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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Per CHANDRA POOJARI, AM:
This appeal by the Revenue and the Cross Objection by the assessee are directed
against the order of the CIT(A)-I, Kochi dated 24/10/2016 and pertain to the
assessment year 2011-12.
The Revenue has raised the following grounds of appeal:
It is prayed that the delay of 5 days occurred in filing the appeal on the part of the Revenue due to reasons beyond control may be condoned and the appeal admitted. 2.1 The learned IT(Appeals) erred in applying various case laws to the assessee's case for cancelling the penalty imposed, which are distinguishable from the facts of the assessee's case.
2.2 The learned CIT(Appeals) erred in not appreciating the fact that the assessee had not offered the correct long term capital gains on transfer of equity shares in the original return of income filed by him for A.Y.2011-12 on 30/07/2011.
2.3 The Learned CIT(Appeals) erred in not appreciating the fact that it is only after the Department initiated enquiry against the assessee, the assessee came forward with the correct long term capital gain on transfer of equity shares.
2.4 The learned CIT(Appeals) failed to appreciate that the return filed in response to the notice u/s.148 by the assessee offering the correct long term capital gain on transfer of equity shares was much beyond the due date prescribed u/s, 139(5) and, therefore, the offer of correct income in respect of the said long term capital gain is not voluntary.
2.5 The CIT(Appeals) failed to appreciate that the provisions of Explanation-1 to section 271(1)(c) very well applicable to the assessee's case, since the assessee had furnished inaccurate particulars of its income from long term capital gain on transfer of equity shares by claiming wrong cost of acquisition, for which the assessee had no satisfactory explanation.
I.T.A. No 04/Coch/2017 & C.O. No.09/Coch/2017 2.1. There was a delay of 04 days in filing the appeal by the Revenue before the
Tribunal. The ld. DR submitted that due to administrative reasons, there was delay
in filing the appeal before the Tribunal. Accordingly, he prayed that the delay of 04
days in filing the appeal before the Tribunal may be condoned.
2.2 We have heard the rival submissions and perused the record. We find that
there is good and sufficient cause for belatedly filing the appeal before the Tribunal.
Hence, we condone the delay of four days and admit the appeal.
2.3 The assessee has raised the following grounds in its Cross Objection:
The additional income of Capital Gains has already been disclosed in the original Return of Income field u/s 139(1) by the Assessee on 30/07/2011 for which disclosure was correct - including the transaction itself and the gross amount received on such sale; except for a mistake in the income calculated on the sale of equity shares of the company and there was no concealment
The "reasons to believe" that the incomes in reference had escaped assessment recorded by the Assessing Officer based on which the notice u/s 148 was issued is stated to be in turn based on the letter dated 24/06/2014 of the Respondent before the Commissioner of Income Tax-1, Cochin. This means that even before the assessment proceedings had commenced, the Assessing Officer had no material other than what the Respondent itself had offered to cause any reason to believe that income had escaped assessment. If any such additional material had been obtained from his own inquiries or from those carried out by the DDIT (inv.), Cochin, these should have been brought out by the Assessing Officer clearing in the assessment order and any additional incomes that were found to have escaped assessment and taxation assessed accordingly. Instead, the assessing Officer has focussed on who knew beforehand the matter of escapement of income when he and the DD1T (Inv.) must have focused on reporting first the matter of escapement of income proved to be the direct result of investigations carried out and unassisted by any voluntary action of the Respondent.
I.T.A. No 04/Coch/2017 & C.O. No.09/Coch/2017 3. The Respondent have voluntarily disclosed the income on 24/06/2014 before the Commissioner of Income Tax u/s 273 A(4) before the Assessing Officer issued the notice u/s 148. This offers the Respondent the protection against future action against penalty proceedings. The Section itself reads as follows: "Without prejudice to the power conferred on him by any other provisions of this Act, the Commissioner may, on an application made in this behalf by an assessee, and after recording his reasons for so doing, reduce or waive the amount of any penalty payable by the assessee under this Act, or stay; or compound any proceeding for the recovery of any such amount, if he is satisfied that-
i. to do otherwise would cause genuine hardship to the assessee, having regard to the circumstances of the case; and
ii. the assessee has cooperated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him:
The Hon'ble Commissioner of Income Tax (Appeals) decided that the Respondent has kept his part of the bargain as envisaged in the second leg above. This is obviously with the expectation and understanding that the Respondent will not be so penalized u/s 271 (1)(c )and other provisions of the Act.
The Hon'ble Commissioner of Income Tax (Appeals) decided that the Assessing Officer appears to be making a deliberate and pretentious mountain of the molehill-phraseology employed by the Respondent that he had revised his Return of Income to declare/disclose the escaped incomes. The due date mentioned by the Assessing Officer has no bearing on the instant case, since that relates to a Revised Return filed u/s 139(5) of the Act and not one, as applicable in the instant case, filed in response to a notice issued (by the AO himself, as he was well aware) u/s. 1448 of the Act.
The Assessing Officer has not specifically stated why the judicial citations were inapplicable on the facts of the instant case of the Respondent. Infact, it can be readily seen that all of them have considerable material bearing on the facts of this instant case and are applicable.
In respect of the Return of income filed by the Respondent in response to the Notice u/s 148, it needs to be presumed (although unstated in the impugned assessment order) that the processing being assessment u/s 143(1) has taken place. Any absence or dereliction in the said matter would be a state error committed by the Assessing Officer for which the Respondent cannot be in any manner held responsible.
I.T.A. No 04/Coch/2017 & C.O. No.09/Coch/2017 7. The Hon'ble Commissioner of Income Tax (Appeals) pointed out that it can be readily seen from the case cited that the judicial position is that each case is specific in itself and that under certain circumstances, even if the Return of Income is revised after the survey or other investigative action by the Department, there could not be held to be concealment of income. In the instant case, the voluntariness of the Respondent's action in accepting the escapement of income as well as the cooperation shown by him later by filing the Return of Income as accepted in response to the Assessing Officer's issuance of notice u/s 148 and in the payment of taxes due are material and relevant facts. Consequently, the Hon'ble Commissioner of Income Tax (Appeals) further pointed out that, the Assessing Officer has done, that he has "detected" on his own strength and accord, concealment of income on the part of the Respondent in the instant case is to stretch the factual matrix to breaking point to establish one's own misconceived interpretation of "detection of concealment". This amounts to bending the rope to place one's leg over and across it to claim a nonexistent victory. From all the above, it appears that the Assessing Officer's summary dismissal of the applicability of the case-ratios proffered by the Respondent as above is "ARBITRARY AND WITHOUT REASON AND SMACKS OF PRE-DEC1DED PREJUDICE." This indicates a contrarian disposition, in the face of inconvenient facts, as against principled moral conviction based on facts and law.
The onus was on the Assessing Officer to demonstrate concealment of income or furnishing of inaccurate particulars. Such onus is deemed to be discharged only when the Respondent can be held to have failed to furnish due, substantiated and satisfactory explanation or given false explanation or acted in a mala fide manner. The Assessing Officer is seen to have not raised nor discussed these while imposing the penalty in a mechanical fashion.
Under the facts and circumstances of the case, the Hon'ble Commissioner of Income Tax (Appeals) observed that the action of the Assessing Officer of initiating and levying penalty u/s 271(1)(c) appears to be an excessive step. The enhancement made in the instant case is the result of a factual mistake in the cost adopted in respect of the acquisition of bonus shares even as the gross receipts and the transaction itself were mentioned in the original Return of Income filed u/s 139(1). The Respondent has thereafter walked the extra length and cooperated with the Department by accepting his mistake and the enhancement and by paying all the additional taxes demanded.
The AO has not, as required under law, examined the penalty provisions, which need to be construed narrowly and strictly, with the right and proper amount of judiciousness and seriousness. He hass neither been able to prove that the Respondent has concealed any particulars of his income nor that he has furnished inaccurate particulars of income. The case of the Respondent is simply one where incomes that have escaped assessment have been 5
I.T.A. No 04/Coch/2017 & C.O. No.09/Coch/2017 voluntarily disclosed in a revised (reopened) Return of Income filed and assessed thereupon.
CASE LAWS REFERRED a) CIT Vs, Dr. Kumari .M. Dubey, (1988) 171 1TR 144 (MP) b) CIT Vs. Vedprakash (2004) 269 ITR255 (Punjab & Haryana) c) C1T Vs. Vega Auto Accessories (P) Ltd. (2012) 212 Taxman 95 (Karnataka). d) Mohanlal V. Nakum Vs. C1T (2002) 255 ITR 649 (Bom) e) Radhey Chandrika Prasad vs. CIT (1983) 139 ITR 274 (All.) f) Kakarla Krishnamurthy vs. CIT (1981) 216 ITR 206 (AP) g) Mahalakshmi Rice Mills vs. CIT (1981) 129 ITR 53 (Karn.)
Prayer
The Respondent humbly prays the order issued by the Hon’ble CIT(Appeals- I) deleting the penalty levied u/s. 271(1)(c) may be upheld and assessee may be allowed to live peacefully in old age without any penalty threats/harassments.
The assessee has filed a petition accompanied by an affidavit stating that he
had gone through the back records of the case and on verifying the same and on
personal notice issued under section 274 read with section 271 of the Income Tax
Act, 1961 a glaring illegality had been noticed which disabled my defence to the
same. According to the assessee, the notice suffers from material illegality making
the penalty proceedings initiated by Assessing Officer void ab initio. Therefore, it
was submitted that an additional ground was filed against the impugned penalty
proceedings and appeal filed by the revenue department as follows. It was
submitted that due to his inadvertent omission, the delay caused in filing this
ground of Cross Objection may be condoned.
I.T.A. No 04/Coch/2017 & C.O. No.09/Coch/2017
Additional Ground:
“It is submitted that penalty proceedins initiated by assessing officer under section 274 of the Act read with section 271 is irregular, illegal and void ab initio. The notice which is produced before this Hon’ble Tribunal shows that assessing officer has not struck out irrelevant part of the notice. He has not specified as about the proceedings on account of concealment of particulars of income or furnishing of inaccurate particulars of income. This clearly cuts the very basis of the penalty proceedings and the inherent impropriety of the notice makes the very penalty proceedings in the present case void ab initio. On this regard as well the appeal is liable to be dismissed.”
3.1 Therefore, it was submitted that since the above illegality is glaring from the
records in support of setting aside of penalty proceedings by the lower appellate
authority the above ground is also furnished which may be received on record and
the endorsement as about withdrawing the Cross Objection filed earlier may be
permitted to be withdrawn in the interest of justice.
The assessee has also filed a petition for admission of the additional documents
of appeals as follows:
“For the reasons stated in the accompanying affidavit, it is most humbly prayed that this Hon’ble Tribunal may be pleased to accept on file Annexure A1 as additional document in the above said Income Tax Appeal and Cross objection and may be please to consider the same while disposing the Appeal.”
We have heard the rival submissions and perused the record. We find bona fide
reasons in the act of the assessee in not raising the additional ground on an earlier
occasion by placing reliance on the judgment of the Supreme Court in the case of
National Thermal Power Corporation Ltd. vs. CIT (229 ITR 383) wherein it was held 7
I.T.A. No 04/Coch/2017 & C.O. No.09/Coch/2017 that Tribunal has the discretion to allow or not to allow additional ground to be
raised for the first time before the Tribunal. Accordingly, we admit the additional
ground for adjudication along with the additional documents.
Coming to the merits of the additional ground, the Ld. AR drew our attention to
the notice issued for imposing penalty u/s. 274 of the Act which reads as follows:
NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE INCOME-TAX ACT, 1961
Office of the Additional Commissioner of Income Tax, Corp. Range-1, Ernakulam To Shri Ambady Krishna Menon, Ambady Panthiyil Towers, Warriam Road, Cochin-682 016. Dated the 30/01/2015
Whereas in the course of proceedings before me for the assessment year 2011-12 appears to me that you;-
“Have without reasonable cause failed to furnish me return of income which you were required to furnish by a notice given under section 22(1)/22(2)/34 of the Indian Income Tax Act, 1922 or which you were required to furnish under section 139(1) or by a notice given under section 139(2)/148 of the Income Tax Act, 1961 No…………………dated………….or have without reasonable cause failed to furnish it within the time allowed and the manner required by the said section 139(1) or by such notice.
“Have without reasonable cause failed to comply with a notice under section 22(4)/23(2) of the Income Tax Act, 1922 or under section 142(1)/142(2) of the Income Tax Act, 1961.
“Have concealed the particulars of your income of ………………….or furnished inaccurate particulars of such income”
I.T.A. No 04/Coch/2017 & C.O. No.09/Coch/2017 2. You are hereby requested to appear before me at 2.00 PM on 09/02/2015 and show cause why an order imposing a penalty on you should not be made under section 271 of the Income-tax Act, 1961 . If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative you may show cause in writing on or before the said date which will be considered, before any such order is made under section 271.
sd/- (Income-tax Officer) Corp.Ward-1(1), Kochi
The Ld. AR submitted that the penalty initiated u/s 271(1)(c) was invalid for the
reason that the default for which the penal action was taken has not been specified
in the notice issued. The notice mentioned both the defaults viz. concealment of
income and furnishing of inaccurate particulars of income. it was submitted that the
Assessing Officer had not struck off the irrelevant portion of the penalty notice
which was not applicable to the assessee and does not clearly mention whether he
proposed to levy penalty for concealment of income or furnishing of inaccurate
particulars of income.
The Ld. AR relied on the recent judgments of the Karnataka High Court in the
case of Muninaga Reddy vs. ACIT reported in 396 ITR 398 and in the case of S.
Chandrasekar Vs. ACIT reported in 396 ITR 538 and also that of Telangana &
Andhra Pradesh High Court in the case of Pr.CIT Vs. Smt. Baisetty Revathi reported
in 398 ITR 88. Hence, it was submitted that the penalty levied may be cancelled.
I.T.A. No 04/Coch/2017 & C.O. No.09/Coch/2017 9. The Ld. DR submitted that it was only a technical mistake which was not to be
considered and the appeal should be decided on merit.
We have heard the rival submissions and perused the record. We have
carefully gone through the notice issued u/s. 274 r.w.s. 271 of the Act narrated in
para 4 of this order. As seen from the above notice issued u/s. 274 of the Act, the
Assessing Officer has not struck out the irrelevant portion of the notice. In other
words he has not specified whether he is levying penalty for concealment of
particulars of income or furnishing of inaccurate particulars of income. As held by
the Karnataka High Court in the case of CIT & Anr. vs. M/s. SSA’s Emerald Meadows
(2015) (11) TMI 1620 that the notice issued by the Assessing Officer u/s. 274 r.w.s
271(1)(c) is to be bad in law as it did not specify which limb of section 271(1)(c) of
the Act, the penalty proceedings had been initiated, i.e., whether for concealment of
particulars of income or furnishing of inaccurate particulars of income. This view
was confirmed by the Supreme Court in the same case, i.e., CIT & Anr. vs. M/s.
SSA’s Emerald Meadows reported in (2016) (8) TMI 1145.
In view of the above discussion, we are inclined to hold that the penalty
proceedings initiated by the AO is void ab initio and allow the appeal of the
assessee. Since we have quashed the penalty proceedings itself, we refrain from
adjudicating the other grounds of cross objection/appeal raised by the assessee and
the Revenue.
I.T.A. No 04/Coch/2017 & C.O. No.09/Coch/2017 12. In the result, appeal of the Revenue is dismissed and the Cross Objection filed
by the assessee is allowed. Order pronounced in the open court on 26th August, 2019.
sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER
Place: Kochi Dated: 26th August, 2019 GJ Copy to: 1. Shri Ambady Krishna Menon, Ambady Panthiyil Towers, Warriam Road, Cochin-682 016. 2. The The ITO, Corp. Ward-1(1), Kochi. 3. The Commissioner of Income-tax(Appeals)-I, Kochi. 4. The Pr. Commissioner of Income-tax, Kochi. 5. D.R., I.T.A.T., Cochin Bench, Cochin. 6. Guard File. By Order
(ASSISTANT REGISTRAR) I.T.A.T., Cochin