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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, JM & SHRI MANOJ KUMAR AGGARWAL, AM
Assessee by : Shri Aliasgar Rampurwala – Ld. AR Department by : Shri Abhi Rama Kartikeyan-Ld.DR सुनवाईक�तार�ख/ : 08/05/2019 Date of Hearing घोषणाक�तार�ख / : 06/06/2019 Date of Pronouncement आदेश / O R D E R Per Manoj Kumar Aggarwal (Accountant Member):-
1. 1. Aforesaid appeal by assessee for Assessment Year [AY] 2012-13 contest confirmation of certain penalty u/s 271(1)(C) by Ld. Commissioner of Income Tax (Appeals)-21 Mumbai [CIT(A)] vide Appeal No. CIT(A)- 10/DCIT-5(1)(2)/382/2015-16 order dated 27/02/2017.
2. The registry has noted a delay of 17 days in filing of the present appeal, the condonation of which has been sought by the assessee on the strength of condonation petition dated 05/10/2018. It has been submitted that all the directors of the assessee company were disqualified under the Companies Act, 2013 to act as directors with effect from 29/10/2016 and the new directors were appointed only on 05/06/2017 which led to the delay in filing of the present appeal. The time period to file the appeal before Tribunal expired on 02/06/2017 and therefore, no director was available to sign the appeal documents. In support, an affidavit of the director of the assessee company affirming the above facts has been placed on record. The Ld. DR opposed the condonation of delay. Keeping in view the principle of natural justice and ratio of decision of Honorable Supreme Court rendered in Hon’ble Apex Court in 167 ITR 471 (SC) Collector, Land Acquisition Vs. Katiji, the bench formed an opinion that the delay was to be condoned. Accordingly, we proceed to dispose-off the appeal on merits.
Facts leading to the imposition of penalty are that the assessee has been assessed for impugned AY u/s 143(3) on 26/02/2015 wherein the assessee was, inter-alia, saddled with following quantum additions: - No. Head of Addition Amount (Rs.) 1. Provision for Annual Leave & PF contribution 24,62,586/- 2. Provision for Doubtful Debts 52,12,993/- The amount of Rs.24,62,586/- was disallowed, the same being contingent liability. The second addition has been made since the assessee could not adduce any evidence to demonstrate that the debts became bad during the year. Accordingly, penalty proceedings were initiated u/s 271(1)(c) against both additions for furnishing of inaccurate particulars of income. It has been submitted that the additions were accepted by the assessee and no further appeal has been preferred against the same. 4.1 During penalty proceedings, a show cause notice u/s 274 r.w.s 271(1)(c) was issued to the assessee on 26/02/2015 directing to assessee to defend the same. The assessee, vide reply dated 19/03/2015, inter-alia, submitted that the aforesaid notice did not specify the exact charge viz. concealing the particulars of income or furnishing of inaccurate particulars of income, for which the penalty was being initiated against the assessee and therefore, the notice was bad in law. Reliance was placed on the decision of Hon’ble Karnataka High Court rendered in CIT Vs. Manjunatha Cotton & Ginning Factory & Others [359 ITR 565] and Ld. AO was requested to drop the penalty proceedings. On merits, it was submitted that the assessee had filed return of income based on unaudited financial statements. During the assessment proceedings, the assessee submitted audited financial statements and suo-moto revised its computation of income by disallowing the aforesaid expenditure. Therefore, there was full disclosure and the additions were made as per assessee’s own submissions and hence, the penalty was not justified. However, rejecting the same, Ld. AO imposed a penalty of Rs.26,08,930/- vide penalty order dated 27/08/2015 by invoking Explanation-1 to Section 271(1)(c) by observing that the assessee has concealed its particulars of income. 4.2 Aggrieved, the assessee reiterated the submissions before Ld. first appellate authority. On legal grounds, the Ld. first appellate authority opined that the notice could not be held to be invalid simply on technical ground that the relevant default / ground was not ticked or struck off. It was also held that Section 271(1)(c) was charging section whereas Section 274 was procedural one which envisages nothing more than giving of reasonable opportunity of being heard and therefore ticking of the ground in the notice was not essential. Reliance was placed on the decision of Hon’ble Bombay High Court rendered in CIT Vs. Smt. Kaushalya 216 ITR 660. In this background, the impugned penalty was confirmed on legal grounds as well as on merits. Aggrieved, the assessee is in further appeal before us.
The Ld. Authorised Representative for assessee [AR] assailed the penalty proceedings on legal grounds by drawing our attention to the following judicial pronouncements. No. Case Law Judicial Authority Citation 1. CIT Vs. Manjunatha Cotton & Hon’ble Karnataka High Court 359 ITR 565 Ginning Factory 2. CIT Vs Samson Perinchery Hon’ble Bombay High Court 392 ITR 4 3. CIT Vs SSA’s Emerald Hon’ble Karnataka High Court 72 Taxmann.com 241 Meadows SLP dismissed reported as 242 Taxman 180 4. Dilip N. Shroff Vs JCIT Hon’ble Supreme Court 291 ITR 519 5. Meherjee Cassinath Holdings P. Mumbai Tribunal 187 TTJ 722 Ltd. Vs ACIT 6. Jayant B. Patel Vs ACIT Mumbai Tribunal The Ld. DR defended the same by placing reliance on the stand of Hon’ble Supreme court rendered in Jain Brothers Vs Union of India 77 ITR 107. 6.1 We have carefully heard the rival submissions and perused relevant material on record and deliberated on the judicial pronouncements as cited before us. The basic facts are not under dispute. It emerges that the assessee has revised its computation of income during assessment proceedings on the basis of audited financial statements which has resulted into certain additions in the hands of the assessee. Accordingly, penalty proceedings were initiated in the quantum assessment order for furnishing of inaccurate particulars of income. 6.2 The perusal of show-cause notice dated 26/02/2015 as placed on record reveal that neither the appropriate clause was marked nor appropriate lime was ticked, for which penalty proceedings were being initiated against the assessee. The assessee, in his submissions, drew attention to the aforesaid fact and stressed that the notice was bad in law. Reliance was placed, inter-alia, on the decision of Hon’ble Karnataka High Court rendered in CIT Vs. Manjunatha Cotton & Ginning Factory & Others [supra]. However, despite being the said fact brought to the notice of Ld. AO, the same was completely disregarded and instead of correcting the shortcoming / mistake, Ld.AO proceeded to impose penalty on the assessee. The said action, in our considered opinion, could not be termed as legally sustainable in the eyes of law in view of the fact that every accused has inherent right to know the ground / premise on which he was being subjected to adverse proceedings under law. Further, the action of Ld. AO in keeping the assessee in dark would snatch assessee’s valuable right to defend the penalty proceedings in defiance to the principle of natural justice. Therefore, we find force in the aforesaid legal grounds raised by Ld. AR before us. 6.3 Proceeding further, it is apparent that if Ld.AO, in the course of assessment proceedings was satisfied that the assessee has concealed the particulars of income or furnished inaccurate particulars of such income, then he may levy penalty on the assessee. Thus, there are two different charges viz. concealment of particulars of income or furnishing of inaccurate particulars of income. These two expressions i.e. furnishing of inaccurate particulars and concealment of income, as per judicial pronouncements of higher judicial authorities, carry different connotations and non-framing of specific charge against the assessee vitiates the penalty proceedings. The penalty could be levied only for a specific charge. Furnishing inaccurate particulars of income means, when the assessee has not disclosed the particulars correctly or the particulars disclosed by the assessee are found to be incorrect whereas, concealment of particulars of income means, when the assessee has concealed the income and has not shown the income in its return or in its books of accounts. Explanation 1 is a deeming provision and is applicable only when an amount is added or disallowed in computation of total income which is deemed to represent the income in respect of which particulars have been concealed. Explanation 1 cannot be applied in a case where the assessee furnishes inaccurate particulars of income. Therefore, the action of Ld. AO in invoking the same for furnishing of inaccurate particulars of income would not stand the test of law. The facts of the present case would reveal that the penalty was initiated on the basis that the assessee has furnished inaccurate particulars of income whereas the penalty has finally been levied in terms of Explanation-1 on account of concealment of income. 6.4 Keeping in view the above findings and reasoning, we hold that the impugned penalty could not be sustained under law since Ld. AO has failed to specify that the exact charge in the show-cause notice and secondly, the penalty has been invoked for one limb but finally levied on another limb, which is not in accordance with law.
6.5 We find that the facts of the present case are squarely covered by the observation of Hon’ble Bombay High Court made in CIT Vs. Samson Perinchery [2017 88 taxmann.com 413] wherein it has been held as under: - 3. The impugned order of the Tribunal deleted the penalty imposed upon the Respondent-Assessee. This by holding that the initiation of penalty under Section 271 (1)(c) of the Act by Assessing Officer was for furnishing inaccurate particulars of income while the order imposing penalty is for concealment of income. The impugned order holds that the concealment of income and furnishing inaccurate particulars of income carry different connotations. Therefore, the Assessing Officer should be clear as to which of the two limbs under which penalty is imposable, has been contravened or indicate that both have been contravened while initiating penalty proceedings. It cannot be that the initiation would be only on one limb i.e. for furnishing inaccurate particulars of income while imposition of penalty on the other limb i.e. concealment of income. Further, the Tribunal also noted that notice issued under Section 274 of the Act is in a standard proforma, without having striked out irrelevant clauses therein. This indicates non-application of mind on the part of the Assessing Officer while issuing the penalty notice.
The impugned order relied upon the following extract of Karnataka High Court's decision in CIT v. Manjunatha Cotton & Ginning Factory[2013] 359 ITR 565/218 Taxman 423/35 taxmann.com 250 to delete the penalty:— "The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus, the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it as case of furnishing of inaccurate particulars. The apex court in the case of Ashok Pai[2007] 292 ITR 11 (SC) at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of Manu Engineering reported in 122 ITR 306 and the Delhi High Court in the case of Virgo Marketing P. Ltd., reported in 171 Taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind."
5. The grievance of the Revenue before us is that there is no difference between furnishing of inaccurate particulars of income and concealment of income. Thus, distinction drawn by the impugned order is between Tweedledum and Tweedledee. In the above view, the deletion of the penalty, is unjustified.
The above submission on the part of the Revenue is in the face of the decision of the Supreme Court in T. Ashok Pai v. CIT[2007] 292 ITR 11/161 Taxman 340 [relied upon in Manjunath Cotton & Ginning Factory (supra)] - wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act, carry different meanings/connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice.
Therefore, the issue herein stands concluded in favour of the Respondent-Assessee by the decision of the Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory (supra). Nothing has been shown to us in the present facts which would warrant our taking a view different from the Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra).
In view of the above, the question as framed do not give rise to any substantial question of law. Thus, not entertained.
Accordingly, all these Appeals are dismissed. No order as to costs.
Similar is the ratio of other decisions as tabulated in para 5.
6.6 So far as the reliance of the revenue on the decision of Hon’ble Apex Court rendered in Jain Brothers Vs. Union of India [1970 77 ITR 107] is concerned, we find the same to be contextually different which is quite evident from perusal of the head-notes of the said case law: - Section 271(1)(a), read with section 297(2)(g), of the Income-tax Act, 1961 - Penalty - For late filing of return - Assessment year 1960-61 - Whether crucial date for purposes of penalty is date of completion of assessment - Held, yes - Whether applying penalty provisions contained in Act of 1961 to cases of persons whose assessments are completed after 1-4-1962, it cannot be said that any class has been singled out for special treatment and, hence, section 297(2)(g) cannot be struck down as discriminatory under article 14 of Constitution - Held, yes - Whether, therefore, assessee would be liable to a penalty as provided by section 271(1) for default mentioned in section 28(1) of Act of 1922, if his case falls within terms of section 297(2)(g) - Held, yes - Whether provisions of section 271 of Act of 1961 will apply mutatis mutandis to proceedings relating to penalty initiated in accordance with section 297(2)(g) of that Act - Held, yes Section 271(2) of the Income-tax Act, 1961 - Penalty - Registered Firm - Whether it is open to legislature to give benefit of a reduced rate to a registered firm for purpose of tax but withhold same when it committed a default and became liable to imposition of penalty and, thus, provisions of section 271(2) do not contravene article 14 of Constitution - Held, yes 6.7 Finally, respectfully following the binding judicial precedent in the shape of cited decision of Hon’ble Bombay High Court, we delete the impugned penalty on legal grounds which makes our indulgence in examining the impugned penalty on merits merely academic in nature and therefore, not dealt with.
7. The appeal stands partly allowed in terms of our above order.