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Income Tax Appellate Tribunal, “L” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO & SHRI RAVISH SOOD
सुनवाई की तायीख / Date of Hearing : 02.02.2017 घोषणा की तायीख /Date of Pronouncement : 08.02.2017 आदेश / O R D E R PER BENCH: There are four appeals under consideration. All these appeals are filed by the assessee involving the assessment years 2005-06 to 2008-09. Since, the issues raised by the assessee in these appeals are identical, therefore, for the sake of convenience, they are clubbed, heard combinedly and disposed of in this consolidated order. Appeal wise adjudication is given in the following paras of the order.
In all the four appeals, assessee raised identical grounds and therefore, for the purpose of adjudication and reference sake, the grounds raised
by the assessee in are extracted as under:-
1. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in confirming penalty u/s 271(1)(c) of the Act amounting to Rs. 2,33,40,986/-.
2. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in not appreciating the fact that the appellant had not concealed particulars of income ie marketing contribution.
On the facts and in the circumstances of the case and in law, the CIT (A) erred in not appreciating the fact that the appellant had not furnished inaccurate particulars of income ie market contribution. 4. The Ld CIT (A) erred in confirming the application of paragraph (B) of Explanation 1 to section 271(1)(c) of the Act. 5. The Ld CIT (A) erred in not appreciating that market contribution has been taxed due to different view adopted during the assessment proceedings.” Further, before us, assessee filed an additional ground, which is identical in 3. all the four appeals and the same reads as under:- “On the facts and circumstances of the case and in law, whether the Assessing Officer was justified in levying penalty u/s 271(1)(c) of the Act when proper satisfaction for initiation of penalty and for issue of notice was not recorded by him, and also when there was no clarity in his mind as to which limb, ie “concealment of particulars of furnishing inaccurate particulars” was applicable, at the limb of initiating the penalty and also the time of issue of notice.” 4. The common issue raised in these appeals relates to the levy of penalty u/s 271(1)(c) of the Act when the penalty notice issued u/s 274 of the Act suffers from the defect of „non application of mind by the AO‟ with regard to striking of / deleting of the relevant limb of clause (c) of section 271(1) of the Act. Though the grounds in all these appeals are raised in different language, the arguments raised by the Ld Counsel for the assessee before us revolves around the above.
Before us, at the outset, Shri P.J. Pardiwala, Ld Counsel for the assessee brought our attention to page no. 56 / 57 of the paper book (notice u/s 274 r.w.s 271 of the Act) and submitted that the Assessing Officer has not applied his mind and did not strike of the relevant limb for which the penalty notice was issued u/s 271(1) of the Act. To substantiate the above, Ld AR also brought our attention to the assessment order of the AO and read out the following (page 8 of the assessment order).
“For concealing the particulars of income penalty proceedings u/s 271(1)(c) are separately initiated.” 6. Ld AR also read out the following from page 9 of the assessment order:- “Penalty proceedings u/s 271(1)(c) is also initiated separately for furnishing inaccurate particulars of income thereby concealing income.” 7. Further, bringing our attention to the penalty order dated 16.03.2012 in general and fourth line of para 5 in particular, Ld AR read out the following:-
5......the addition .......is deemed to represent the income in respect of which particulars have been concealed
Considering the above, Ld Counsel for the assessee mentioned that the AO is not clear about the provisions for which AO levied the penalty, therefore, it is a case of non application of mind by the AO to such an issue relating to levy of penalty u/s 271(1)(c) of the Act.
Referring to the consequences of such non application of mind by the AO, Ld AR brought our attention to the judgment of the Hon‟ble Karnataka High Court in the case of CIT vs. Manjunath Connon and Ginning Factory (359 ITR 565), which is relevant for the proposition that “penalty proceedings does not survive when the AO failed to delete from the standard profarma of the relevant clauses, such failure leads to an inference as to non-application of mind.” Further, mentioning that such judgment has obtained the approval of the Hon‟ble Supreme Court, Ld Counsel for the assessee brought our attention to the judgment of the Apex Court in the case of CIT vs. SSA‟S Emerald Meadows [2016] 73 taxmann.com 248 (SC), which is relevant for the above legal proposition. Ld AR also relied on the judgment of the Hon‟ble jurisdictional High Court in the case of CIT vs. Shri Samson Perinchery in IT Appeal No.1154 of 2014 and others dated 5.1.2017 and submitted the above legal proposition was approved by the jurisdictional High Court.
On hearing both the parties, we have perused the said extracts from the orders of the AO and find that the confusion in the mind of the AO is obvious from the said extracts. The consequence of such a mess in the minds of the officers is not approved by various judicial forums including that of the Hon‟ble jurisdictional High Court as well as the Hon‟ble Apex Court. In this regard, we have perused the legal proposition in the case of SSA‟S Emerald Meadows (supra) and the same reads as under:- “Where Tribunal, relying on a decision of Karnataka High Court, allowed appeal of assessee holding that notice issued under section 274 read with section 271(1)(c) was bad in law, as it did not specify under which limb of section 271(1)(c) penalty proceedings had been initiated and High Court, on appeal, held that there was no substantial question of law arising for determination, SLP was to be dismissed.”
Further, we have also perused the judgment of the Hon‟ble jurisdictional High Court in the case of Shri Samson Perinchery (supra) and find the contents of paras 6 and 7 are relevant. Considering the significance as well as for the sake of completeness of this order, the said relevant portions of paras 6 and 7 of the High Court‟s judgment are extracted as under:- “6........Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant / permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated / notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has not notice.
Therefore, the issue herein stands concluded in favour of the Respondent- Assessee by the decision of the Karnataka High Court in the case of Manjunath Cotton and Ginning Factory (supra). Nothing has been shown to us in the present facts which would warrant our taking a view different from the Karnataka High Court in the case of Manjunath Cotton and Ginning Factory (supra).”
Considering the above binding judgment on the issue / arguments of the Ld Counsel for the assessee, we find, the order of the CIT (A) is required to be reversed. For the said reasons, penalty has to be deleted for the AY 2005-06 in ITA No.5525/M/2014. Accordingly we order.
In respect of the other three appeals (ITA Nos.5526, 5527 & 5528/M/2014) for the AYs 2006-07 to 2008-09, similar argument was put forward by the Ld Counsel for the assessee and relied heavily on the non-application of mind by the AO on the said notice issued u/s 274 r.w.s 271(1) of the Act and find identical approach of the AO as inescapable observation. In all these three appeals too, AO filed to strike of relevant limb for which the penalty was initiated. Considering the commonness of the issue with that of the one adjudicated by us in in the above paras of this order, we find, similar view should be taken in respect of the penalty in these three appeals too. Accordingly, penalty levied in the appeals for the AYs 2006-07 to 2008-09 is deleted. Consequently, the grounds raised
by the assessee in all the four appeals are allowed on the above technical ground.
14. Considering the our decision on the legal issue, we are of the opinion, the adjudication of the other grounds raised on merits becomes an academic exercise. Accordingly, relevant grounds raised by the assessee in all the four appeals are dismissed as academic.
15. In the result, all the four appeals of the assessee are partly allowed.