WINNER SPORTS LTD,MUMBAI vs. ITO WD 1(1), JAIPUR

The captioned appeal by assessee for Assessment Year [AY] 2009-10 assails the order of Ld. Commissioner of Income tax (Appeals) [CIT(A)], Aligarh at Jaipur (Camp House) dated 10/03/2016 qua confirmation of penalty u/s 271(1)(c) for Rs.3,04,457/-. The jurisdiction of the assessee has been changed from ITO, Ward 6(1), Jaipur to DCIT- 10(3)(2), Mumbai vide order dated 06/04/2016 of Pr. Commissioner of Income Tax, Jaipur-II. The name of the assessee has also been changed from Winner Sports Limited to Planet Traders Limited and consequently a revised Form 36 has been filed. In this background, we proceed to decide the appeal in the succeeding paragraphs.

Briefly stated, the assessee, being resident corporate assessee, was subjected to an assessment u/s 143(3) vide Assessing Officer [AO] order dated 30/12/2011 wherein the total income of the assessee was determined at Rs.27,790/- after certain adjustments / disallowances as against Loss return of Rs.9,85,215/- filed by the assessee on 24/09/2009. The assessee suffered certain disallowances u/s 43B, 40(a)(ia), bad Debts and depreciation all aggregating to Rs.9,85,279/- and accordingly subjected to impugned penalty of Rs.3,04,457/- u/s 271(1)(c) vide AO penalty order dated 25/06/2012 for furnishing of inaccurate particulars. The same was assailed with partial success before Ld. CIT(A) vide order dated 10/03/2016, against which the assessee is in appeal before us. 3. The Ld. Counsel for Assessee [AR], first of all, assailed the penalty on technical / legal grounds by drawing our attention to the quantum Assessment order, show cause notice issued u/s 274 read with Section 271(1)(c) and AO’s penalty order and contended that the penalty order stood vitiated on technical grounds as the penalty was initiated / levied by AO without due application of mind. First of all, no specific charge was ITA No.3458/M/2016 Planet Traders Limited Assessment Year 2009-10 mentioned by AO in the quantum order for which the penalty was being initiated. Further, the show-cause notice issued u/s 274 r.w.s. did not specify the exact ground / limb for which the assessee was being penalized which impinged upon a valuable right of the assessee to effectively contest the penalty proceedings. Finally the penalty was levied for furnishing of inaccurate particulars. Thus, the AO was never clear in his mind as to limb against which he initiated the penalty in the quantum order and therefore, the penalty order was bad in law in the light of various judicial pronouncements. Reliance has been placed on the judgment of Hon’ble Apex court in the case of CIT Vs SSA’s Emerald Meadows [72 taxmann.com 248] and Hon’ble Bombay High Court in CIT Vs. Samson Perinchery [98 CCH 0039 Mum HC]. Per contra, Ld. DR contended that the penalty was initiated with due application of mind. The notice u/s 274 was in the standard format and the limb for which the penalty was initiated was duly ticked by the AO and the assessee very well knew at all times for which the penalty was initiated and levied. The assessee actively contested the penalty and therefore, not entitled to raise this issue now.

We have heard the rival contentions and perused the relevant material on record. A perusal of the quantum assessment order reveals that the Ld. AO has used the expression ‘Penalty notice u/s 271(1)(c) issued’. Further, a perusal of notice dated 30/12/2011 issued under Section 274 read with section 271 of the Income Tax Act, 1961 reveals that the AO has ticked point no. (iii) which states that ‘have concealed the particulars of your income or furnished inaccurate particulars of income. Finally, the penalty has been levied vide order dated 25/06/2012 for furnishing of inaccurate particulars of income. Therefore, in our opinion, the AO has not initiated the penalty with due application of mind as at the time of initiation of penalty the AO was not clear about the limb for which the penalty was being initiated. It is well settled that the expression concealment of income and furnishing of inaccurate particulars carries different meanings / connotations and the therefore, the assessee has every right to know the limb for which he is being penalized and failure to do so vitiates the penalty. Our Planet Traders Limited Assessment Year 2009-10 view is fortified by the ratio of cited case laws. Hence, finding the penalty bad in law, we quash the same and allow assessee’s appeal. In nutshell, the assessee’s appeal succeeds.

Order pronounced in the open court on 17th April, 2017.