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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
Per Shri A.T.Varkey, JM These cross appeals filed by the assessee and the revenue against the order of Ld. CIT(A)-3, Kolkata dated 31.03.2015 for AY. 2010-11 against the penalty imposed u/s. 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”).
Briefly stated facts as observed by the AO are that in the assessment order the AO made three disallowances i.e. commission of Rs. 57 lacs in respect of sale of 57 vehicles, sales promotion expenditure of Rs.6,54,177/- which was stated to be incurred for purchases of gold coins given to the purchaser of the vehicles, Rs. 97,940/- and Rs.43,000/- debited under the head sales promotion expenses were also disallowed due to non-furnishing of the relevant details and the disallowance to Rs.13,58,557/- incurred on foreign travel by the directors. Due to lack of relevant details and evidence and in the absence of proper explanation, the AO disallowed the expenses and initiated the penalty proceedings u/s. 2 & 718/Kol/2015 Ural India Ltd. AYs- 2010-11 271(1)(c) of the Act and imposed penalty of Rs.48,53,570/- being 200% of the tax sought to be evaded. Aggrieved, assessee preferred appeal before the ld. CIT(A), who restricted the penalty at 100% of the tax sought to be evaded and gave partial relief to the assessee. Aggrieved, both the assessee as well as the revenue is in appeal before us.
At the outset, Ld. Counsel for the assessee drew our attention to the notice u/s. 274 of the Act r.w.s. 271 of the Act dated 08.03.2013 served on the assessee wherein we note that the AO has not struck down the limb of charge/default i.e. ‘concealed the particulars of income’ or ‘furnishing inaccurate particulars of income’ for which the penalty was initiated against the assessee which according to the Ld. AR, make the notice defective and, therefore, the notice was invalid and penalty levied is not sustainable in the eyes of law and relied on the decision of Hon’ble Karnataka High Court in the case of CIT vs Manjunatha Cotton and Ginning Factory reported in (2013) 359 ITR 565 (Kar.) and pointed out that against the said order of Hon’ble High Court the revenue preferred SLP before the Hon’ble Supreme Court which was dismissed. On the other hand, Ld. CIT, DR vehemently opposed the said plea of the assessee and contended that it is clearly discernible that a tick mark has been put on one of the faults specified therein so, if the assessee had any grievance he should have taken up the matter with the AO during penalty proceedings and get it clarified. Therefore, according to the Ld. DR, there is no question of invalidity of the notice. He, therefore, relied on the following decisions: i) Dr. Syamal Baran Mondal Vs. CIT (2011) 244 CTR 631 (Cal), ii) Jaysons Infrastructure India Private Ltd. Vs. ITO TS 5873 ITAT 2017 (Bangalore), iii) Trishul Enterprises Vs. DCIT * 385/Mum/2014 for AYs. 2006-07 & 2007-08 dt. 10.02.2017, iv) M/s. Maharaj Garage & Co. Vs. CIT judgment dated 22.08.2017, v) Earthmoving Equipment Service Corporation Vs. DCIT (2017) 84 taxmann.com 51 and vi) Decision of ITAT, Jaipur in ITA No. 820/JP/2016 in Airen Metals Pvt. Ltd. dt. 29.09.2017. And ld DR has filed his written submission stating that the penalty cannot be struck down for merely a procedural lapse, like in this case.
3 & 718/Kol/2015 Ural India Ltd. AYs- 2010-11 4. We have heard rival submissions and gone through the facts and circumstances of the case. We find that since the notice has been issued for both the limbs of the faults “having concealed the particulars of income” or “furnished inaccurate particulars of such income” and only a tick mark has been put which is applicable for both the faults/limbs, it does not clearly call upon the assessee as to which fault for which he is being proceeded against for imposition of penalty. We note that in a similar case, the Hon’ble High court of Karnataka in the case of CIT vs Manjunatha Cotton and Ginning Factory reported in (2013) 359 ITR 565 (Kar) has cancelled the penalty taking note of the fact that the penalty notice did not spell out clearly as to whether the assessee has concealed the particulars of income or has furnished inaccurate particulars of Income. We also find that Hon’ble Karnataka High Court in the case of CIT Vs. SSA’s Emerald Meadows, reported in (2016) 73 taxmann.com 241 (Kar) endorsed the same view in Manjunatha Cotton and Ginning Factory (supra) and held as under:
“3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (for short ‘the Act’), to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of CIT Vs. Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565/218 Taxman 423/35 taxmann.com 250(Kar).
In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court. The appeal is accordingly dismissed.”
We also find that the aforesaid order of the Hon’ble High Court was challenged by the department before the Hon’ble Supreme Court by preferring an SLP which has been dismissed which fact has been reported in CIT Vs. SSA’s Emerald Meadows (2016) 73 taxmann.com 248 (SC).
5. We note that since the penalty notice issued to the assessee dated 08.03.2013 did not spell out as to which default the assessee has committed for which penalty u/s. 271(1)(c) of the Act has been initiated, therefore, respectfully following the Hon’ble Karnataka High Court’s order in Manjunatha Cotton & Ginning Factory (supra) and SSA’s Emerald Meadows (supra), we set aside the order of Ld. CIT(A) and delete the penalty imposed by the AO and restricted by the Ld. CIT(A) to 100% of the tax sought to be evaded u/s.
In the result, appeal of assessee is allowed and that of the revenue is dismissed. .
Order is pronounced in the open court on 21st December. 2017.