional ground raised
by the Assessee does not require enquiry into new facts which are not already on record. By way of the additional ground the Assessee has challenged the validity of the penalty notice, dated 30.12.2009, and 25.01.2011, on the ground that the same have been issued without deleting or striking off inapplicable part. Thus, the Appellant has not been -5651/Mum/2011 Assessment Year 2002-2003 informed whether penalty proceedings were initiated for furnishing inaccurate particulars of income or for concealment of income. The additional ground raised by the Assessee is based upon the facts contained in the notices issued by the Assessing Officer under Section 271(1)(c) read with Section 274 of the Act. The Hon‘ble Supreme Court has, in the case of National Thermal Power Company Ltd. (supra), observed as under: ―5. Under section 254 of the Income-tax Act, 1961, the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is, thus, expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier.‖
11. In view of the above, we admit the additional ground raised by the Assessee and proceed to adjudicate the same on merit as it challenges the validity of the penalty notices and the consequential penalty order.
Having considered the rival submission and perused the notices dated 30.12.2009, and 25.01.2011 issued under Section 271(1)(c) of the Act read with Section 274 of the Act as well as the penalty order, dated 11.03.2011, we reject the contention advanced by the -5651/Mum/2011 Assessment Year 2002-2003 Ld. Counsel for the Revenue that the facts in the present case are distinguishable from the facts in the case of Mohd. Farhan A Shaikh (supra). In both the cases notices under Section 271(1)(c) read with Section 274 of the Act were omnibus show cause notices issued without deleting or striking off the inapplicable part. Thus, the statutory notices did not provide the ground on which the penalty proceeding was initiated – whether the penalty was sought to be levied for furnishing inaccurate particulars of income or for concealment of income.
In the case Mohd. Farhan A Shaikh Vs. DCIT (supra) the full Bench of the Hon‘ble Bombay High Court has held that a mere defect in the notice - not striking off the irrelevant matter, would vitiate the penalty proceedings. The relevant extract of the aforesaid judgment reads as under: ―Answers: Question No. 1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(1)(c), does a mere defect in the notice—not striking off the irrelevant matter—vitiate the penalty proceedings? 181. It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(1)(c), read with section 274 of IT Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness.‖ (Emphasis supplied) 14. In view of the above, the penalty proceedings stand vitiated on -5651/Mum/2011 Assessment Year 2002-2003 account of defect in the penalty notices, dated 30.12.2009 and 25.01.2011, issued under Section 271(1)(c) read with Section 274 of the Act. Accordingly, penalty order, dated 11.03.2011, passed under Section 271(1)(c) of the Act is set aside as being invalid and without jurisdiction. Thus, the additional ground raised by the Assessee is allowed.
Since the issue raised in the additional ground and facts related thereto in preferred by Mr. Hasmukh I. Gandhi, Mr. Chintan H. Gandhi, and ITA No. 5651/Mum/2011 preferred by Mrs. Madhu H. Gandhi are identical to ITA No. 5648/Mum/2011 above, adopting the reasoning given hereinabove while admitting the additional ground raised in ITA No. 5648/Mum/2011 and allowing the same, the additional grounds raised in ITA No. 5649/Mum/2011, ITA No. 5650/Mum/2011 and ITA No. 5651/Mum/2011 are admitted and allowed.
In result, all the four appeals are allowed.
Order pronounced on 07.02.2023.