INCOME TAX OFFICER, WARD-1, MANDYA vs. MR. ASADULLAH KHAN, MANDYA

Several grounds are raised by revenue in both years but the common issue involved in both these years is regarding deletion of penalty imposed by the AO u/s. 271(1)(c) of IT Act of Rs. 11.25 Lakhs in Assessment Year 2007-08 and Rs. 45.09 Lakhs in Assessment Year 2008-09.

In both the years, the ld. DR of revenue supported the penalty order. It was also submitted by him that not-ticking of relevant limb in the notice issued u/s. 271(1) (c) of IT Act is only a human error and minor mistake which is covered u/s. 292B of the Act and therefore, ld. CIT (A) was not justified in deleting the penalty by following the judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Manjunatha Cotton and Ginning Factory as reported in (2013) 359 ITR 565.

As against this, the ld. AR of assessee supported the order of CIT (A). He also submitted that in Assessment Year 2007-08, the amount of tax effect is & 1882/Bang/2018 Page 2 of 4 only Rs. 11.25 Lakhs and hence, this appeal of revenue is not maintainable because of low tax effect as per CBDT instructions as per Circular No. 3/2018 dated 11.07.2018. He also submitted the copy of notice issued by the AO u/s. 274 r.w.s. 271(1)(c) of IT Act on 26.12.2016 and pointed out that as per this notice, the AO has not specified the allegations as to whether the allegation is regarding concealment of income or furnishing of inaccurate particulars of income. He submitted that under these facts, the judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (supra) is squarely applicable. In the rejoinder, the ld. DR of revenue placed reliance on judgment of Hon’ble Apex Court rendered in the case of Sundaram Finance Ltd. Vs. DCIT as reported in [2018] 99 taxmann.com 152 (SC). He also submitted a copy of the judgment of Hon’ble Madras High Court rendered in the same case as reported in [2018] 93 taxmann.com 250 (Madras).

We have considered the rival submissions. Regarding the appeal of the revenue for Assessment Year 2007-08, we dismiss this appeal of revenue because of low tax effect in view of CBDT instructions as per Circular No. 3/2018 dated 11.07.2018.

Regarding the appeal of the revenue for Assessment Year 2008-09, we find that ld. CIT (A) has decided the issue in favour of the assessee by following the binding judgment of Hon'ble Karnataka High Court rendered in the case of CIT vs. Manjunatha Cotton and Ginning Factory (supra). Before us, the ld. AR of assessee has submitted the copy of notice issued by the AO u/s. 274 r.w.s. 271(1)(c) of IT Act and as per this notice, the AO has not specified regarding his allegation as to whether the allegation is regarding concealment of income or furnishing of inaccurate particulars of income. In the assessment order also, the allegation is not specified. As per the penalty order, this is the allegation of the AO that the assessee has concealed particulars of income and this is not the finding of AO in the penalty order that the assessee is guilty of both i.e. concealment of income and furnishing of inaccurate particulars of income. Now in the light of these facts, we examine the applicability of judgment of Hon’ble Madras High Court rendered in the case of Sundaram Finance Ltd. vs. ACIT (supra) & 1882/Bang/2018 Page 3 of 4 which is confirmed by Hon’ble Apex Court also by dismissing the SLP filed by the assessee. In this case, this is the finding of Hon’ble Madras High Court in para no. 12 of the judgment that the assessee has not only concealed particulars of income but has also furnished inaccurate particulars of income. Hon’ble Madras High Court in this case has duly considered this judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (supra) but it appears that because of this factual finding in that case that assessee was guilty of both i.e. concealment of income and also furnishing of inaccurate particulars of income, there was no occasion to give a finding regarding the applicability of the judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (supra). Moreover, we are bound by the judgment of Hon'ble Karnataka High Court and we cannot follow any other judgment of any other High Court in preference to judgment of Hon'ble Karnataka High Court. Hence we hold that we are not following the judgment of Hon’ble Madras High Court rendered in the case of Sundaram Finance Ltd. vs. ACIT (supra) and since Hon’ble Apex Court has only dismissed the SLP, it cannot be said any ratio was laid down by Hon’ble Apex Court in that case. Hence respectfully following this judgment of Hon'ble Karnataka High Court, we decline to interfere in the order of CIT(A).

In the result, both the appeals filed by the revenue are dismissed. Order pronounced in the open court on the date mentioned on the caption page.