EMARSSO EXPORTS P. LTD,MUMBAI vs. DCIT RG 8(1), MUMBAI

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ITA 7817/MUM/2011Status: DisposedITAT Mumbai17 March 2017AY 2008-093 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty was not legally sustainable due to a lack of clarity from the revenue authorities regarding whether the case involved concealment of income or furnishing of inaccurate particulars. This ambiguity entitled the assessee to relief.

What were the facts?

The assessee, engaged in garment export, declared a significant loss. The AO made disallowances for unexplained stock and bad debts, leading to a revised taxable income. The AO initiated penalty proceedings under Section 271(1)(c) for concealment or furnishing inaccurate particulars of income.

What were the issues?

The primary issue was the validity of the penalty levied under Section 271(1)(c) when the notice and penalty order lacked clarity on the specific limb of the section invoked (concealment vs. inaccurate particulars).

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI

Before: SHRI D. KARUNAKARA RAO & SHRI SANDEEP GOSAIN

For Appellant: Shri I.P. Rathi
For Respondent: Shri Vishwas Mundhe, DR
Hearing: 01.03.2017Pronounced: 17.03.2017

सुनवाई की तायीख / Date of Hearing : 01.03.2017 घोषणा की तायीख /Date of Pronouncement : 17.03.2017 आदेश / O R D E R

PER D. KARUNAKARA RAO, AM:

1.

This appeal filed by the assessee on 18.11.2011 is against the order of the CIT (A)-16, Mumbai dated 2.9.2011 for the assessment year 2008-2009. In this appeal, assessee raised the following ground which reads as under:- “The Ld CIT (A) has erred in confirming the penalty charged u/s 271(1)(c) of the Act for Rs. 2,82,98,339/-.”

2. Briefly stated relevant facts of the case are that the assessee is engaged in the business of „manufacturing, trading and export of readymade garments‟. Assessee filed the return of income declaring the total loss of Rs. 8,31,53,070/-. Assessment was completed u/s 143(iii) of the Act and the assessed income was determined at Rs. 1,01,826/-. In the assessment, AO made certain disallowances viz (i) disallowance of Rs. 8,22,49,900/- on the ground that no evidence of stock reducing to NIL has been furnished and (ii) disallowance of expenses claimed as bad debts amounting Rs. 6,53,074/-. During the assessment proceedings, AO noticed that the opening stock was shown at Rs. 8,22,49,900/- and closing stock at Rs. NIL. Assessee was asked to justify the stock along with the claim of expenses made in the P & L Account. Considering the assessee‟s failure to substantiate its claim, AO held that the assessee concealed particulars of income, furnished inaccurate particulars of income and proceeded to initiate the penalty proceedings u/s 271(1)(c) of the Act. Accordingly, penalty order was passed on 3.3.2011. Matter travelled to the CIT (A).

3.

During the proceedings before the first appellate authority, after considering the submissions of the assessee, CIT (A) dismissed the appeal and confirmed the penalty levied by the AO. Aggrieved, assessee is in appeal before the Tribunal.

4.

Before us, at the outset, Ld Counsel for the assessee briefly narrated the background facts of the case and brought our attention the copy of the notice issued u/s 274 of the Act and mentioned that the AO did not ticked any of the columns provided on page of the said notice. Ld AR for the assessee reasoned that the AO has ambiguity on the applicable limb ie „concealment of income‟ or „furnishing of inaccurate particular of income‟.

5.

Further, bringing our attention to the penalty order dated 03.03.2011, Ld Counsel for the assessee read out the para 2 which reads as under:- “................As the assessee has “concealed particulars of income”, “furnished inaccurate particulars of income”, the penalty proceeding u/s 271(1)(c) of the Act are initiated.”

6.

After hearing both the parties and on perusal of the orders of the Revenue Authorities, we find, there is no clarity in the minds of the Revenue Authorities, whether the amount involved is a case of “concealment of income” or “furnishing of inaccurate particulars of income”. In such circumstances, the assessee is entitled to relief as per the ratio laid down in the binding judgment of Hon’ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton and Ginning Factory [2013] 359 ITR 565 (Karn.). For all the above reasons, we find, the penalty levied by the AO and confirmed by the CIT (A) is not legally sustainable. Accordingly, grounds raised

by the assessee are allowed.

7. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 17th March, 2017.

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