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Income Tax Appellate Tribunal, BENCH “B” MUMBAI
Before: SHRI MAHAVIR SINGH, JM & SHRI RAJESH KUMAR, AM
स्थधमी रेखध सं./ PAN : AAACT1947J (अऩीरधथी /Appellant) (प्रत्मथी / Respondent) : अऩीरधथी की ओय से / Assessee by : Shri J D Mistri, Sr.Advocate प्रत्मथी की ओय से/ Revenue by : Shri Suman Kumar सुनवधई की तधयीख /Date of Hearing : 22.8.2017 घोषणध की तधयीख /Date of Pronouncement : 15.9.2017 आदेश / O R D E R PER RAJESH KUMAR, A. M: The captioned is appeal by the assessee pertaining to assessment years 2006-07. The appeal is directed against the order of the CIT(A)-5, Mumbai, dated 12.12.2013 which in turn has arisen from an order passed 2 by the Assessing Officer dated 29.3.2012 under section 271(1)(c) of the Act.
The sole ground raised
by the assessee is against the confirmation of penalty by the ld.CIT(A) as imposed by the AO under section 271(1)(c) of the Income Tax Act, 1971.
3. The facts of the case are that the assessee filed return of income on 23.11.2006 declaring loss of Rs.4,14,62,374/-. The loss of the assessee was assessed at Rs.2,96,06,860/- vide assessment order dated 15.10.2008 passed under section 143(3) by making some disallowances namely of depreciation of Rs.23,45,989/-, professional fees of Rs.66,64,415/- and of Rs.49,19,714/- out of expenses claimed under the income from house property. In the assessment order, the penalty proceedings u/s 2721(1)(c) of the Act was initiated separately for furnishing inaccurate particulars of income whereas in the notice issued under section 274 of the Act dated 12.3.2012, the AO stated that the assessee has furnished inaccurate particulars of income for which penalty proceedings u/s 271(1)( c ) of the Act were attracted. Finally, the AO imposed the penalty of Rs.41,79,035/- vide order dated 29.3.2012 passed u/s 271(1)© of the Act by relying on the decision in the case of Zoom Communication (P) Ltd 40 DTR 249 (2010) and on the basis of explanation (1) to section 271(1)(c) by 3 distinguishing the decision in the case of CIT V/s Reliance Petro Products (P) Ltd reported in (2010) 322 ITR 158(SC).
In the appellate proceedings, the ld. CIT(A) partly allowed the appeal of the assessed by observing and holding as under : “4.4 In the present case the assessee had accepted during the assessment proceedings itself about wrong claim of the depreciation. The excess depreciation to the extent of Rs 23,45,989/· was accordingly disallowed. On the issue of disallowance of Rs 23,10,223/- on account of professional fee, the assessee though raised the-Issue bef1Jre'CIT(A) in quantum appeal, but did not press it for the reasons that in the' facts of:, the case deduction was not in accordance with the provision of the IT Act. Even if the issue was of deferment on account of amortization, the assessee would be treated to have filed inaccurate particulars as far as taxability of income is concerned for the year under consideration. Similarly, the assessee has wrongly claimed the repairs & maintenance expenses to the extent of Rs 22,50,414/- on the house property over and above 30% deduction on Annual Let out value. Thus it was not a case that the issues were debatable or there were two views. The explanation given for such claim also is not found bonafide. Mere assertion that it was inadvertent mistake is also not enough to absolve the assessee from levy of penalty. Thus keeping In view the ratio of decisions given In the aforesaid judgments. discussed in para 4.2 &: 4.3, it is held that the AO has rightly imposed penalty u/s 271 (1 )(e), however, the quantum of penalty needs to be recomputed onto the total amount of addition of Rs 69,06,626/-. This would reduce the amount of penalty. The AO is directed to give appeal effect accordingly.”
Still aggrieved by the order of the FAA, the assessee is in appeal before us.
4 6. At the outset, the ld. AR raised the legal and technical issue that the proceedings under section 271(1)( c ) of the Act were initiated for furnishing in accurate particulars income, whereas in the notice issued u/s 274 r.w.s. 271(1)(c), dated 15.10.2008 the AO did not state the charge on which the penalty proceedings were initiated and penalty was proposed to be levied. Thus the AO used the standard format for issuing show cause notice to the assessee. Thereafter the AO issued notice dated 12.3.2012 wherein again the AO stated that the penalty proceedings u/s 271(1)( c ) were attracted as the assessee has concealed the particulars of income or furnished the inaccurate particulars of income. The ld. AR finally submitted that in the order passed under section 271(1)(c) of the Act imposing the penalty , the AO again stated that explanation (1) to section 271(1)(c) was applicable. The ld. AR argued that it is settled position of law that no penalty could be levied u/s 271(1)(c) of the Act until and unless specific charge is pointed out by the AO under which the penalty was proposed to be levied. In view of the said facts and circumstance of the case the ld.AR prayed before us that the penalty imposed by the AO for concealment or furnishing of inaccurate particulars of income deserved to be quashed. In defense of his arguments the ld counsel relied on a number of decisions namely CIT V/s Manjunath Cotton and Ginning 5 Factory reported in 359 ITR 565(Kar), CIT V/s SSA’s Emerald Meadows (SLP) (SC) 380 of 2015 of Karnataka High Court and CIT V/s Shri Samson Perinchery in 1154 of 2014 Bombay High Court.
On the other hand, the ld.DR relied on the orders of authorities below and also submitted that the objection specific charge raised by the ld.AR at this stage was never raised before the ld.CIT(A) or before the AO and therefore should not be entertained and the order of the ld.CIT(A) should be upheld.
We have heard both the parties on the issue perused the materials placed before us including the impugned order. A perusal of the notice issued u/s 271(1)( c ) r.w.s.274 of the Act reveals that the penalty was stated to be initiated for furnishing inaccurate particulars of income, whereas in the notice dated 15.10.2008 and 12.3.2012, the same was stated to be initiated on account of concealment of particulars of income or furnishing inaccurate particulars of income by the assessee and ultimately the penalty was imposed by invoking the Explanation (1) to section 271(1)( c) of the Act. For the sake of convenience and ready reference we extract the two notices issued u/s 274 r.w.s. 271 (1)© of the Act as under:
6 NOTICE U/S 274 R.W.S.271(1)( c ) OFTHE INCOME TAX ACT, 1961. No.ACIT/Cir 2(2)/271(1)( c )/2011-12 Office of the Asst.CIT Circle-2(2), 545, Aayakar Bhavan, M K Road. Mumbai-400020 (022-22077580) Date: 12.3.2012 The Principal Officer, The Manjri Stud Farm Privater Limited, Shapoorji Pallonji Centre 41/44, Minoo Desai Marg, Colaba,Mumbai-400005. PAN:AAACT1947J Sir, Whereas in the course of proceedings before me for the Assessment Year 2006-07 it appears to me that you have concealed the particulars the particulars of your income or furnished inaccurate particulars of such income thereby the penal provisions of section 271(1)© of the Act are attracted in your case, You are hereby requested to appear before me at 545, Aayakar Bhavan M K Road, Mumbai-20 on 16.3.2012 at 11.00 am and show cause why an order imposing a penalty on you should not be made under section 271(1)( c ) of the Income Tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorised representative, you may show cause in writing on or before the said date which will be considered before any such order is made under section 271(1)( c ). (R P Rastogi) ACIT Circle 2(2), Mumbai.
7 We also reproduce the copy of the order dated passed by ACIT-2(2) dated 15.10.2008 as under : NOTICE U/S 274 R.W.S.271 OF THE INCOME TAX ACT, 1961. Pen.14/103/08-09 Asst.CIT Circle-2(2), Aayakar Bhavan, 5th floor, Room 577, M K Road, Mumbai-400020 The Manjri Stud Farm Private Limited, Shapoorji Pallonji Centre 41/44, Minoo Desai Marg, Colaba,Mumbai-400005. PAN:AAACT1947J Sir, Whereas in the course of proceedings before me for the Assessment Year 2006-07 it appears to me that you Have without reasonable cause failed to furnish me return of income which you were required to furnish by a notice given under section 22(1)/22(2)/34 of Indian Income Tax Act, 1922 or which you were required to furnish under section 139(1) or by a notice given under section 139(2)/148 of the Income Tax Act, 1961, No.........dated....or have without reasonable cause failed to furnish it within time allowed and the manner required by he said section 139(1) or by such notice. Have without reasonable cause failed to comply with a notice u/s n 22(4)/23(2) of Indian Income Tax Act, 1922 or u/s 142(1)143(2) of the Income Tax Act, 1961. 8 Have concealed the particulars the particulars of your income or furnished inaccurate particulars of such income ... You are hereby requested to appear before me at 11.00 AM/PM on 5.11.2008 and show cause why an order imposing a penalty on you should not be made under section 271(1)( c ) of the Income Tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorised representative, you may show cause in writing on or before the said date which will be considered before any such order is made under section 271(1)( c ). Asstt.Comm.of Income Tax -2(2), Mumbai.
We find merit in the arguments of the ld.AR that it is mandatory on the part of the AO to point out the specific charge and strike off one of the two charges contained in the notice issued u/s 271(1)( c ) r.w.s.274 falling which the proceedings u/s 271(1)( c ) of the Act and consequent order were to be quashed. The ld. AR also submitted that the Hon’ble High Court of Karnataka in the case of CIT V/s Manjunath Cotton and Ginning Factory reported in 359 ITR 565 held that the AO has to mention specific charge in the notice whether the penalty is for concealment of income or for furnishing inaccurate particulars of income and has to strike off the charge not applicable. In addition, the ld. AR also relied on the following decisions of CIT V/s SSA’s Emerald Meadows (SLP) (SC)(supra) and CIT V/s Shri Samson Perinchery (Supra). Even the Special Leave Petition Filed in the case of CIT V/s Manjunath Cotton and Ginning Factory stands dismissed by the Hon’ble Supreme Court. The ld. AR also relied upon the 9 decision of co-ordinate Bench of the Tribunal in the case of P K Joshua, V/s ITO in to 4491/Mum/2014 (AY-2001-02 to 2005-06) dated 7.6.2016, wherein the similar issue has been decided by the ratio laid down by the Hon’ble jurisdictional High Court in the case of Manjunath Cotton and Ginning Factory(supra). It is relevant to state that the SLP filed in the case of Manjunath Cotton and Ginning Factory(supra) has been dismissed by the Hon’ble Apex Court.
After examining the facts of the case in the light o the decisions of Hon’ble Karnataka High Court and the Jurisdictional High Court (supra) we are of the considered view that the proceedings initiated by the AO without specifying the specific charge under which the penalty is proposed to be initiated is bad in law and so is the consequent order.. Since, we have already decided the appeal of the assessee on technical and legal ground, there is no need to go into the merits of the case.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 15th Sept, 2017. sd (महाविर स िंग/Mahavir Singh) (राजेश कुमार/Rajesh Kumar) न्याययक दस्य / Judicial Member ऱेखा दस्य / Accountant Member भुंफई Mumbai; ददनधंक Dated : 15th Sept.2017