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Income Tax Appellate Tribunal, BANGALORE BENCH “ C ”
Before: SHRI VIJAY PAL RAO
These two appeals by the assessee are directed against two separate orders
both dt.24.9.2013 of Commissioner of Income Tax (Appeals) arising from
assessment order passed under Section 143(3) and penalty order passed under
Section 271(1)(c) of the Income Tax Act, 1961 (in short 'the Act').
There is a delay of 61 days in filing these appeals by the assessee. The
assessee has filed petition for condonation of delay which is supported by an
Affidavit of the assessee.
2 ITA Nos.187 & 188/Bang/2014 3. I have heard the learned Authorised Representative as well as learned
Departmental Representative and considered the Affidavit filed by the
assessee explaining the delay in filing the appeals. The ld. AR has referred to
the contents of the Affidavit and submitted that the delay in filing the appeal is
due to time taken in appointing Chartered Accountant to look after the
income tax matters in fling the appeals and the assessee has undergone
cryopexy under LA treatment of left eye and was advised complete rest for 8
weeks form 25.1.2010 onwards. The ld. AR has referred to the medical
certificate copies enclosed along with the Affidavit. Thus the learned
Authorised Representative has pleaded that the delay in filing the appeal is
neither intentional nor willful but because of the facts and circumstances which
were beyond the control of the assessee.
On the other hand, the ld. DR has vehemently opposed the condonation
of delay and submitted that the conduct of the assessee shows that the
assessee is habitual in not taking the matter seriously as there was a delay of 4
years before the CIT (Appeals). Thus the ld. DR has submitted that the assessee
has not explained the delay in filing the appeal.
Having considered the rival submissions as well as the relevant material
on record, it is noted that the assessee has filed the medical record to show
3 ITA Nos.187 & 188/Bang/2014 that the assessee has undergone eye treatment on 20.10.2005 in Shekar
Netralaya, Bangalore. The assessee has pleaded that she has again undergone
the left eye cryopexy under LA treatment on4.11.2009 and thereafter advised
complete rest for 8 weeks. The assessee has further explained that since the
assessee is a single lady and was facing health problem and therefore could not
take necessary steps in time for filing the appeal. Accordingly, the assessee has
pleaded for condonation of delay. Having considered the facts and
circumstances of the case as well as in the interest of justice the delay of 61
days in filing the appeals before this Tribunal is condoned.
In the quantum appeal, the assessee has raised the following grounds :
“ 1. On the facts and in the circumstances of the case, the learned CIT (Appeals) erred in passing the order in the manner he did. 2. On the facts and in the circumstances of the case, the learned CIT (Appeals) ought to have condoned the delay in filing the appeal, given an adequate opportunity to the appellant to explain the sufficient cause for the delay as the delay was caused by the authorized representative of the appellant which was a bona fide mistake and not intentional. 3. The learned CIT (Appeals) ought to have appreciated that on merits the appellant had a good case since the Assessing Officer erred in disallowing the cash deposits into the bank account as unexplained. 4. The learned CIT (Appeals) erred in upholding the levy of interest under Sections 234A & 234B of the Act. 5. For these and such other grounds that may be urged at the time of hearing, the appellant prays that the appeal may be allowed.”
4 ITA Nos.187 & 188/Bang/2014 7. I have heard the learned Authorised Representative as well as learned
Departmental Representative and considered the relevant material on record.
There was a delay of four years in filing the appeal before the CIT (Appeals) and
the CIT (Appeals) declined to condone the delay on the ground that the
assessee has failed to explain the delay. The only explanation furnished by the
assessee before the CIT (Appeals) is that the assessee has undergone the left
eye cryopexy under LA treatment. It is pertinent to note that as per the medical
record filed by the assessee she has undergone the treatment on 20.10.2005
and on the same day the assessee was discharged form the hospital. Therefore
the treatment was only for a one day hospitalization for which the delay of
four years cannot be explained. Apart from the said explanation the assessee
has not explained any other facts or surrounding circumstances which have
caused the delay in filing the appeal before the CIT (Appeals). Thus having
considered the facts and circumstances of the case this Tribunal do not find any
error or illegality in the order of the appeal for condonation of delay of four
years. Accordingly, the appeals filed against the assessment order passed
under Section 143(3) of the Income Tax Act, 1961 (in short 'the Act') deserves
dismissal. Further it is noted that the assessee has not produced the relevant
record in support of the claim of deposit of Rs.25 lakhs in the bank account. It
5 ITA Nos.187 & 188/Bang/2014 is pertinent to note that the assessment order in thecase of the assessee on
30.12.2008 and the assessee took four years to file the appeal before the CIT
(Appeals) despite taking four years the assessee did not file the supporting
evidence even before the CIT (Appeals). Now at this stage the assessee has
filed additional evidence and seeking permission to file the additional evidence
and admission of the additional evidence. Having regard to the facts and
circumstances of the case and conduct of the assessee, this case is not fit for
admitting the additional evidence filed by the assessee at this stage that too is
not a complete evidence in support of the claim but the assessee has filed the
alleged confirmation letters in respect of the part of the amount. Accordingly,
in the peculiar facts and circumstances of the case, the additional evidence filed
by the assessee at this stage cannot be admitted. Hence the appeals filed by
the assessee arising from the assessment order is dismissed.
In the penalty appeal, the assessee has originally raised the following
grounds :
“ 1. On the facts and in the circumstances of the case, the order of the learned CIT (Appeals) is opposed to law and facts of the case. 2. On the facts and in the circumstances of the case, the learned CIT (Appeals) ought to have appreciated that there was no mala fide intension on the part of the Appellant to justify the levy of penalty under Section 271 (1 )(c) of the Act. 3. On the facts and in the circumstances of the case, the learned CIT (Appeals) ought to have appreciated that the Appellant was doing saree business among the family
6 ITA Nos.187 & 188/Bang/2014 members and close friends circle and declared a turnover of Rs.32.36 lakhs which is not covered under Section 44AB of the IT Act. Accordingly, the profit has been arrived under Section 44AF at 5% on the turnover and taxes have been paid on the same. 4. The learned CIT (Appeals) ought to have appreciated the reasonable cause and hardship of the Appellant for not furnishing the proof for the cash deposit since the Appellant's failure to produce the documents was on account of reasonable cause. Thus, there was no concealment or furnishing of inaccurate particulars and consequently the levy of penalty under Section 271 (1 )( c) of the Act was uncalled for. 5. On the facts and in the circumstances of the case, the learned CIT (Appeals) erred in not considering the various judicial pronouncements relied on by the Appellant.
For these and such other grounds that may be urged at the time of hearing. the Appellant prays that the appeal may be allowed.” 9. The assessee has also raised additional ground which reads as under :
“ 1. The Assessing Officer having issued the notice under Section 274 read with section 271(1)(c) of the Act in a mechanical manner, the penalty order passed under Section 271(1)(c) of the Act is not sustainable in the eye of law. 2. The appellant begs to submit that the decision of the jurisdictional High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565 (Karn) is squarely applicable and therefore the impugned order of the authorities below is required to be set aside.”
I have heard the learned Authorised Representative as well as learned
Departmental Representative and considered the relevant material on
admission of additional grounds. As it is clear from the issue raised in the
additional ground that it is pure legal in nature whereby the assessee is
challenging the validity of notice issued under Section 274 r.w.s. 271(1)( c ) of
the Act and supported the same with the judgment of Hon'ble jurisdictional
High Court in the case of Manjunatha Cotton & Ginning Factory reported in 359
7 ITA Nos.187 & 188/Bang/2014 ITR 565. Since the additional grounds raised by the assessee does not require
any fresh investigation of facts therefore, in the facts and circumstances of the
case and in view of the judgment of Hon'ble Supreme Court in the case of NTPC
Ltd. Vs. CIT 229 ITR 383, the additional ground raised by the assessee is
admitted for adjudication.
The assessee has filed the notice issued under Section 274 r.w.s. 271(1)(c)
of the Act and submitted that the Assessing Officer has not specified the default
on the part of the assessee whether it is concealment of income or furnishing
of inaccurate particulars of income. Therefore the said show cause notice
under Section 274 is defective and illegal and consequently penalty is not
sustainable. She has also relied upon the subsequent decision of the Hon'ble
jurisdictional High Court dt.25.1.2016 in the case of Safina Hotels Pvt. Ltd. Vs.
CIT, Bangalore III & Another in ITA No.240/2010 wherein the Hon'ble High
Court has reiterated the principle as laid out in the case of CIT Vs. Manjunatha
Cotton & Ginning Factory (supra).
On the other hand, the ld. DR has relied upon the orders of authorities
below.
Having considered the rival submissions and material on record, it is
noted that the Assessing Officer has initiated the penalty proceedings by issuing
8 ITA Nos.187 & 188/Bang/2014 a notice under Section 274 r.w.s. 271 dt.30.12.2008. The grounds of proposed
penalty under Section 271(1)(c) of the Act has been mentioned in the notice as
under :
“have concealed the particulars of your income or …… furnished inaccurate particulars of such income.”
As it is clear that the Assessing Officer has not made it clear as on which
ground the penalty was proposed to be initiated by issuing the said notice, the
Hon'ble jurisdictional High Court in the case of CIT Vs. Manjunatha Cotton &
Ginning Factory (supra) has held that the notice under Section 274 of the Act
should specifically state the ground mentioned in 271(1)(c) of the Act i.e.
whether it is for concealment of income or furnishing of inaccurate particulars
of income. Sending printed form where all the grounds mentioned in the
section 271(1) are mentioned would not satisfy the requirement of law. By
considering the said decision, the Hon'ble jurisdictional High Court in the
subsequent decision dt.25.1.2016 in the case of M/s. Safina Hotels Pvt. Ltd.
Vs. CIT & Another (supra) has held in paras 9 to 11 as under :
“ 9. The Judgment of Manjunath Cotton and Ginning's case (supra) is squarely applicable to the facts of the present case wherein, it is held that the levy of penalty is not automatic concomitant of the assessment and the standard proforma without speaking of the relevant clauses lead to an inference to non-application of mind. In the conclusion part at para.63 of the said judgment, in clauses n,p,q,r, it is held thus:
9 ITA Nos.187 & 188/Bang/2014 "(n) The direction referred to in Explanation IB to Section 271 of the Act should be clear and without any ambiguity. (p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section271(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." 10. As regards Section 271(1-B) of the Act, it clearly indicates that the assessment order should contain a direction for initiation of proceedings. Merely saying that the penalty proceedings have been initiated would not satisfy the requirement, a direction to initiate proceeding shall be clear and not be ambiguous. 11. In the light of the said judgment of the Co-ordinate Bench, we are of the considered view that the Assessing Officer has not applied his mind at the time of issuing notice under Section 274 R/W Section 271(1)(b) of the Act. This view is fortified by the order passed under Section 271(1)(c) of the Act. No direction is coming forth in the assessments order for levying penalty which is mandatory as per Section 271(1B) of the Act. Considering the relevant factors, appellate commissioner has rightly allowed the appeal of the assessee setting-aside the order passed by the Assessing Officer which has been reversed by the ITAT on the ground that the assessee deliberately evaded the payment of tax by declaring the capital expenditure as revenue expenditure in the 'financial expenses'. In our considered opinion, for the reasons stated above, the order passed by the ITAT is not sustainable. Accordingly, we set aside the order of the ITAT and restore the order passed by the CIT(A) answering the substantial questions of law in favour of the assessee and against the revenue.” Respectfully following the judgment of the Hon'ble jurisdictional High Court on
this issue, the penalty levied under Section 271(1)(c) on the basis of defective
10 ITA Nos.187 & 188/Bang/2014 notice under Section 274 is not sustainable and accordingly the same is deleted.
In the result, the assessee's appeals in ITA No.187/Bang/2014 is dismissed
and ITA No.188/Bang/2014 is allowed. Order pronounced in the open court on 29th day of July, 2016.
Sd/- (VIJAY PAL RAO) JUDICIAL MEMBER
*Reddy gp
Copy to : 1. Appellant 2. Respondent 3. C.I.T. 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard File.
By Order
Asst. Registrar, ITAT, Bangalore