THE PR.COMMISSIONER OF INCOME TAX vs. M/S.RYATARA SAHAKARI SAKKARE KARKHANE NIYAMITHA

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ITA/100013/2019HC KarnatakaKAHC02011238201911 March 2020Bench: JYOTI MULIMANI,S.SUJATHA6 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal held that the penalty levied under Section 271(1)(c) was invalid because the show cause notice issued under Section 274 did not specify whether the charge was for concealment of income or furnishing inaccurate particulars of income. This decision was upheld by the High Court.

What were the facts?

The assessee claimed excess depreciation and certain expenses which were disallowed. The Assessing Officer initiated penalty proceedings under Section 271(1)(c) and levied a substantial penalty. The ITAT deleted the penalty, holding that the show cause notice was defective.

What were the issues?

Whether a penalty under Section 271(1)(c) is sustainable when the show cause notice under Section 274 is vague and does not specify the exact charge against the assessee.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274,Section 260A,Section 292B

AI-generated summary — verify with the full judgment below

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IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 11T H DAY OF MARCH, 2020 PRESENT THE HON’BLE MRS. JUSTICE S.SUJATHA AND THE HON’BLE MS. JUSTICE JYOTI MULIMANI

INCOME TAX APPEAL NO.100013/2019

BETWEEN:

1.

THE PR.COMMISSIONER OF INCOME TAX DR.B.R. AMBEDKAR ROAD, BELAGAVI.

2.

THE INCOME TAX OFFICER WARD-2, BAGALKOTE.

... APPELLANTS (BY SRI. Y V RAVIRAJ, ADVOCATE)

AND

M/S.RYATARA SAHAKARI SAKKARE KARKHANE NIYAMITHA RANNANAGAR, TIMMAPUR, TQ: MUDHOL, DIST: BAGALKOTE, PAN: AAAAR 0428 E.

... RESPONDENT

THIS ITA FILED U/SEC.260A OF THE INCOME-TAX ACT, 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTION OF LAW AS STATED ABOVE AND ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, 'A' BENCH, BENGALURU IN ITA NO.1277/BANG/2018, DATED 03.04.2019 AND CONFIRM THE ORDER DATED 08.07.2013 PASSED BY THE INCOME TAX OFFICER, WARD-I, BAGALKOT FOR THE ASSESSMENT YEAR 2010-11.

THIS APPEAL COMING ON FOR ADMISSION THIS DAY, S.SUJATHA J., THE FOLLOWING:

2 JUDGMENT

This appeal is filed by the Revenue under Section 260A of the Income Tax Act, 1961 (for short, ‘Act’) relating to the Assessment Year 2010-11 raising the following substantial questions of law: (1) Whether on the facts and circumstances of the case and law, the Tribunal is right in dismissing the appeal of the Revenue by holding that imposition of penalty cannot be sustained and directing the same to be cancelled without appreciating that the Chennai High Court in the case of Sundaram Finance Ltd. Vs. ACIT Company Circle VI(4) Chennai in TCA No.876 & 878/2008 dated 23.04.2018? (2) Whether on the facts and circumstances of the case, the Tribunal is right in law in upholding the deletion of penalty without appreciating the fact that when the assessee participated in the entire proceedings, if a defect in the notice was not allowed to be cured, the purpose/intent of Section 292B would be defeated?

3 2. The respondent-assessee had filed return of income declaring nil income for the Assessment Year 2010-11. The case was selected for scrutiny and Assessing Authority concluded the assessment as against nil income declared after giving credit for set- off of loss carried forward. The Assessing authority during the assessment proceedings has noticed that the assessee claimed depreciation of Rs.10,23,53,309/- as against admissible depreciation of Rs.1,44,74,986/-. Thus, the Assessing Authority disallowed a sum of Rs.30,86,504/- and Rs.4,86,946/- being payment made to harvesters/transporters and vehicle hire charges and legal fees. The said order having reached finality, the Assessing Authority initiated penalty proceedings in respect of aforesaid two claims and passed an order under Section 271(1)(c) of the Act levying penalty of Rs.2,82,00,000/-; against which the assessee had preferred an appeal before the Commissioner of

4 Income Tax (Appeals), Belagavi (for short, ‘CIT(A)’) which came to be dismissed for want of prosecution.

3.

Being aggrieved by the same, the assessee filed an appeal before the Income Tax Appellate Tribunal (for short, ‘ITAT’). The ITAT remanded the matter to the file of CIT(A) to adjudicate the matter on merits without being influenced by any observations made in the order. On adjudication by the CIT(A), penalty levied came to be deleted by allowing the appeal filed by the assessee. On further appeal filed by the Revenue before the Karnataka Appellate Tribunal, the assessee had also filed cross- objection challenging the notice issued by the Revenue under Section 274 of the Act as defective. The ITAT placing reliance on the judgment of this Court in the case of CIT(A) Vs. Manjunatha Cotton and Ginning Factory reported in (2013) 359 ITR 565 held that imposing of penalty under Section 271(1)(c) of the Act is bad in law and invalid for the

5 reason that the show cause notice issued under Section 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or for furnishing of inaccurate particulars of income. It is also noticed that SLP preferred by the Revenue against the decision rendered by this Court in the case of Manjunatha Cotton and Ginning Factory (supra) has been dismissed.

4.

It is apparent that the show-cause notice issued under Section 274 of the Act does not specifically disclose the charge against the Assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income, which is sine-quo-non for issuance of show- cause notice and for want of such particulars, the Tribunal set-aside the order of the penalty levied on the Assessee. In the circumstances, the questions of law being answered in the case of Manjunatha

6 Cotton and Ginning Factory (supra) confirmed by the Hon’ble Supreme Court, we do not find any reason to entertain the present appeal to answer the questions of law raised by the appellant-Revenue. Hence, the appeal stands dismissed.

Sd/- JUDGE

Sd/- JUDGE

JTR

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