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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: HON’BLE SHRI R. C. SHARMA, AM & HON’BLE SHRI SANDEEP GOSAIN, JM
Prakash Chandra Kapoor ACIT CC-42 बिधम/ Pallonji Mansion, Flat No. 6/D, Aayakar Bhavan, M. Cuffe Parade, K. Road, Vs. Mumbai-400 021 Mumbai-400 020 स्थायीलेखासं./जीआइआरसं./ PAN/GIR No. ABAPK6775D (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant by : Shri Anuj Kisnadwala प्रत्यथीकीओरसे/Respondentby : Shri Abi Rama Kartikiyen सुनवाईकीतारीख/ : 03/10/2018 Date of Hearing घोषणाकीतारीख / : 10/10/2018 Date of Pronouncement आदेश / O R D E R
Per Sandeep Gosain, Judicial Member:
The Present Appeal has been filed by the assessee against the order of Commissioner of Income Tax-49, Mumbai dated 15.10.15 for AY 2007-08 & 2006-07 respectively.
2 & 874/Mum/2016 Prakash Chandra Kapoor 2. Since all the issues involved in these two appeals are common, therefore, they have been clubbed, heard together and a consolidated order is being passed for the sake of convenience and brevity.
At the very outset, Ld. AR appearing on behalf of the assessee drawn our attention towards letters dated 03.10.18 alongwith affidavit which relates to condonation of delay in filing appeals before Hon’ble ITAT. Ld. AR submitted that the present appeals could not be filed within time because of the reasons mentioned in affidavit and thus there was a delay of 68 days in filing the present both appeals.
On the other hand, Ld. DR requested for dismissal of the said application.
We have heard the counsels for both the parties on the applications for seeking condonation of delay and while taking into consideration the contents of application filed by the assessee, supporting affidavit, whereby the assessee has 3 & 874/Mum/2016 Prakash Chandra Kapoor mentioned the reasons in detail for not filing the appeal within limitation, therefore keeping in view the reasons mentioned in the affidavit and following the principles laid down by Hon’ble Supreme Court in case of “Land Acquisition Collector Vrs. MstKitzi, AIR 1987 S.C. 1353/(1987) 167 ITR 471 (SC), we condone the delay of 68 days in filing both the appeals. Resultantly, these applications are allowed and appeals are admitted to be heard on merits.
(AY 2008-09) 6. First of all we take up assessee’s appeal in for assessment year 2008-09 as lead case.
The solitary ground raised by the assessee relates to challenging the order of Ld. CIT(A) in confirming the penalty u/s 271(1)(c) of the I.T. Act.
4 & 874/Mum/2016 Prakash Chandra Kapoor 8. Ld. AR apart from addressing the arguments on merits had also challenged the legality of the notice issued under section 274 r.w.s. 271 of the Act for initiating of the penalty proceedings under section 271(1)(c) of the Act for A.Y. 2008-09. A perusal of the notice issued under section 274 r.w.s. 271 of the Act reveals that the AO has not deleted the inappropriate words and parts of the notice, whereby it is not clear as to the default committed by the assessee, i.e. whether it is concealment of particulars of income or furnishing of inaccurate particulars of income that the penalty under section 271(1)(c) of the Act is sought to be levied. In this regard, we find that the Hon'ble High Court of Karnataka in its order in the case of M/s Manjunatah Cotton & Ginning Factory in ITA No. 2546 of 2005 dated 13.12.2012, relied on by the assessee, has held that such a notice, as has also been issued in the case on hand, is invalid and the consequential penalty proceedings are also not valid. The relevant portion of their Lordships judgement at paras 59 to 62 thereof are extracted hereunder for reference: -
5 & 874/Mum/2016 Prakash Chandra Kapoor “59. As the provision stands, the penalty proceedings can be initiated on various ground set therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation-1 or in Explanation-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay 6 ITA No.7602/Mum/2014(AY-2005-06) TCFC Finance Ltd. penalty. The practice of the Department sending a printed farm where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of 6 & 874/Mum/2016 Prakash Chandra Kapoor law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee.
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 7 & 874/Mum/2016 Prakash Chandra Kapoor 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 7 ITA No.7602/Mum/2014(AY-2005-06) TCFC Finance Ltd. order of penalty which, when passed, was not sustainable.
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 8 & 874/Mum/2016 Prakash Chandra Kapoor 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 a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in 292 ITR 11 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 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. Thom, 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.”
The conclusion drawn therein by their Lordships at para 63 thereof and particularly at p) to s) thereof are as under:
“63 ………………………………. a) ………………………………. p)Notice under section 274 of the Act should specifically state the ground mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. q)Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. s) Taking up of penalty proceedings on the limb and finding the assessee guilty of another limb is bad in law.”
It may be mentioned that in this regard, no contrary decision of the Hon'ble Apex Court or the Hon'ble Bombay High Court has been brought to our notice or placed before us for consideration. Therefore, respectfully following the decision of the Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory reported in (2013) 359 ITR 565
10 & 874/Mum/2016 Prakash Chandra Kapoor (Kar), decision of Hon’ble Bombay High Court in the case of CIT Vrs Samson Perinchery dated 05.01.2017, we hold that the notice issued under section 274 r.w.s. 271 of the Act dated 14.03.14 for A.Y. 2008-09 for initiating penalty proceedings under section 271(1)(c) of the Act in the case on hand is invalid and consequently, the penalty proceedings are also invalid. Since the very basis for the levy of penalty under section 271(1)(c) of the Act has been held to be invalid, we are of the view that the other grounds of appeal, raised by the assessee against the merits of the levy of penalty under section 271(1)(c) of the Act require no adjudication at this stage. In the result, the appeal filed by the assessee is allowed.
Since the issue raised in other appeal filed by the assessee in for AY 2006-07 is similar, therefore following the decision in AY 2008- 09 as mentioned above, we allow this appeal filed by the assessee.
Order pronounced in the open court on 10th Oct., 2018 Sd/- Sd/- (R. C. Sharma) (Sandeep Gosain) लेखासदस्य / Accountant Member न्याययकसदस्य / Judicial Member मुंबई Mumbai;यदनांकDated : 10.10.2018 Sr.PS. Dhananjay आदेशकीप्रनिनिनिअग्रेनर्ि/Copy of the Order forwarded to : अपीलाथी/ The Appellant 1. 2. प्रत्यथी/ The Respondent 3. आयकरआयुक्त(अपील) / The CIT(A) आयकरआयुक्त/ CIT- concerned 4. 5. यवभागीयप्रयतयनयध, आयकरअपीलीयअयधकरण, मुंबई/ DR, ITAT, Mumbai 6. गार्डफाईल / Guard File आदेशधिुसधर/ BY ORDER,