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Income Tax Appellate Tribunal, DIVISION BENCH, JODHPUR
Before: SHRI N.K. SAINI & SHRI SANDEEP GOSAIN
IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, JODHPUR
BEFORE SHRI N.K. SAINI, VICE PRESIDENT AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA Nos. 364 to 366/Jodh/2019 Assessment Years: 2010-11 to 2012-13
M/s Banarsi Marble Stone Pvt. Ltd. Vs. Asst. CIT SP2, Udyog Vihar Central Cirle-1 Udaipur(Raj.) Sukher Udaipur(Raj.)
PAN/ TAN No. AACCS1969D
(Appellant) (Respondent) Assessee by : Smt. Raksha Birla, CA Shri Rajendra Jain, Advocate Department by: Shri Girish Mehta, JCIT DR
Date of hearing : 28/11/2019 Date of Pronouncement : 28/11/2019 O R D E R PER N.K. SAINI, VICE PRESIDENT:
These appeals by the assessee are directed against the common order dt. 23/07/2019 of Ld. CIT(A)-2 Udaipur.
Since the issue involved is common in all these appeals which were heard together, so these are being disposed off by this consolidated order for the sake of convenience and brevity.
At the first instance, we will deal with the appeal in ITA No. 364/Jodh/2019 for the A.Y. 2010-11 wherein assessee has raised the following grounds:
That on the facts and in the circumstances of the case, the Ld. CIT(A)-2, Udaipur has erred in confirming the penalty of Rs. 15,83,190/- under section 271(1)(c) of the Act. 2. That the petitioner may kindly be permitted to raise any additional or alternative grounds at or before the time of hearing. 3. The petitioner prays for justice & relief.
3.1 From the aforesaid grounds it would be clear that the only grievance of the assessee relates to the confirmation of penalty levied by the AO amounting to Rs. 15,83,190/- under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’).
Facts of the case in brief are that the assessee e-filed its return of income on 27/09/2010 declaring total income of Rs. 43,84,904/-. However the assessment was framed at an income of Rs. 95,08,500/- vide order dt. 30/03/2015 passed by the AO under section 144 r.w.s 147 of the Act. The AO during the course of assessment proceedings noticed that the assessee received license premium of Rs. 51,23,590/- for the year under consideration from Maharaja Group of Companies and same was unaccounted. He made the addition and initiated the penalty proceedings under section 271(1)(c) of the Act for furnishing of inaccurate particulars of income. According to the AO the assessee completely failed to explain the transactions with regular books of account and had not furnished the ledger account alongwith vouchers for verification. Therefore, unrecorded and unverified transaction of income amounting to Rs. 51,23,590/- in form of license premium was brought to tax in the hands of the assessee as an income from "undisclosed sources". The AO levied the penalty of Rs. 15,83,190/- under section 271(1)(c) of the Act.
Being aggrieved the assessee carried the matter to the Ld. CIT(A) and submitted that as the penal provisions have held to be strictly construed, the notice issued u/s 274 of the Act should satisfy the grounds which the AO has to meet specifically. It was further stated that in the notice issued under section 274 r.ws. 271(1)(c) of the Act to the assessee, no specific charge was mentioned and it was not clear as to whether the penalty proceedings were initiated for concealment of income or for furnishing of inaccurate particulars of income which shows that the AO himself was not sure. The reliance was placed on the following case laws:
• CIT Vs. Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565 (Kar) • H. Lakshminarayana Vs. ITO, IT Appeals Nos. 992-996(Bang) of 2014 • CIT Vs. Jyoti Ltd. ]2013] 34 taxmann.com 65 • DCIT Vs. B.J.D Paper products [2012] 17 taxmann.comj 11 (Luck) • DCIT Vs. Nepa Limited. ITA No. 683/Indore/2013 • Hafeez contractor vs. ACIT, ITA No. 6222/2013 (Mumbai) • Suvaprasanna B Vs. ACIT, ITA No. 1303/Kol/2010
• Sanjog T. Lodha Vs. ITO, ITA No. 688/PN/2014 etc.
5.1 It was further submitted that Explanation 1 to Section 271(1)(c) did not make the assessment order as conclusive evidence that the amount assessed was in fact the income of the assessee and even the assessee gave the explanation which was not proved but also not disproved i.e; it was not accepted but circumstances did not lead to the reasonable and positive inference that the assessee's case was false and that there was no positive material to show that the amount in question was the income of the assessee.
Ld. CIT(A) after considered the submissions of the assessee observed that there was no existing legal challenge to the assessment order in any form therefore the addition to the income of the assessee on account of undisclosed license premium received in cash had attended the finality, therefore, there was concealment of income on account of undisclosed license premium received in cash. Accordingly the levy of penalty under section 271(1)(c) of the Act for concealment of income on undisclosed license premium received in cash was confirmed.
Now the assessee is in appeal.
Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the AO did not specified under which limb the penalty was levied i.e; it was not specified in the notice issued under section 274 r.w.s 271(1)(c) of the Act,(copy of which is placed at page no. 1 of the assessee's compilation) that as to whether there was concealment of income or furnishing of inaccurate particulars of income, and in the absence of specific charge in the penalty notice under section 274 of the Act, the penalty under section 271(1)(c) may not be levied. Reliance was placed on the following decision of the ITAT Jodhpur Bench:
• Shri Shiv Singh Chouhan Vs ACIT in ITA No. 23/Jodh/2019 dt. 07/05/2019
• Shri Manoj Singhvi V/s DCIT, Central Circle-2 in ITA No. 391/Jodh/2017 dt. 03/05/2019
• Shri Deepak Sheshrao Bakde Vs. ITO in ITA No. 43/Jodh/2019 dt. 03/05/2019
We have considered the submissions of both the parties and perused the material available on the record. In the present case, from the notice under section 274 r.w.s 271(1)(c) of the Act dt. 31/08/2015 it is clear that the AO had not specified the charge for which the penalty was initiated under section 271(1)(c) of the Act the said notice placed at page no. 1 of the assessee's compilation read as under:
To, The Director, M/s Shree Banarsi Marble Stone Pvt. Ltd. SP-2, Udyog Vihar, Sukher, Udaipur PAN: AACCS1969D
Sir, Please refer to this office notice dated 30.03.2015 issued u/s. 274 read with section 271(l)(c) of the Income-Tax Act 1961 for A.Y. 2010-11 Whereas in the course of proceedings for above referred A.Y., it appears that you have without reasonable cause concealed the particulars of your income and I or furnished inaccurate particulars of your income. 2. In the case, you have preferred an appeal against the relevant order of assessment and then you are requested to furnish the copy of relevant appeal memo, grounds of appeal with evidence of date of filing of the appeal to this office. 3. In the above matter, one more opportunity is being given to you. Therefore you are requested to submit your explanations on 08.09.2015 in writing in my office at the above address.
Yours faithfully,
Sd/- (D.Khandelwal) Asstt. Commissioner of Income-Tax, Central Circle-1, Udaipur
The similar issue having identical facts has been decided by this bench of the Tribunal in case of Shri Deepak Sheshrao Bakde Vs. ITO in ITA No. 43/Jodh/2019 dt. 03/05/2019 and the relevant findings has been given in para 6 to 6.3 read as under: 6. Now coming to the merits of the case. In the instant case, the A.O. initiated the penalty proceedings under section 271(l)(c) of the Act for ‘furnished inaccurate particulars of income’ and thereafter issued the notice u/s 274 without specifying the limb of the penalty imposable and finally imposed penalty for furnished inaccurate particulars of income. Therefore the question emerges as to whether penalty is sustainable, under the facts wherein the notice is not clear and/or issued without specifying the limb of charge.
6.1 Hon'ble Apex Court vide judgment in case of M/s. SSA's Emerald Meadows, (2016) 73 taxmann.com 248(SC) dismissed the Special Leave Petition filed by the Revenue against the judgment rendered by Hon'ble High Court of Karnataka whereby identical issue was decided in favour of the assessee. Operative part of the judgment in case of M/s. SSA’s Emerald Meadows (supra) decided by Hon'ble High Court of Karnataka is reproduced below "2. This appeal has been filed raising the following substantial questions of law:
(1) Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case?
(2 Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in. holding that the penalty notice under Section 274 r.w.s. 271(l)(c) is hud in law and. invalid inspite the amendment of Section 271(1 B) with retrospective effect and by virtue of the amendment, the assessing officer has initiated the penalty by properly recording the satisfaction for the same?
(3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in deciding the appeals against the Revenue on the basis of notice issued, under Section 274 without taking into consideration the assessment order when the assessing officer has specified that the assessee has concealed particulars of income?
The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(l)(c) of the Income Tax Act, 1961 (for short 'the Act') to be bad in law as it did not specify which limb of Section 271(l)(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. . The Tribunal, while allowing the appeal of the assessee, has relied 01 the derision of the Division Bench of this Court rendered In the case of COMMISSIONER, or INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR565. .
In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court, the appeal is accordingly dismissed."
6.2 penalty provisions of section 271(l)(c) of the Act are trie re the assessee has concealed the particulars of income fered inaccurate particulars of such income. It is also a well- Uc.-epted proposition that the aforesaid two limbs of section 271(l)(c) of the Act carry different meanings. Therefore, it is imperative for the Assessing Officer to strike - off the irrelevant limb so as to make the assessee aware as to what is the charge made against him so that he can respond accordingly.
The Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Kar) observed that the levy of penalty has to be clear as to the limb under which it is being levied. As per Hon’ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon’ble High Court held that the standard proforma of notice under section 274 of the Act without striking off the irrelevant clauses would lead to an inference of non-application of mind by the Assessing Officer. The Hon’ble Supreme Court in the case of Dilip N. Shroff vs. JOT, 291 ITR 519(SC) has also noticed that where the Assessing Officer issues notice under section 274 of the Act in the standard proforma and the inappropriate words are not deleted, the same would postulate that the Assessing Officer was not sure as to whether he was to proceed on the basis that the assessee had concealed the particulars of his income or furnished inaccurate particulars of income. According to the Hon'ble Supreme Court, in such a situation, levy of penalty suffers from non-application of mind. 6.3 In the instant case, from the notice dated 22-01-2014 issued u/s 274 of the Act, it is clear that the Assessing Officer initiated the penalty proceedings by issuing the notice u/s 274/271(l)(c) of the Act without specifying as to whether the assessee has concealed "particulars of income" or assessee has furnished "inaccurate particulars of income", and without striking off the irrelevant words so as to provide adequate opportunity to the assessee to explain the show cause notice, which in our considered view, amounts to non-application of mind because while issuing the notice dated 22-01-2014 u/s 274 of the Act, the A.O. was not clear under which limb, the assessee was supposed to reply and defend its case and under which limb the penalty was supposed to be levied, hence the penalty becomes unsustainable, therefore we have no hesitation to delete the penalty levied by the AO and affirmed by the Ld. CIT (A).
So respectfully following the foresaid referred to order the impugned penalty under section 271(1)(c) of the Act, levied by the AO and sustained by the Ld. CIT(A)is deleted.
The facts and issue involved in ITA No. 365 & 366/Jodh/2019 are similar to the facts and issue involved in ITA No. 364/Jodh/2019 which we have already adjudicated in the former part of this order therefore our findings for the assessment year 2010-11 shall apply mutatis mutandis for the assessment years 2011-12 & 2012- 13.
In the result, appeals of the assessee are allowed.
(Order pronounced in the open Court on 28/11/2019 )
Sd/- Sd/- (SANDEEP GOSAIN) (N.K. SAINI) JUDICIAL MEMBER VICE PRESIDENT Dated : 28/11/2019 AG Copy to: 1.The Appellant, 2. The Respondent, 3. The CIT(A), 4. The CIT, 5. The DR