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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 17.08.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2008-09.
The assessee has raised two grounds of appeal. In the first ground of appeal, the assessee has challenged the penalty on the technical issue that Ld. CIT(A) has confirmed the penalty as levied by the AO despite the fact that penalty was initiated for furnishing of inaccurate particulars of income but finally levied for concealment of income and also ignoring the fact that the notice under section 274 read with section 271 of the Act was issued in a mechanical manner without application of mind as
The facts in brief are that the assessment was framed in this case vide order dated 06.12.2010 assessing the income at Rs.24,91,180/- as against the return of income of Rs.24,90,922/- wherein the AO assessed the profit of Rs.24,90,922/- on sale of shares as business income as against the short term capital gain shown by the assessee besides disallowance of Rs.32,922/- under section 14A read with rule 8D2(iii). The AO initiated the penalty proceedings as mentioned in page 6 of the assessment order for furnishing of inaccurate particulars of income and also notice dated 06.12.2010 was issued under section 274 read with section 271 of the Act without mentioning or stating the particular limb on which the penalty was proposed to be levied. Finally, the penalty was levied in the penalty order dated 29.03.2014 for concealment of income as stated in page 6 of the penalty order.
The Ld. CIT(A) also dismissed the appeal of the assessee after taking into account the submissions and contentions raised during the appellate proceedings and hence the assessee is in appeal before us.
The Ld. A.R. vehemently submitted before the Bench that the order passed by the AO under section 271(1)(c) of the Act dated 29.03.2014 is void and bad in law for the reason that AO initiated penalty proceedings in the assessment order passed under section 143(3) dated 06.12.2010 for filing of inaccurate particulars of income and the notice under section 274 read
3 Mrs. Sonali D. Mehta with section 271 dated 06.12.2010 was issued without mentioning therein the particular limb on which the penalty was proposed to be levied. In other words, the notice was issued in a mechanical manner without application of mind as the AO failed to strike off the inappropriate words in the notice. Thus the penalty notice was issued under both the limbs i.e. for concealment of particulars of income as well as for furnishing of inaccurate particulars of income. The Ld. A.R. further stated that the penalty order passed under section 271(1)(c) dated 29.03.2014 levying the penalty for concealment of particulars of income which is blatantly wrong and against the ratio laid down by the various judicial forums. The ld AR contended that the order so framed is bad in law as the assessee was given proper opportunity to defend himself as the charge was not specifically confronted to the assessee. In defense of his arguments, the Ld. A.R. relied on the following case laws: • CIT vs. SSA's Emerald Meadows (SC) 73 taxmann.com 248 dated 5.8.2016 • Mrs. Piedade Perinchery (BomHC) ITANo. 1310 of 2014 dated 10.01.2017 • Shri Samson Perinchery vs. CIT (Bom HC ) 392 ITR 4 dated 05.01.2017 • CIT vs. SSA's Emerald Meadows (Kar HC) 73 taxmann.com 241 dated 23. 11. 20 15 • CIT vs. Manjunatha Cotton & Ginning Factory 35 taxmann.com 250 (Karnataka) • K.M. Bhatia vs. CIT 62 TAXMAN 430 (GUJ.) • CIT vs. Lakhdhir Lalji 85 ITR 77 (GUJ.) • Pr.CITvs.BaisettyRevathi(APHC)ITANo684of2016datedl3.7.2017 • Shri S. Narendrakumar & Co. vs. ACIT- ITA No.7334/Mum/2016 dated 22.03.2019 • ACIT vs. BhushanKamalnayanVora [2017] 60 ITR(T) 82 (Mumbai -Trib.) • Orbit Enterprises vs. ITO (ITAT Mumbai) ITA 1596& 1597 /M/2014 dated 01.09.2017 • Jehangir HC Jehangir vs. ACIT - ITA No. 1261/Mum/201 1 dated 17.05.2017 • Meherjee Cassinath Holdings (P.) Ltd. vs. ACIT (Mumbai Trib.) dated 28.04.2017 • Prince Consultancy (P.) Ltd. vs. DCIT [2017] 54 ITR(T) 334 (Mumbai -Trib.) • Eon Aviation Pvt Ltd vs. DCIT (Mum ITAT) 301 l/M/2016 • Dharni Developers vs. ACIT [2015] 61 taxmann.com 208 (Mumbai -Trib.)
The Ld. A.R. further submitted that in the assessment order framed by the AO dated 06.12.2010, the AO has only
4 Mrs. Sonali D. Mehta changed the heads of income i.e. the income by way of profit on sale of shares which was shown by the assessee as short term capital was assessed as business income by the AO besides making small additions on account of disallowance under section 14A of the Act Rule 8D(2)(iii) of Rs.32,922/-. The Ld. A.R., therefore, submitted that on mere change of heads of income by the AO, penalty u/s 271(1)© is not attracted relying on the following decisions: CIT vs. Indersons Leather P. Ltd. 328 ITR 167 (P&H - HC) CIT vs. Shyam Tex International Ltd. 43 DTR 19 (Delhi HC) CIT vs. Chandrasekaran [2015] 56 taxmann.com 210 (Kamataka) Bharat Tiles & Marble (P.) Ltd. vs. DCIT (Mumbai Trib.) dated 14.02.2018 Parinee Developers (P.) Ltd. vs. ACIT [2017] 88 taxmann.com 42 (Mumbai - Trib.) ITO vs. Roborant Investments (P) Ltd 7 SOT 181 (Mum ITAT) M/s Superb Royal Travels and Tours Pvt Ltd. vs. ITO - ITA No.: 4147/Mum/2012 DCIT vs. JMD Advisors Pvt. Ltd. 124ITD 223 (Delhi ITAT)
Further, the Ld. A.R. submitted that no penalty is attracted under section 271(1)(c) for the disallowance made under section 14A of the Act as the assessee has disclosed all the particulars in the annual accounts filed before the revenue authorities. The Ld. A.R. relied on the decision of Pr. CIT vs. Gruh Finance Ltd. (2018) 100 taxman.com 104 SC and CIT vs. Reliance Petroproduct Pvt. Ltd. 322 ITR 158 SC. The Ld. A.R., while summing up his arguments, submitted that the order passed under section 271(1)(c) of the Act dated 06.12.2010 is bad in law for the various reasons as stated hereinabove and may kindly be quashed as being void ab initio.
The Ld. D.R., on the other hand, relied on the order of authorities below by submitting that the order passed by AO under section 271(1)(c) was as per the provisions of the Act and was rightly upheld by the Ld. CIT(A). The Ld. D.R. submitted
5 Mrs. Sonali D. Mehta that the penalty proceedings were initiated by the AO in the assessment order for furnishing of inaccurate particulars of income. Thereafter, the notice under 274 read with section 271(1)(c) of the Act was issued wherein both the limbs of the penalty were mentioned and there is no defect whatsoever in the said notice. Thereafter, the penalty order dated 06.12.2010 was passed for concealment of particulars of income. Since the AO has correctly initiated the penalty proceedings thereafter the notice issued under section 274 read with section 271 and the assessee duly participated in the penalty proceedings, therefore the contentions raised by the assessee were duly considered and assessee should not be given the benefit of just non striking off g of particular charge on the penalty notice. The ld Dr contended that it is not open to the assessee to claim that no proper opportunity was given as particular limb on which the penalty was proposed to be levied was not mentioned. The Ld. A.R. relied on the following decisions: 1. Union of India vs. Dharmendra Textile Processors (2007) 295 ITR 244 2. RL Traders vs. ITO (2017-TIOL-2583-HC-DEL-IT) 3. CIT vs. Zoom Communication (P) Ltd. (191 taxman 179 (Delhi)/(2010) 327 ITR 510 (Delhi)/(2010) 233 CTR 465 4. CIT vs. Moser Baer India Ltd. (184 Taxman 8 (SC)/ (2009) 315 ITR 460 (SC)/(2009) 222 CTR 213 5. CIT vs. Gold Coin Health Food (P.) LTd. (172 Taxman 386 (SC)/(2008) 304 ITR 308 (SC)/(2008) 218 CTR 359) 6. MAK Data P. Ltd. vs. CIT (38 taxmann.com 448 (SC)/(2013) 358 ITR 593 (SC)/(2013) 263 CTR 1 7. B.A. Balasubramaniam & Bros. Co vs. CIT (116 Taxman 842, 236 ITR 977, 157 CTR 556) 8. CIT vs. Gates Foam & Rubber Co (91 ITR 467) 9. Steel Ingots Ltd. vs. CIT (296 ITR 228) 10. CIT vs. Escorts Finance Ltd. (183 Taxman 453 (Delhi)/(2010) 328 ITR 44 (Delhi)/(2009) 226 CTR 105
6 Mrs. Sonali D. Mehta 11. CIT vs. R.M.P. Plasto (P.) Ltd. (184 Taxman 372 (SC)/(2009) 313 ITR 397 (SC)/(2009) 227 CTR 635) 12. K.P. Madhusudhanan vs. CIT (2010) 118 Taxman 324 (SC)/(2001) 251 ITR 99 (SC)/(2001) 169 CTR 489 (SC)
The Ld. D.R. also filed the written submissions at the time of hearing.
After hearing both the parties and perusing the material on record, we observe that in this case the AO initiated penalty proceedings in the assessment order dated 06.12.2010 for furnishing of inaccurate particulars of income at page No.6 o the assessment order, para 5.3 by issuing notice under section 274 read with section 271 of the Act dated 06.12.2010 wherein the AO has not mentioned the particular limb under which the penalty was proposed to be levied. In other words, the notice was issued in a standard format without any application of mind and the inappropriate/redundant words were not deleted by the AO. Thereafter, the penalty was imposed for concealment of particulars of income which is different from the limb on which the penalty was initiated in the assessment order. In our opinion, by these acts of the AO in not striking off the inappropriate limb in the notice and initiating the penalty on one limb and imposing penalty finally on the other limb is clear cut in violation of principle of natural justice as the assessee was deprived of reasonable opportunity to respond and deal with the particular charge on which the penalty was levied. In our view, the penalty order in such a scenario is clearly bad in law and can not be sustained. The case of the assessee is clearly supported by the decision relied upon by the assessee as stated hereinabove in the case of Shri Samson Perinchery vs. CIT
7 Mrs. Sonali D. Mehta (supra) and CIT vs. Mrs. Piedade Perinchery (Bom-HC) (supra) the Hon’ble Bombay High Court has held that where the AO has failed to state particularly the one of the two limbs on which the penalty was proposed to be levied then the penalty order would be bad in law as the assessee was not given proper opportunity to respond to the charge on which the penalty was levied. The similar ratio has been laid down in the case of CIT vs. SSA SSA's Emerald Meadows (supra) which has been affirmed by the Hon’ble Supreme Court in 73 taxman.com 248. The case laws relied by the ld DR were carefully perused and we find that same are not of any help to the revenue when the issue is settled by the jurisdictional High court and also by the Hon’ble Apex court as has been stated above. We, therefore, respectfully following the decision of the Hon’ble Bombay High Court in the case of Shri Samson Perinchery vs. CIT (supra) and CIT vs. Mrs. Piedade Perinchery (Bom-HC) (supra) and also the decision of Hon’ble Supreme Court in the case of CIT vs. SSA SSA's Emerald Meadows (supra) hold that the penalty as levied by the AO has to be deleted on the technical ground raised by the assessee. Accordingly, we hereby direct the AO to delete the penalty.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 15.05.2019.