INCOME TAX OFFICER-12(1)(1), MUMBAI vs. M/S.AMPRO FORMS PRIVATE LIMITED, MUMBAI

O R D E R PER C.N. PRASAD (JM) 1. This appeal is filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals) – 20, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 28.06.2018 for the A.Y. 2009-10.

(A. Y: 2009-10) M/s. Ampro Forms Private Limited u/s. 69C/37(1) on account of bogus purchases and Rs. 4,68,328/- on account of unproved liabilities u/s. 41(1) of the Income Tax Act, 1961, without appreciating the merit of the case and also the fact that the assessee had accepted the quantum addition made in the assessment order?" (2) The appellant prays that the order of the Ld. CIT (A) on the above ground be set aside and that of the Assessing Officer be restored. (3) The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.

“9. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. We begin with the decisions relied on by the Ld. DR. In the case of Smt. Kaushalya & Ors. (supra), the Hon’ble Bombay High Court held: “9. We will first take up the show-cause notice dated March 29, 1972, pertaining to the assessment years 1968-69 and 1969-70. The assessment orders were already made and the reasons for issuing the notice under section 274 read with section 271(1)(c) were recorded by the Income-tax Officer. The assessee fully knew in detail the exact charge of the Department against him. In this background, it could not be said that either there was non- application of mind by the Income-tax Officer or the so-called ambiguous wording in the notice impaired or prejudiced the right of the assessee to reasonable opportunity of being heard. After all, section 274 or any other provision in the Act or the Rules, does not either mandate the giving of notice or its issuance in a particular form. Penalty proceedings are quasi-criminal in nature. Section 274 contains the principle of natural justice of the assessee being heard before levying penalty. Rules of natural justice cannot be imprisoned in any straight-jacket formula. For sustaining a complaint of failure of the principles of natural justice on the ground of absence of opportunity, it has to be established that prejudice is caused to the concerned person by the procedure followed. The issuance of notice is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done. Mere mistake in the language used or mere non-striking of the inaccurate portion cannot by itself invalidate the notice. The entire factual background would fall for consideration in the matter and no one aspect would be decisive. In this context, useful reference may be made to the following observation in the case of CIT v. Mithila Motor's (P.) Ltd. [1984] 149 ITR 751 (Patna) (head note): ‘Under section 274 of the Income-tax Act, 1961, all that is required is that the assessee should be given an opportunity to show cause. No statutory notice has been prescribed in this behalf. Hence, it is sufficient if the assessee was aware of the charges he had to meet and was given an opportunity of being heard. A mistake in the notice would not invalidate penalty proceedings.’ In M/s Maharaj Garage & Co. (supra), the Hon’ble Bombay High Court at para 15 held: “The requirement of section 274 of the Income Tax Act for granting reasonable opportunity of being heard in the matter cannot be stretched to the extent of framing a specific charge of asking the assessee an explanation in respect of the quantum of penalty proposed to be imposed, as has been urged. The assessee was supplied with the findings recorded in the order of re-assessment, which was passed on the same date on which the notice u/s 271(1)(c) was issued, initiating the proceedings of imposing the penalty. The assessee had sufficient notice of the action of imposing penalty. We, therefore, do not find either any jurisdiction error or unjust exercise of power by the authority.”

(A. Y: 2009-10) M/s. Ampro Forms Private Limited In Sky Light Hospitality LLP (supra), the assessee (Sky Light Hospitality LLP) who had taken over on 13.05.2016 and acquired rights and liabilities of M/s Sky Light Hospitality Pvt. Ltd. upon conversion under the Limited Liability Partnership Act, 2008, filed a writ petition impugning notice dated 30.03.2017 issued by the AO u/s 147/148 for the AY 2010-11. The contention of the assessee before the Hon’ble High Court was that notice u/s 147/148 of the Act dated 30.03.2017 was addressed and issued to M/s Sky Light Hospitality Pvt. Ltd., PAN No. AALCS3800N, a company which had ceased to exist and was dissolved on 13.05.2016. It was stated that the said notice issued to a dead juristic person is invalid and void in the eyes of law. Also contentions were raised stating that section 292B was inapplicable. The Hon’ble Delhi High Court held as under: “21. Our attention was drawn to Parashuram Pottery Works Co. Ltd. V. ITO, Circle I, Ward A, Rajkot, (1977) 106 ITR 1 (SC) which records that the Assessing Officer entrusted with the task of calculating and realizing tax should familiarize themselves with the relevant provisions and become well versed with the law on the subject. This is a salutary advice. Indeed, there have been lapses and faults resulting in the present litigation. Notice under Section 147/148 of the Act was issued at the end of the limitation period. Noticeably, Assessment Order for the assessment year 2013-2014 was passed on 31.03.20I6, one year earlier. Second lapse is also apparent. Despite correctly noting the background, notice under Section 147/148 of the Act was not addressed in the correct name and even the PAN Number mentioned was incorrect. Nevertheless, human errors and mistakes cannot and should not nullify proceedings which are otherwise valid and no prejudice had been caused. This is the effect and mandate of Section 292B of the Act.” In Smt. Shantidevi Mahavir Prasad Gupta (supra), the Tribunal held as under: “10. The question before us is not whether the income is of the nature of “notional income” but the question is whether the assessee has filed inaccurate particulars or concealed the true facts. As stated hereinabove, in our humble opinion, the assessee has concealed the true facts thereby filed inaccurate particulars. Therefore, we do not find any error or infirmity in the findings of the Ld. CIT(A). The penalty u/s. 271(1)(c) is leviable on the facts of the case. The reliance on the decision of the Tribunal is clearly distinguishable on the facts. We, accordingly confirm the levy of penalty u/s. 271(1)(c) of the Act.” In Ms. Laudres Austin (supra), the Tribunal held the following : “In the instant case also we hold that penalty proceedings were initiated properly as there is no defect in the recording of satisfaction by the AO as well there is no defect in the notice issued u/s 271 r.w.s. 274 of the 1961 Act. The decision of Hon’ble Bombay High Court in Samson Perincherry (supra) is concerning the issuance of penalty proceedings under one limb while levying of penalty under another limb of section 271(1)(c) which is no permissible as per ratio of this decision. The Hon’ble Supreme Court in SSA’s Emerald Meadows (supra) while dismissing SLP recorded finding that the Hon’ble Lordships did not find any merit in this petition which means ratio of decision of Hon’ble Karnataka High Court in SSA’s Emerald Meadows in of 2015 stood confirmed. The Hon’ble Karnataka High Court in SSA’s Emerald Meadows has affirmed the ratio of judgment of Manjunatha Cotton and Ginning Factory (supra). We have already seen that Hon’ble Karnataka High Court in Manjunatha Cotton and Ginning (A. Y: 2009-10) M/s. Ampro Forms Private Limited Factory (supra) has affirmed that alternate charge is possible under both the limbs simultaneously.” 9.1 In the instant case, the AO vide his order u/s 143(3) dated 28.12.2011 has initiated the penalty proceedings u/s 271(1)(c) for furnishing inaccurate particulars of income or concealment of income. In the draft penalty order u/s 271(1)(c) dated 24.03.2014, the AO has imposed penalty of Rs.46,59,047/- for concealment of income. Also we find that there is no provision in the Income Tax Act, 1961 for a draft penalty order u/s 271(1)(c) of the Act. 9.2 It would be apposite to refer here to the decision in Dilip N. Shroff v. JCIT (2007) 210 CTR (SC) 228, wherein it has been held : “83. It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same 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 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.

(A. Y: 2009-10) M/s. Ampro Forms Private Limited proceedings initiated are bad in law. Thus, we uphold the order passed by the Ld.CIT(A) and reject the grounds of the Revenue.

Order pronounced in the open court on the 22nd November 2019