MULLER & PHIPPS (I) LTD,MUMBAI vs. DCIT CIR 2(2), MUMBAI

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ITA 5575/MUM/2013Status: DisposedITAT Mumbai16 September 2016AY 2001-024 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 noted that a co-ordinate bench had previously quashed the reassessment proceedings. Since the penalty was imposed based on these invalid proceedings, the penalty order was also deemed unsustainable.

What were the facts?

The assessee challenged a penalty levied under Section 271(1)(c) of the Income Tax Act. The penalty was confirmed by the CIT(Appeals). The assessee argued that the reassessment proceedings, which formed the basis for the penalty, were invalid.

What were the issues?

Whether a penalty levied under Section 271(1)(c) can survive if the underlying reassessment proceedings are quashed. Whether principles of natural justice were followed in levying the penalty.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 148

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI

Before: SHRI R.C.SHARMA (AM) & SHRI RAM LAL NEGI (JM)

For Appellant: Shri. Nitin Kulkarni
For Respondent: Shri. G. Nanthakumar
Hearing: 09/09/2016Pronounced: 16/09/2016

PER RAM LAL NEGI, JM

1.

This appeal has been preferred by the assessee against order dated 14/03/2013 passed by the Ld. CIT(Appeals)-5, Mumbai, for the Asst. year 2001-02 whereby the Ld CIT(A) confirmed the penalty levied by the AO u/s 271(1(c) of the Income Tax Act, 1961 (in short ‘the Act’).

2.

The assessee has raised the following effective grounds of appeal:-

1. CIT(A) has erred and disregarded the fact that A.O had not given the appellant an opportunity of being heard and had not served any show cause notice under section 274 r.w.s. 271(1)(c) and that the principles of natural justice have not been followed.

2. CIT(A) has erred and disregarded that AO had wrongly stated in the penalty order that he had issued notice under section 274 r.w.s. 27 (1)(c) requiring the appellant to show cause as to why penalty should not be levied and the appellant had replied vide letter dt. 24th March, 2011 to the said notice.

3. On the facts and the circumstances of the case and in Law the CIT(A) has erred in confirming the levy of the penalty u/s 271 (1)( c ) of the Income Tax Act, 1961, without appreciating the fact that the appellant had received Rs. 6 crores on account of transfer of trademark prior to 31.3.2001 i.e. prior to the amendment in section 55(2) of the Income Tax Act, 1961 and that the said receipt was properly disclosed as not liable for tax following Supreme Court decision in B C Srinivasa Setty v/s CIT 128 ITR 294, in the return of income filed on 29th October, 2002

4. CIT(A) has erred and disregarded that AO had not considered the details submitted to him and the explanations offered during the assessment of income were correct and had wrongly treated the transaction as taxable capital gains.

5. CIT(A) has erred and had failed to appreciate that the appellant had not furnished any inaccurate particulars and made the claim in accordance to the truth and the same was not erroneous and that there was no concealment of income nor were any inaccurate particulars of income furnished about the receipt of money while passing the order u/s 143(3) r.w.s. 147 of the Act and therefore it was merely a case of difference.

6. CIT(A) has erred and wrongly concluded that appellant had filed inaccurate particulars of Income falling within the meaning of section 271(1)(c) read with explanation thereof.

3. At the outset the Authorised Representative (AR) for the assessee submitted that the quantum appeal has been allowed by the Mumbai Bench of ITAT in favour of the assessee. Therefore, the penalty order is not sustainable. The Ld. Departmental Representative did not controvert the said fact.

4. We notice that the assessee, besides on merits, challenged the impugned order passed by the Ld. CIT(A) on the following legal ground:-

“I. Re-opening is bad in law:

1. 1. The notice u/s.148 dated 17.02.2006 is issued merely on change of opinion.

2. The copy of reasons recorded for reopening of assessment was not provided during the course of asst. proceeding in spite of specific request made by the assessee, therefore, the opportunity to raise objection against the reopening not provided. The date of recording the reason is also not known. The recording of reason should be prior to the date issue of notice u/s.148.”

4.

The co-ordinate Bench by following the law laid down by the Hon’ble Supreme Court in GKN Driveshaft 259 ITR 19 and Hon’ble jurisdictional High Court in Videsh Sanchar Nigam Ltd. (2012) 340 ITR 66 quashed the reassessment proceedings being invalid and allowed the appeal of the assessee. In view of the fact that the coordinate Bench has quashed the reassessment proceedings on the basis of which penalty was imposed and allowed the quantum appeal the penalty order does not survive. We, therefore, allow all the appeal of the assessee and direct the AO to delete the penalty so imposed.

5.

In the result appeal filed by the assessee for the A.Y. 2001-02 is allowed.

Order pronounced in the open court 16th September, 2016.

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