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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, JM & SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R
Per Manoj Kumar Aggarwal (Accountant Member) 1. The captioned appeal by revenue for Assessment Year [AY] 2011- 12 contest the order of Ld. Commissioner of Income-Tax (Appeals)-8 [CIT(A)], Mumbai, Appeal No.CIT(A)-8/IT-640/14-15 dated 28/04/2016 qua deletion of penalty u/s 271(1)(c) for Rs.50,99,484/-. The assessee has filed cross-objections against the same. The assessment for impugned AY was framed by Ld. Income Tax Officer 3(1)(1), Mumbai [AO] u/s 143(3) of the Income Tax Act,1961 on 21/02/2014 whereas the impugned penalty has been levied vide order dated 19/08/2014. Since the assessee’s cross objections raises legal grounds and goes to the root of the matter, we take up the same first. 2.1 Facts leading to the imposition of penalty are that the assessee being resident corporate assessee engaged as service provider was assessed at Rs. ‘Nil’ under normal provisions and at Rs.255.86 Lacs u/s 115JB as against ‘Nil’ return filed by the assessee on 30/09/2011. 2.2 During assessment proceedings, it was noted that as per return of income, the assessee did not pay any tax u/s 115JB. The assessee, in response, submitted working of Book Profits for Rs.255.86 Lacs u/s 115JB which was accepted by Ld. AO. Consequently, penalty was initiated u/s 271(1)(c) and the assessee was saddled with a penalty of Rs.50.99 Lacs vide penalty order dated 19/08/2014. 3. The assessee contested the same with success before Ld. CIT(A) vide impugned order dated 28/04/2016 where the assessee, inter-alia, ITA.No.4857/Mum/2016 & CO.No.304/Mum/2017 Alia Creative Consultants Private Limited Assessment Year 2011-12 drew attention to the fact that the assessee was entitled to claim exemption u/s 10A which was inadvertently deducted while computing Book Profit u/s 115JB which resulted into negative Book Profits and therefore, no tax was paid by the assessee u/s 115JB. The assessee also placed reliance on CBDT Circular No. 25/2015 dated 30/12/2015 to contend that penalty was not attracted in case the tax was paid u/s 115JB. Reliance was placed on several judicial pronouncements for various contentions. Finally, convinced with assessee’s stand, Ld.CIT(A) deleted the penalty, against which the revenue is in further appeal before us.
The Ld. Authorized Representative for the assessee [AR], at the outset, while drawing our attention to the legal grounds raised in cross- objections, contended that the penalty proceedings stood vitiated on legal grounds and Ld. CIT(A) erred in not considering the same. It was pointed out that the Ld. AO has failed to specify the exact charge in the quantum assessment order for which the penalty was being initiated and further, the show-cause notice dated 11/07/2014 did not specify the exact charge / limb for which the penalty was being initiated and therefore, the penalty proceedings stood vitiated on legal grounds. Reliance has been placed on the judgment of Hon’ble Bombay High Court rendered in CIT Vs. Shri Samson Perinchery [392 ITR 4]. The Ld. AR further contended that even otherwise there was no furnishing of inaccurate particulars of income or concealment of income within the meaning of Section 271(1)(c) since full particulars of income were furnished by the assessee in the return of income and error in ITA.No.4857/Mum/2016 & CO.No.304/Mum/2017 Alia Creative Consultants Private Limited Assessment Year 2011-12 computation crept in under bona fide belief and due to inadvertent mistake on the part of the assessee and therefore, the impugned penalty was not justified. Per contra, Ld. Departmental Representative [DR] contended that the assessee admitted the mistake during assessment proceedings only and he was fully aware of the grounds for which the penalty was being initiated and therefore, there was no strength in assessee’s legal grounds. On merits, reliance has been placed on the judgment of Hon’ble Madras High Court rendered in Sri Gokulam Hotels India (P) Ltd. Vs. ACIT [49 Taxmann.com 543 09/07/2014] for the contention that penalty was leviable in case the assessee failed to pay the tax within the meaning of Section 115JB.
We have carefully heard the rival contentions and perused relevant material including cited case laws. It is undisputed fact that the assessee has been assessed at Rs.‘Nil’ under the normal provisions and tax has been paid by the assessee u/s 115JB. The perusal of return of income in ITR-6 as placed on Page Numbers 116 to 139 reveals that the assessee has computed negative Book Profits of Rs.1,27,955/- for the purpose of Section 115JB after making adjustments including deduction u/s 10A. This very fact distinguishes the case law cited by the revenue since upon perusal of paragraph-8 of that judgment we find that the assessee in that case failed to furnish computations u/s 115JB in the return of income, which is not the case here.
So far as the legal ground raised by the assessee is concerned, we find that penalty has been initiated in the quantum assessment order by Ld. AO by making following observations:-
ITA.No.4857/Mum/2016 & CO.No.304/Mum/2017 Alia Creative Consultants Private Limited Assessment Year 2011-12 Since the assessee has concealed income i.e. Book Profit and furnished inaccurate particulars of income penalty proceedings u/s. 271(1)(c)of the I.T.Act, are also separately initiated.
Further, a perusal of the show-cause notice dated 11/07/2014 reveals that Ld. AO has not specified the exact charge / limb viz. concealment of income or furnishing of inaccurate particulars of income for which the penalty was being initiated. The revenue could not controvert the said fact by showing any other penalty notice u/s 274 read with Section 271(1)(c). Finally, a perusal of the penalty order reveals that the penalty has been levied by observing that the assessee has filed inaccurate particulars of income. A perusal of the above facts shows that the Ld. AO has applied both the limbs simultaneously i.e. concealment of income or furnishing of inaccurate particulars for which the penalty was being initiated against the assessee. The aforesaid two limbs, as per settled legal pronouncements, carry different meaning and connotations. The three events, as stated above, put together, reveal that Ld. AO has failed to adhere to the settled legal propositions while imposing penalty on the assessee which is quite evident from certain legal judicial pronouncements as enumerated by us in the succeeding paragraphs.
The Hon’ble Supreme Court in the judgment titled as Dilip N.Shroff Vs. JCIT (291 ITR 519) has observed that the concealment of income and furnishing of inaccurate particulars of income are different and carry different connotations. The Hon’ble Court further held that non-striking off of the relevant portions of standard show-cause notice reflects non- application of mind by AO and hence vitiates the penalty. We also note that the ratio of this judgment was very much relevant and valid despite ITA.No.4857/Mum/2016 & CO.No.304/Mum/2017 Alia Creative Consultants Private Limited Assessment Year 2011-12 the judgment of Apex Court in the case of CIT Vs. Dharmendra Textile Processor (306 ITR 277) in view of another judgment of Supreme Court in CIT Vs. Reliance Petro products Pvt. Ltd. [322 ITR 158] wherein it was observed that reasoning given in the case of Dilip N.Shroff could not be faulted except to the extent of observations regarding necessity of mens- rea for the purpose of Section 271(1)(C). Similar view has been expressed in the judgment of Hon’ble Karnataka High Court rendered in CIT Vs. Manjunatha Cotton & Ginning Factory [2013 359 ITR 565] which was later followed by the same court in CIT Vs. SSA’s Emerald Meadows [ITA NO. 380 OF 2015 23/11/2015] against which special leave petition [SLP] filed by the revenue before Apex Court in CC No.11485/2016 order dated 05/08/2016 was dismissed by the Hon’ble court, finding no merits in the case. Further, Hon’ble Bombay High Court has followed the ratio of same judgment in CIT Vs. Shri Samson Perinchery [ITA No. 1154 of 2014 order dated 05/01/2017] and further Tribunal, in catena of judgment and more particularly in Wadhwa Estate & Developers Vs. ACIT [ITA N0. 2158/Mum/2016 dated 24/02/2017] has taken the same view following the aforesaid judgments.
Upon consideration of factual matrix as noted by us in paragraph 5, we find that the three events, put together, reflects non-application of mind on the part of AO and the AO himself was not sure about the limb / exact charge for which the assessee was being penalized. Therefore, the penalty order stood vitiated for want of principles of natural justice and hence, liable to be quashed. Respectfully following the catena of ITA.No.4857/Mum/2016 & CO.No.304/Mum/2017 Alia Creative Consultants Private Limited Assessment Year 2011-12 judgments on the issue favoring the assessee, we allow assessee’s cross objections.
Since the assessee’s cross objection has been allowed by us in terms of our above order, the question of delving into revenue’s grounds of appeal
remain merely academic in nature and therefore, we find no reason to ponder over the same.
10. Resultantly, the revenue’s appeal CO. No. 304/Mum/2017 stands allowed. Order pronounced in the open court on 31st January, 2018 Sd/ Sd/- (Mahavir Singh) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांक Dated : 31.01.2018 Sr.PS:- Thirumalesh आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��थ� / The Respondent 2. आयकर आयु�(अपील) / The CIT(A) 3. आयकर आयु� / CIT – concerned 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai 5. गाड� फाईल / Guard File 6.