VECTUS INDUSTRIES LTD.,,GWALIOR vs. DCIT/ACIT 1(1) , GWALIOR
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Income Tax Appellate Tribunal, AGRA BENCH “DB”: AGRA
Before: SHRI M. BALAGANESH
INCOME TAX APPELLATE TRIBUNAL AGRA BENCH “DB”: AGRA SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER (Through virtual hearing) ITA Nos. 06, 07 & 08/AGR/2023 (AYs: 2012-13, 2017-18 & 2018-19) Vectus Industries Ltd, Vs. ACIT, 262, Jiwaji Nagar, Thatipur, Circle-1(1), Gwalior, MP Gwalior (Appellant) (Respondent) PAN:AACCV5516B Assessee by : Shri K. Sampath, Adv Shri V. Rajkumar, Adv Revenue by: Shri Shailender Shrivastava, Sr. DR Date of Hearing 06/02/2025 Date of pronouncement 06/02/2025
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA Nos. 06, 07 & 08/AGR/2023 for AYs 2012-13, 2017- 18 & 2018-19, arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as „ld. NFAC‟, in short] dated 22.11.2022 against the order of assessment passed u/s 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 22.03.2022 by the Assessing Officer, ACIT, 1(1), Gwalior (hereinafter referred to as „ld. AO‟).
The assessee vide Ground No. 4 had raised a ground stating that the ld. AO in the penalty notice had not struck off the inappropriate portion as to whether the assessee had concealed the particulars of income or furnished inaccurate particulars of income.
ITA Nos. 06, 07 & 08/AGR/2023 Vectus Industries Ltd
We have heard the rival submissions and perused the materials available on record. We find that the ld. AR placed on record the show cause notice issued for penalty u/s 274 read with section 271(1)(c ) of the Act dated 30.12.2018 wherein it is very clear that the ld. AO had not specifically mentioned the offence committed by the assessee by striking off the irrelevant portion i.e. whether the assessee had concealed his particulars of income or had furnished inaccurate particulars of income. Now the short question that arises is whether non-striking off of the irrelevant portion in the penalty notice by not specifically mentioning the offence committed by the assessee, would become fatal to the penalty proceedings? This issue is no longer res integra in view of the Full Bench Decision of Hon‟ble Bombay High Court in the case of Mohd. Farhan A Shaikh vs DCIT reported in 434 ITR 1 (Bom)(FB) dated 11.3.2021. The relevant operative portion of the said judgement is reproduced hereunder:-
“Question No. 3: What is the effect of the Supreme Court's decision in Dilip N. Shroff Case (supra) on the issue of non-application of mind when the irrelevant portions of the printed notices are not struck off ? 187 In Dilip N. Shroff case (supra), for the Supreme Court, it is of "some significance that in the standard Pro-forma used by the assessing officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done". Then, Dilip N. Shroff case (supra), on facts, has felt that the assessing officer himself was not sure whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. 188. We may, in this context, respectfully observe that a contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must be precise. It should give no room for ambiguity. Therefore, Dilip N. Shroff Case (supra) disapproves of the routine, ritualistic practice of issuing omnibus show-cause notices. That practice certainly betrays non- application of mind. And, therefore, the infraction of a mandatory procedure leading to penal consequences assumes or implies prejudice.
ITA Nos. 06, 07 & 08/AGR/2023 Vectus Industries Ltd
In Sudhir Kumar Singh, the Supreme Court has encapsulated the principles of prejudice. One of the principles is that "where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, "except in the case of a mandatory provision of law which is conceived not only in individual interest but also in the public interest". 190. Here, section 271(1)(c) is one such provision. With calamitous, albeit commercial, consequences, the provision is mandatory and brooks no trifling with or dilution. For a further precedential prop, we may refer to Rajesh Kumar v. CIT [2007] 27 SCC 181, in which the Apex Court has quoted with approval its earlier judgment in State of Orissa v. Dr. Binapani Dei AIR 1967 SC 1269. According to it, when by reason of action on the part of a statutory authority, civil or evil consequences ensue, principles of natural justice must be followed. In such an event, although no express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue contravenes the principles of natural justice, it may also be held ultra vires Article 14 of the Constitution. 191. As a result, we hold that Dilip N. Shroff Case (supra) treats omnibus show-cause notices as betraying non-application of mind and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that generic notice. Conclusion: We have, thus, answered the reference as required by us; so we direct the Registry to place these two Tax Appeals before the Division Bench concerned for further adjudication.”
Similar view was taken by the Hon‟ble Jurisdictional High Court in the case of PCIT vs Sahara India Life Insurance Co. Ltd reported in 432 ITR 84(Del) wherein it was held as under:-
“21. The Respondent had challenged the upholding of the penalty imposed under section 271(1) (c) of the Act, which was accepted by the ITAT. It followed the decision of the Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory [2013] 35 taxmann.com 250/218 Taxman 423/359 ITR 565 and observed that the notice issued by the AO would be bad in law if it did not specify which limb of section 271(1)(c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. The Karnataka High Court had followed the above judgment in the subsequent order in CIT Page | 3
ITA Nos. 06, 07 & 08/AGR/2023 Vectus Industries Ltd
v. SSA's Emerald Meadows [2016] 73 taxmann.com 241, the appeal against which was dismissed by the Supreme Court of India in SLP No. 11485 of 2016 by order dated 5th August, 2016. 22. On this issue again this Court is unable to find any error having been committed by the ITAT. No substantial question of law arises. 23. The appeals are accordingly dismissed.”
In the instant case, on perusal of the penalty notice placed on record dated 30.12.2018, it is evident that the ld. AO had not struck off the irrelevant portion thereon mentioning the specific offence committed by the assessee. The ratio laid down in the aforesaid decision of Hon‟ble High Courts squarely applies to the facts of the instant case before us. Hence we direct the ld. AO to delete the penalty levied u/s 271(1)(c) of the Act. Accordingly, the Ground No. 4 raised by the assessee is allowed. Since the relief is granted based on Ground No. 4 itself, there is no need to separately adjudicate the other grounds raised by the assessee.
In the result, the appeal of the assessee is allowed.
ITA No. 7/Ag/2023 – Asst Year 2017-18 - Assessee Appeal 7. The only effective issue to be decided in this appeal is as to whether the Learned NFAC was justified in confirming the levy of penalty under section 270A of the Act in the facts and circumstances of the instant case.
We have heard the rival submissions and perused the materials available on record. The original return of income for the Assessment Year 2017-18 was filed by the assessee company on 13-10-2017 declaring total income of Rs 14,98,32,770/-. The assessee is engaged in the business of manufacturing of plastic pipes and fittings and containers of plastics at its manufacturing units situated in integrated industrial state. The assessee
ITA Nos. 06, 07 & 08/AGR/2023 Vectus Industries Ltd
company has claimed deduction under section 80IC of the Act for 3 different units i.e. 2 units located at Haridwar and 1 unit located at Kashipur. The learned AO in the course of quantum assessment proceedings observed that in respect of scrap sale, interest received, exchange difference, business support services, amounts written back and miscellaneous income, the assessee would not be entitled for deduction under section 80IC of the Act as it cannot be construed as profits derived from the eligible unit. Accordingly, the learned AO disallowed the deduction under section 80IC of the Act as excessively claimed in the sum of Rs 5,65,487/-. Pursuant to the assessment framed, the assessee company did not contest the same by preferring first appeal before the learned Commissioner (appeals). The assessee paid the due taxes in respect of demand raised by the learned AO. The assessee filed Form No. 68 before the learned AO on 3-2-2020, which was delayed by 3 days. The due date of filing the said Form was 31-1- 2020 and the same was filed by the assessee on 3-2-2020 seeking immunity from levy of penalty in accordance with provisions of section 270AA of the Act. Since the Form No. 68 was filed belatedly by 3 days, the learned AO levied penalty under section 270A of the Act on the assessee.
From the above, it could be seen that the Assessee Company had substantially complied with the provisions of section 270 AA of the Act, wherein two of the three conditions prescribed therein had been fully complied with, i.e. by not preferring any appeal against the assessment order and Assessee Company duly making payment of complete taxes in respect of demand raised by the Learned AO in the Assessment Order. No doubt, Form No. 68 was to be filed by the Assessee Company on or before 31-01-2020 i.e. within one month from the end of the month in which the order was served on the Assessee. In the instant case, the Assessee Company had filed the said Form No. 68 on 3-02-2020 with a minor delay of
ITA Nos. 06, 07 & 08/AGR/2023 Vectus Industries Ltd
3 days. The bonafide intention of the assessee to settle the disputes by paying due taxes thereon cannot be doubted in the instant case. Substantive provision of not preferring any further appeal and by paying due taxes had been complied with by the Assessee Company. The filing of Form No. 68 within the due date is only to intimate the Learned AO about the compliance of substantive provisions, which is to be construed as directory in nature. In our considered opinion, for any violation of directory provisions, no assessee could be invited with penal consequences. Hence we hold that the assessee would be eligible for immunity from levy of penalty in terms of section 270AA of the Act in the facts and circumstances of the instant case.
On merits, we find that the Learned AO had merely disallowed a particular claim of deduction under section 80IC of the Act on certain items. Hence there cannot be any levy of penalty on disallowance of a claim of deduction. Reliance in this regard is placed on the decision of Hon‟ble Supreme Court in the case of Reliance Petroproducts Ltd reported in 322 ITR 158 (SC). Though this decision was rendered in the context of penalty under section 271(1)(c ) of the Act, the same analogy could be drawn for the penalty under section 270A of the Act also.
In view of our aforesaid observations, we direct the Learned AO to cancel the levy of penalty under section 270A of the Act for the Assessment Year 2017-18. The grounds raised by the assessee are hereby allowed.
In the result, the appeal of the assessee is allowed.
ITA No. 8/Ag/2023 – Asst Year 2018-19 - Assessee Appeal 13. The only effective issue to be decided in this appeal is as to whether the Learned NFAC was justified in confirming the levy of penalty under section 270A of the Act in the facts and circumstances of the instant case.
ITA Nos. 06, 07 & 08/AGR/2023 Vectus Industries Ltd
We have heard the rival submissions and perused the materials available on record. The Learned AO in the quantum assessment proceedings made some disallowance of claim of deduction under section 80IC of the Act for the year under consideration for some items. Pursuant to the assessment framed, the assessee company did not contest the same by preferring first appeal before the Learned Commissioner (appeals). The assessee paid the due taxes in respect of demand raised by the learned AO. The assessee did not file Form No. 68 before the Learned AO on or before 31-5-2021 in order to claim immunity from levy of penalty in terms of section 270AA of the Act. The assessee however preferred an application under section 119(2)(b) of the Act seeking condonation before the Central Board of Direct Taxes for Form No. 68 being filed after a lapse of time by stating the following reasons:-
a) There is no dispute that the units at Haridwar and Kashipur are entitled for deduction under section 80 IC of the Act. The assessee had submitted audit report in Form No. 10CCB for claiming deduction under section 80 IC of the Act along with the return of income. The assessee has relied upon the figures reflected in column numbers 29 and 30 of the said audit report in Form 10CCB issued by the Chartered Accountants and claimed deduction under section 80IC of the Act thereon in the return of income. b) However, on noticing that deduction under section 80IC of the Act has been wrongly claimed relying upon Auditor's report, the assessee suo moto before detection by the Learned AO submitted revised computation of income for Rs. 26,38,52,930/- as against the returned income of Rs. 25,85,88,080/- in order to avoid protracted litigation and to purchase peace of mind.
ITA Nos. 06, 07 & 08/AGR/2023 Vectus Industries Ltd
c) Since the assessee itself had voluntarily offered by way of revised computation of income, the same amount stood added by the Learned AO while completing the assessment apart from making certain minor disallowances on account of scrap sale, interest on deposits, miscellaneous income, etc. d) The assessee agreed to the entire assessment and did not file any appeal and paid the due taxes thereon. Hence, it was pleaded that substantive provisions of section 270 AA of the Act had been duly complied with and filing of Form No. 68 alone could not be done within time which was to be construed as a procedural provision. e) The assessee further stated that the office of their Chartered Accountants in Gwalior remained closed from 15-04-2021 to 02-06- 2021 due to Corona crisis. f) Between this period, District Administration Gwalior imposed Corona curfew wherein no one was allowed to open their establishment except essential services. g) Further, the senior partner of the Chartered Accountant firm, Shri G.D. Ladha, ageing 79 years, his wife was ailing from severe Parkinson's disease and he could not leave her alone in the house. Hence, he was also precluded from attending to his official duties. The work of the CA office was attended to only by the trainees that is article clerks who were also not allowed to attend the office due to Corona by their parents. Further, the Junior Partner CA Nitin Paharia lost his mother on 5-05-2021. h) There were several glitches on the income tax site due to their renovation and updation work during this period which went on for a long time. i) All these reasons collectively contributed for not uploading the Form No. 68 within time.
ITA Nos. 06, 07 & 08/AGR/2023 Vectus Industries Ltd
Hence, it was pleaded before the learned CBDT to condone the delay in furnishing of Form No. 68 by the assessee.
From the above, it could be seen that Assessee had duly proved its bonafide intention of settling the complete dispute by accepting to the assessment framed by the Learned AO. The Assessee had paid the due taxes in respect of demand raised by the Learned AO in the assessment order. No appeal has been filed by the Assessee before the Learned CIT appeals against the said assessment order. Hence, substantive provisions have been complied with. None of the factors and reasons stated by the Assessee for delayed filing of Form No. 68 was found to be untrue. Hence, we hold that filing of Form No. 68 is to be construed only as procedural and accordingly to be construed as directory in nature. No penal consequences could follow for violation of any directory provisions. Hence, we hold that Assessee would be entitled for immunity from levy of penalty in terms of section 270 AA of the Act in the facts and circumstances of the instant case. Accordingly, we direct the Learned AO to cancel the levy of penalty under section 270 A of the Act. The grounds raised by the Assessee are allowed.
In the result, the appeal of the assessee is allowed.
To sum up, all the appeals of the assessee are allowed.
Order pronounced in the open court on 06/02/2025.
-Sd/- -Sd/- (SATBEER SINGH GODARA) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 06/02/2025 A K Keot
ITA Nos. 06, 07 & 08/AGR/2023 Vectus Industries Ltd
