VECTUS INDUSTRIES LTD.,,GWALIOR vs. DCIT/ACIT 1(1), GWALIOR

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.

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".

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.

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:-

On this issue again this Court is unable to find any error having been committed by the ITAT. No substantial question of law arises.

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.

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 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 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.

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:-

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.