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Income Tax Appellate Tribunal, DELHI BENCH ‘B’: NEW DELHI
Before: SHRI PRASHANT MAHARISHI & SHRI K.NARASIMHA CHARY
ORDER PER K. NARASIMHA CHARY, JM
Challenging the order dated 03/12/2014 in appeal No. 183/13- 14/MZR passed by the learned Commissioner of Income Tax (Appeals)- Muzaffarnagar (“Ld. CIT(A)”), for assessment year 2010-11, Doon Valley Roller Flour Mills Ltd. (“the assessee”), preferred this appeal.
Brief facts of the case are that, for the assessment year 2010-11, the assessee filed the return of income on 13/10/2010 declaring income of Rs.1,33,13,580/-. During the course of assessment proceedings, learned Assessing Officer noticed that the assessee had sold the factory and agricultural land and for the purpose of calculation of capital gain the sale consideration of land, building, Plant and Machinery was taken by the assessee at Rs.1.2 crores by assuming the sale as “slump sale”, whereas the value for the purpose of stamp duty under section 50 C of the Income Tax Act, 1961 (for short “the Act”) was shown at Rs.1,93,16,000/-. When asked to justify the slump sale and explain as to why the sale consideration for the sale of factory shall not be taken at Rs.1,93,16,000/-as per the provisions of section 50C of the Act, the assessee replied that after going through all the legal positions and facts, the assessee revised the computation of income by ignoring the claim of slump sale and showing long term capital gains on the sale of factory land after taking the sale consideration as per section 50C of the Act and short-term capital gain on sale of factory building and machinery under section 50C and also paid the balance amount of tax/interest.
On this, the Assessing Officer was of the opinion that the assessee had revised the computation of income after detecting the concealment by the Revenue and therefore the assessee had concealed the particulars of its income and furnished inaccurate particulars thereof. Learned Assessing Officer accordingly initiated proceedings under section 271(1)(c) of the Act. In the penalty proceedings, the assessee submitted that they were under the bona fide belief that the case of the assessee was covered under the provisions relating to slump sale, the prescribed auditor’s report was also furnished for the claim of slump sale and, therefore, the assessee did not furnish any inaccurate particulars of income.Assessee further submitted that they have withdrawn the claim of slump sale by reducing revised computation of income voluntarily and without deduction, and therefore, provisions under section 271(1)( c ) of the Act are not applicable to the case of the assessee.
Learned Assessing Officer, however, did not agree with the assessee and proceeded to return a finding that the assessee had revised computation of income only after detecting the concealment by the Department and therefore, the assessee is guilty of concealing the income and thereby furnishing the inaccurate particulars thereof. He, therefore, by order dated 24/9/2013 levied penalty of Rs.9,96,000/-for furnishing inaccurate particulars of its income and also concealing the particulars of income.
Aggrieved by the levy of penalty, assessee preferred appeal before the Ld. CIT(A) and submitted that during the year, the assessee sold all the fixed assets in lump sum sale for Rs.1.2 crores and offered the same to tax under the head ‘capital gain’ under section 50B of the Act as per the certificate in form No. 3CEA issued by the auditor and enclosed the same to the return of income but when the Assessing Officer issued show cause notice, to avoid the unwanted litigation with the Department, assessee gave up its claim of slump sale and filed the revised computation of income as per the provisions of section 50C of the Act, which was considered by the learned Assessing Officer to complete the assessment. Assessee placed reliance on the decision of the Hon’ble Apex Court in the case of CIT vs. Reliance Petro Products Private Limited (2010) 322 ITR 158 and also in the case of Price Waterhouse Coopers Private Limitedvs. CIT 348 ITR 306 in support of its contention that merely because the assessee had claimed slump sale basing on the auditors certificate in form 3CEA, which they gave up in order to purchase peaceand to avoid unwanted litigation,the assessee cannot be charged with furnishing of inaccurate particulars of income. Ld. CIT(A), however, did not concede the plea taken by the assessee and holding that the addition was made in this case on Long Term Capital Gain (LTCG) after detection by the Department and the assessee failedto furnish true particulars, upheld the levy of penalty and dismissed the appeal.
Assessee is, therefore, before us in this appeal contending in the grounds of appeal
thatthe authorities are not clear while recording penalty being imposed on concealment of income or furnishing of inaccurate particulars of income and therefore the levy of penalty is illegal; that the additions/disallowances only because of technical reason and difference of opinion, which cannot be treated as concealment of income or furnishing of inaccurate particulars in terms of section 271(1)(c) of the Act and, as a matter of fact, there is neither concealment of particulars of income nor furnishing of inaccurate particulars thereof. It is further stated in the grounds of appeal that the addition made on account of difference between the slump sale claimed and that of the learned Assessing Officer as per section 50C of the Act cannot be treated as concealment of income or furnishing of inaccurate particulars inasmuch as the assessee claimed slump sale under section 50B of the Act on the basis of technical opinion of counsel whereas the assessing officer has computed the sale of the basis of section 50. C of the Act and it is only to avoid unwanted litigation and to by mental peace, the assessee had accepted the view of the Assessing Officer but the fact remains that there was slump sale at Rs.1.2 crores.
When the matter is called, however, neither the assessee nor any authorised representative entered appearance. It could be seen from the record that the notice sent to the address given in form No. 36 is returned with the endorsement of the postal servant that there is no such addressee in the given address. If the assessee is available in such address, such notice should have been served on the assessee. If for any reason, the assessee is not available there, it is for the assessee to make arrangements for service of such notice by furnishing the address where the assessee would be available, or to deliver it to some authorised person, or by making request to the postal department to detain the mail till the assessee claims the same. Since the assessee does not seem to have adopted any of these methods, we are the considered opinion that no time could be granted. Basing on the record we shall proceed to hear the counsel for Revenue and decide the matter on merits.
Ld. DR placed reliance on the orders of the authorities below and submitted that the assessee revised the return of income only after the Department detected the concealment of income and therefore the authorities are justified in levying the penalty. According to him the concealment of income amounts to the furnishing of inaccurate particulars also.
We have gone through the record in the light of the submissions made by the Ld. DR. It could be seen from the record that from the beginning the assessee maintained that they sold all their fixed assets including land, building, Plant and Machinery etc at Rs. 1.2 crores and basing on the certificate in form No.3CEA issued by the auditor, they were labouring under the bona fide belief that the case is covered under the provisions relating to slump sale, but the moment the learned Assessing Officer questioned the same, in order to purchase peace and to avoid litigation, they revised the return of income giving up the claim of slump sale and offering to tax the amount covered by the value of the stamp duty under section 50C of the Act.
Penalty order does not reveal that the learned Assessing Officer undertake any new material that was suppressed by the assessee, pursuant to which the detection of concealment of income was found. It’s not the case of the Revenue that the assessee did not reveal the auditor’s report or their claim of slump sale under section 50B of the Act. Further it could be seen that except the valuation covered by the stamp duty, there is nothing on record to show that the value of the slump sale was not Rs.1.2 crores. Even according to the penalty order, immediately on the learned Assessing Officer issuing show cause notice, the assessee gave up the claim of slump sale and by way of revised computation of income accepted the opinion of the learned Assessing Officer and paid the taxes thereon with interest.
Now the question is whether this amounts to either concealment of income or furnishing of inaccurate particulars thereof.In this context we would like to refer to the decision of the jurisdictional High Court rendered inthe case of CIT vs. DCM Limited(2013) 359 ITR 0101 (Delhi), wherein the Hon’ble High Court of Delhi held that law does not bar or prohibit an assessee for making a claim, which he believes may be accepted or is plausible; that when such a claim is made during the course of regular or scrutiny assessment, liberal view is required to be taken as necessarily the claim is bound to be carefully scrutinized both on facts and in law; that full probe and appraisal is natural and normal; that threat of penalty cannot become a gag and/or haunt an assessee for making a claim which may be erroneous or wrong, when it is made during the course of the assessment proceedings; that normally, penalty proceedings in such cases should not be initiated unless there are valid or good grounds to show that factual concealment has been made or inaccurate particulars on facts were provided in the computation. Law does not bar or prohibit a person from making a claim, when he knows the matter is going to be examined by the Assessing Officer.
In CIT vs Reliance Petroproducts Pvt Ltd[2010] 322 ITR 158 Hon’ble Apex Courtheld that when the assessee preferred a claim, it was up to the authorities to accept its claim in the Return or not, but merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not attract the penalty under Section 271(1 )(c). It was further held that if the contention of the Revenue is accepted, then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c) and that is clearly not the intendment of the Legislature.
Further, in the grounds of appeal the assessee questioned as to under which limb of section 271(1)( c ) of the Act the penalty was levied, whether it was for concealment of income or furnishing of inaccurate particulars thereof. On this aspect, in the case of CIT vs Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Kar), vide paragraph 60, the Hon’ble Karnataka High Court has held as follows :-
“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 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 called 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.”
In Commissioner of Income Tax v. SSA’s Emerald Meadows (2016) 73 taxman.com 241 (Kar) the Hon’ble Karnataka High Court Considered the question of law as to,-
“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?”
And the Hon’be High Court answered the same in favour of the assessee observing that:
“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(1)(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(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. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of Commissioner of Income Tax -Vs- Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565. 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.”
The Special Leave Petition filed by the Revenue challenging the aforesaid judgement of the High Court was dismissed by the Hon’ble Supreme Court holding :
“We do not find any merit in this petition. The special leave petition is, accordingly, dismissed.”
In PCIT vs. Sahara India Life Insurance Company Limited case, and batch, order dated 02/08/2019, Hon’ble Delhi High Court, upheld the view taken by the Tribunal basing on the decision of the Hon’ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra) and SSA’s Emerald Meadows (supra) wherein it was held that the notice issued by the learned Assessing Officer would be bad in law if it did not specify under 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 for furnishing of inaccurate particulars thereof. Relevant observations of the Hon’ble High Court read that,- “21. The Respondent had challenging the upholding of the penalty imposed under section 271(1)(c) of the Act, which was accepted by the ITAT. It followed the decision of Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar) and observed that the notice issued by the AO would be bad in law if it did not specify which limb of Section 271(1)(c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. The Karnataka High Court had followed the above judgement in the subsequent order in Commissioner of Income Tax v. SSA’s Emerald Meadows (2016) 73 taxman.com 241 (Kar), the appeal against which was dismissed by the Supreme Court of India in SLP No. 11485 of 2016 by order dated 5th August, 2016.
On this issue again this court is unable to find any error having been committed by the ITAT.”
The penalty order does not clearly specify under which limb of section 271(1)(c) of the Act, the penalty was levied. So also, the impugned order by the Ld. CIT(A) also not clear on that aspect. For these reasons, viewing from any angle, we are of the considered opinion that penalty cannot be sustained and the same is liable to be deleted. We accordingly direct for its deletion.
In the result appeal of the assessee is allowed. Order pronounced in the Open Court on 20th January, 2020.