Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH: ‘G’ NEW DELHI
ORDER
Per N. K. Saini, AM:
This is an appeal by the assessee against the order dated 05.08.2015 of ld. CIT(A)-7, New Delhi.
Following grounds have been raised in this appeal: “1. On the facts and circumstances of the case, the order passed by the learned CIT(A) levying penalty under section 271(1)(c) is bad, both in the eye of law and on the facts.
2. On the facts and circumstances of the case, the Id. CIT(A) has erred, both on facts and in law, in confirming the levy of penalty amounting to Rs.5,83,542/- on account of disallowance of deduction made by the Id. AO of an amount of Rs. 18,88,488/- under section 10A of the Act.
3. On the facts and circumstances of the case, the Id. CIT(A) has erred both on facts and in law in confirming levy of penalty by the Id. AO under section 271(1)(c) despite the fact that the claiming of deduction u/s 10A was an inadvertent mistake on the part of the assessee and was not on account of willful conduct.
2 Quantum Coders Ltd.
4. On the facts and circumstances of the case, the Id. CIT(A) has erred both on facts and in law in confirming levy of penalty by the Id. AO under section 271(1)(c) despite the fact that there is neither concealment nor furnishing of inaccurate particulars.
5. On the facts and circumstances of the case, the id. CIT(A) has erred both on facts and in law in confirming levy of penalty made by the id. AO ignoring the fact that the penalty proceedings are independent proceedings, as such merely on the basis of disallowances and additions, penalty cannot be levied.
6. The appellant craves leave to add, amend or alter any of the grounds of appeal
.”
3. The only grievance of the assessee in this appeal relates to the confirmation of penalty of Rs.5,83,542/- levied by the AO u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the Act).
Facts of the case in brief are that the assessee e-filed its return of income on 26.09.2011 declaring an income of Rs.50,490/-. Later on, the case was selected for scrutiny. During the course of assessment proceedings, the AO noticed that the assessee claimed deduction u/s 10A of the Act amounting to Rs.18,88,488/-. He further observed that as per the provisions u/s 10A of the Act, the deduction from total income derived by an undertaking from the export of articles or things or computer software was provided for a period of 10 consecutive years which commences from the assessment year relevant to the previous year in which the undertaking beings to manufacture or produce such article or thing or computer software. According to the AO, the assessee company commenced manufacturing/production on 13.05.2000 i.e. assessment year 2001-02 and therefore, the 10 years holiday period in the case of assessee expired in assessment year 2010-11. Accordingly, the deduction claimed by the assessee was denied and the penalty proceedings u/s 271 r.w.s. 274 of the 3 Quantum Coders Ltd. Act were initiated for furnishing of inaccurate particulars of income. However, the AO levied the impugned penalty by holding that the assessee had concealed particulars of his income of Rs.18,88,488/-.
5. Being aggrieved the assessee carried the matter to the ld. CIT(A) who sustained the penalty levied by the AO.
6. Now the assessee is in appeal. The ld. Counsel for the assessee drew our attention towards page no. 59 of the assessee’s paper book which is the copy of the notice u/s 274 r.w.s. 271 of the Act and submitted that in the said notice no specific charge was levied and both the limbs of the section namely concealment of particulars of income and furnishing of inaccurate particulars of income had been mentioned. It was further submitted that the AO in the assessment order dated 28.02.2014 initiated the penalty proceedings u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income. However, the penalty vide order dated 27.08.2014 u/s 271(1)(c) of the Act was levied for concealment of income. Therefore, the penalty levied by the AO and sustained by the ld. CIT(A) was not justified. The reliance was placed on the following case laws: � CIT Vs Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar) � ITO, Bangalore Vs M/s SSA’s Emerald Meadows [2016 (8) TMI 1145] � Sahara Global Vision Pvt. Ltd. Vs DCIT in order dated 22.03.2018 � BSCC and CJV Vs ACIT in ITA No. 7296/Del/2017 order dated 30.01.2018 � Mr. Ashok Kumar Chordia Vs DCIT in ITA Nos. 5788 to 5790/Del/2014 � Price Waterhouse Coopers Pvt. Ltd. Vs CIT (2012) 348 ITR 306 (SC) � CIT Vs M/s Bennett Coleman and Co. Ltd. [2013 (3) TMI 373] 4 Quantum Coders Ltd. � CIT Vs Escorts Finance Ltd. (2009) 28 DTR 293 (Del.) � CIT Vs Mahanagar Telephone Nigam Ltd. (2011) 63 DTR 87 � DCIT, Circle-9(1) Vs M/s Sony India Pvt. Ltd. [2017 (10) TMI 62] � Praveen Kumar Jolly Vs ACIT in ITA No. 1982/Del/2014 order dated 31.07.2017 � CIT (LTU) Vs Indian Renewable Energy in ITA No. 294/2016 order dated 22.08.2017 (Del.) � Pr. CIT Vs Power Grid Corporation of India Ltd. in ITA Nos. 595 & 725/2017 order dated 08.09.2017 (Del.) � CIT Vs Reliance Petro Products Ltd. 322 ITR 158 (SC) � CIT-II Vs Sh. Samson Perinchery in ITA No. 1154/2014 order dated 05.01.2017 (Bom. HC) 7. In his rival submissions, the ld. Sr. DR strongly supported the orders of the authorities below and relied on the following case laws: � Union of India Vs Dharamendra Textile Processors (2007) 295 ITR 244 (SC) � CIT Vs Zoom Communication (P.) Ltd. (2010) 327 ITR 510 (Del.) � MAK Data P. Ltd. Vs CIT (2013) 358 ITR 593 (SC) � CIT Vs Gates Foam & Rubber Co. 91 ITR 467 (Ker.) � CIT Vs India Seafood 105 ITR 708 (Ker.) � Steel Ingots Ltd. Vs CIT 296 ITR 228 (MP) � CIT Vs Escorts Finance Ltd. (2010) 328 ITR 44 (Del.) � K.P. Madhusudhanan Vs CIT (2001) 251 ITR 99 (SC) 8. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the AO initiated the penalty proceedings u/s 271 r.w.s. 274 of the Act for furnishing of inaccurate particulars of income which is evident from para 3.2 at page no. 2 of the assessment order dated 28.02.2014. It is 5 Quantum Coders Ltd. also noticed that the AO levied the penalty u/s 271(1)(c) of the Act vide order dated 27.08.2014 by holding that the assessee had concealed particulars of income of Rs.18,88,488/- which is evident from para 3 of the said order dated 27.08.2014. Therefore, in the present case, the AO initiated the penalty proceedings for furnishing of inaccurate particulars of income while the penalty was levied u/s 271(1)(c) of the Act on different charge i.e. concealment of income. It is also noticed that the AO in the notice dated 28.02.2014 u/s 274 r.w.s. 271 of the Act has not specified the charge on which the penalty proceedings were initiated. He mentioned that it appears “the assessment company concealed the particulars of income or furnished inaccurate particulars of such income”.
From the above, it is clear that the AO had not mentioned the specific charge on the basis of penalty proceedings u/s 271(1)(c) of the Act were initiated.
9. On a similar issue, the Hon’ble Bombay High Court in the case of CIT-II Vs Sh. Samson Perinchery in vide order dated 05.01.2017 by following the judgment of the Hon’ble Karnataka High Court in the case of CIT Vs Manjunatha Cotton & Ginning Factory reported at 359 ITR 565 deleted the similar penalty u/s 271(1)(c) of the Act. The relevant observations by their Lordships in the order dated 05.01.2017 in paras 3 to 7 read 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 6 Quantum Coders Ltd. 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.
4. The impugned order relied upon the following extract of Karnataka High Court's decision in CIT v/s. Manjunatha Cotton and Ginning Factory 359 ITR 565 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 reported in [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.”
7 Quantum Coders Ltd.
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 Ashok Pai v/s. CIT 292 ITR 11 [relied upon in Manjunatha 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 and 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 the present case also as we have already mentioned that initiation of penalty u/s 271(1)(c) of the Act was on the basis of one limb i.e. for furnishing of inaccurate particulars of income while the penalty was levied on another limb i.e. concealment of income and also the AO issued noticed u/s 274 of the Act which was in standard proforma without having striked out irrelevant clauses.
8 Quantum Coders Ltd.
Similar issue has been decided by the ITAT Delhi Bench ‘G’, New Delhi in the case of Sanraj Engineering Pvt. Ltd. Vs ITO, Ward-7(3), New Delhi in for the assessment year 2006-07 vide order dated 27.10.2017 wherein the relevant findings have been given in paras 8 to 10 which read as under: “8. We have carefully gone through the contentions of either side and perused the material papers on record. Order dated 29.12.2008 passed u/s 143(3) of the Act reads that since the assessee company has concealed particulars of income, penalty proceedings u/s 271(1)(c) of the Act are being initiated. Further the penalty order dated 26.04.2013 vide para 3.2 says that the AO is satisfied with the assessee company had furnished inaccurate particulars of its income to the extent of Rs.2,40,00,000/- and Rs.96,98,457/-, provisions u/s 271(1)(c) of the Act are clearly attracted and, therefore, penalty of Rs.81,68,920/- was levied. Impugned notice u/s 274 r.w. sec 271 of the Act is a printed form wherein the relevant portion relating to the limb of charge is as follows: “……………………….. *have concealed the particulars of your income or furnished inaccurate particulars of such income in terms of explanation 1, 2, 3, 4 and 5. ………………………..”
It, therefore, is amply clear that the Assessing Officer has not specified whether the notice was issued for concealment of particulars of income or for furnishing of inaccurate particulars of income. We have carefully perused the material papers on record in the light of the statements made on behalf of the assessee including the judgment relied upon by him 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 :-
9 Quantum Coders Ltd. “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.”
10. The Hon’ble Karnataka High Court in CIT vs SSA’s Emerald Meadows, [2016] 73 taxmann.com 241 (Karnataka) has followed the Division Bench judgment in 10 Quantum Coders Ltd. the case of CIT vs Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Kar). Hon’ble Supreme Court in SSA’s Emerald Meadows (supra) dismissed the SLA preferred against the decision of the Hon’ble Karnataka High Court in the case of CIT vs SSA’s Emerald Meadows, [2016] 73 taxmann.com 241 (Karnataka). The principle laid down by these decisions is clear that 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 and the notice issued u/s 274 r.w.s. 271(1)(c) of the Act shall specify under which limb of Sec. 271(1)(c) of the Act the penalty proceedings were initiated, and in the absence of such clarity, the proceedings are bad in law. We, therefore, while respectfully following the judgements referred to above, hold that the impugned penalty proceedings are bad in law and cannot be sustained. We, therefore, while quashing the proceedings, allow the appeals. Since we propose to quash the proceedings on the question of law, we do not deem it necessary to delve deeper into merits of the case.”
So, respectfully following the aforesaid referred to order, the penalty levied by the AO and sustained by the ld. CIT(A) u/s 271(1)(c) of the Act is deleted.
In the result, the appeal of the assessee is allowed. (Order Pronounced in the open Court on 29/06/2018)