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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI MAHAVIR PRASAD & SHRI BHAGIRATH MAL BIYANI
आदेश / O R D E R PER BHAGIRATH MAL BIYANI, A.M.:
This appeal filed by the Revenue is directed against the penalty-order dated 01.10.2019 of the learned CIT(A)-3, Bhopal [“Ld. CIT(A)”] in Appeal No. CIT(A)-3/BPL/IT-10286/2019-20, which in turn arises out of the penalty-order dated 27.06.2019 passed by the learned ACIT-Central-Ujjain [“Ld. AO”] u/s 271(1)(c) of the Income-tax Act, 1961 [“the Act”] for assessment-year 2016-17.
M/s Ariba Foods Pvt. Ltd. ITA No.02/Ind/2020
The revenue has raised following Grounds:
“1. On the facts and in the circumstances of the case, the ld. CIT(A) erred in deleting the penalty of Rs. 60,00,000/- levied by the Assessing Officer u/s 271(1)(c) of the Income Tax Act, 1961 without appreciating the fact that the assessee offered the income for taxation only as a consequence of survey action carried out on its premises. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the aforesaid penalty levied by the Assessing officer without appreciating the fact that the disclosure made by the Assessee is itself an evidence that the assessee had income which was not offered for taxation.” 3. Precisely stated the facts are such that the assessee is a company. It filed original return of income on 17.10.2016 declaring a loss of Rs. 1,19,76,320/-. On 27.07.2017, a survey was conducted u/s 133A at the place of assessee wherein the assessee offered undisclosed income of Rs. 1,43,65,000/-. Thereafter the assessee submitted revised return on 22.08.2017 declaring a loss of Rs. 23,07,528/-, after declaring the aforesaid income of Rs. 1,43,65,000/- and claiming additional depreciation on newly installed plant and machinery. The Ld. AO selected case under scrutiny, issued statutory notices and finally completed assessment u/s 143(3) on 26.12.2018. Simultaneously on 26.12.2018, the Ld. AO issued notice u/s 274 read with section 271(1)(c) of the Act for imposition of penalty u/s 271(1)(c). The assessee made submissions in response to the notice but the Ld. AO rejected those submissions and passed order on 27.06.2019 imposing a penalty of Rs. 60,00,000/- for concealing the particulars of income of Rs. 1,43,65,000/-. Being aggrieved by this penalty-order dated 27.06.2019, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) granted relief to assessee and deleted the entire penalty of Rs. 60,00,000/-. Against the order of Ld. CIT(A), the revenue has filed this appeal and now before us.
The Ld. DR supported the order of Ld. AO and argued that the penalty has been imposed because the assessee has admitted the undisclosed income 2
M/s Ariba Foods Pvt. Ltd. ITA No.02/Ind/2020
of 1,43,65,000/- during the course of survey proceeding u/s 133A of the act. The Ld. DR contended strongly that had there been no survey-action by the revenue, the income of Rs. 1,43,65,000/- would have remained evaded because the assessee had not disclosed the same in the original return filed before survey. The Ld. DR also submitted that the assessee was prompted to admit the income and pay tax thereon only because of survey-action. Hence it is not a case of voluntary disclosure. The Ld. DR, therefore, vehemently submitted that it is a clear-cut case of concealment of income and the Ld. AO was fully justified in imposing penalty. With this submission, the Ld. DR argued that the penalty of Rs. 60,00,000/- imposed by the Ld. AO must be upheld.
The Ld. AR started his arguments by carrying our attention to the show- notice dated 26.12.2018 issued by Ld. AO u/s 274 read with section 271(1)(c), placed at Page No. 49 of the Paper-Book. Referring to the notice, the Ld. AR submitted that the Ld. AO has stated as under:
“Whereas in the course of proceedings before me for the A.Y. 2016- 17 it appears to me that you have concealed the particulars of your income or furnished inaccurate particulars of such income ….”
The Ld. AR submitted that the notice u/s 274 sets in motion the penalty- proceeding. According to Ld. AR, the notice dated 26.12.2018 issued by Ld. AO is very much vague in as much it contains stereotype language of section 271(1)(c). The Ld. AR contended that by saying that the assessee has “concealed the particulars of income” or “furnished inaccurate particulars of income”, the Ld. AO is himself not sure about the default committed by the assessee. According to the Ld. AR, there are innumerable decisions of the Hon’ble Courts and ITAT where it has been loudly held that if the show-cause notice does not specify the specific charge of default committed by the assessee, the notice and subsequent proceeding founded thereon are invalid. In support of his contention, the Ld. AR placed strong reliance on the decision of 3
M/s Ariba Foods Pvt. Ltd. ITA No.02/Ind/2020
Hon’ble Jurisdictional High Court of M.P. in the case of Pr.CIT-I, vs. Kulwant Singh Bhatia, ITA No. 9 to 14 of 208, order dated 9th May 2018, wherein it was held as under:
“8. In the case of CIT V/s. Manjunatha Cotton Ginning Factory (supra), it was observed by the Karnataka High Court in para 59 that the practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentioned would not satisfy the requirement of law when the consequences of the assessee not rebutting the initiated presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the provisions have to be held to be strictly construed, notices issued under Section 274 should satisfy the grounds, which he has to meet specifically. Otherwise, principle of natural justice is offended if the show cause notice is vague. Even in the matter of search case where penalty is levied under Explanation 5A to Section 271(1)(c), it was held by the Karnataka High Court that the show-cause notice under Section 274 was defective as it does not spell out the ground on which the penalty is sought to be imposed and consequently penalty imposed was cancelled. The decision of CIT V/s. Manjunatha Cotton Ginning Factory (supra) was further followed by the Karnataka High Court in the case of CIT V/s. SSA'S Emerald Meadows, (2016) 73 taxman.com 248 (SC) / dated 23.11.2015 (ITA 380/2015), the High Court has dismissed the appeal of the revenue by observing that the Tribunal has allowed the appeal of the assessee holding that the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Act of 1961 was bad-in-law as it did not specify which limb of Section 271(1)(c) of the Act of 1961, the penalty proceedings had been initiated, i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars. The Tribunal while allowing the appeal of the assessee, had relied on the decision of the Division Bench of Karnataka High Court decision in the case of CIT V/s. Manjunatha Cotton Ginning Factory (supra). It is further pointed out that the SLP filed by the Deptt. before the Apex Court on 5.8.2016 in the matter of CIT V/s. SSA'S Emerald Meadows (supra) was dismissed. In the case of CIT V/s. Suresh Chandra Mittal, (2000) 251 ITR 9 (SC), the Apex Court has upheld the decision of M.P. High Court wherein, in similar circumstances, it was held that the initial burden lies on the revenue to establish that the assessee had concealed the income or had furnished inaccurate particulars of such income. In the present case, in show-cause notice the Assessing Officer has not specified specifically charges, there was no such mention. 4
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On due consideration of the arguments of the learned counsel for the appellant, so also considering the fact that the ground mentioned in show-cause notice would not satisfy the requirement of law, as notice was not specific, we are of the view that the learned Tribunal has rightly relying on the decision of CIT V/s. Manjunatha Cotton Ginning Factory (supra) and CIT V/s. SSA'S Emerald Meadows (supra) rightly allowed the appeal of the assessee and set aside the order of penalty imposed by the authorities. No substantial question of law is arising in these appeals. ITA.No(s). 9/2018, 10/2018, 11/2018, 12/2018, 13/2018 and 14/2018, filed by the appellant have no merit and are hereby dismissed.”
The Ld. AR submitted that the present case of assessee stands fully covered by this binding decision of Hon’ble jurisdictional High Court and in view of the same, the penalty-order passed by Ld. AO is totally invalid.
The Ld. AR further carried our attention to the order of Ld. CIT(A) wherein the Ld. CIT(A) has deleted the penalty imposed by the Ld. AO considering various aspects, one of which is the aforesaid binding decision of jurisdictional High Court in Kulwant Singh Bhatia (Supra). The relevant para of the order of Ld. CIT(A) is reproduced below:
“4.1.4 As per provisions of section 271(1)(c) of the Act, there are two different charges i.e. the concealment of particulars of income or furnishing of inaccurate particulars of income. The penalty can be imposed for a specific charge. It is a settled proposition that both these limbs i.e. concealment of particulars’ of income or of ‘furnishing inaccurate particulars of income carry different connotations as held by the Honourable Supreme Court in the case of T Ashok Pai vis CIT (2007) 292 ITR (SC). The penalty notice was issued in a mechanical manner without specifying the specific charge as to whether the appellant is found guilty of concealing the particulars of the income or have furnished inaccurate particulars of income. Thus the very initiation of the present penalty proceeding is not in accordance with the law and have led to vitiation of entire penalty proceedings. The Hon'ble jurisdictional High Court in the case of Principal Commissioner of Income Tax Vs. Kulwant Singh Bhatia dated 09.05.2018 (ITA 9 to 14 of 2018) has held that the penalty uls 271(l)(c) of the Act of
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1961 is not sustainable in law as the notice was not specific, observing as follows:- "on due consideration of the arguments of the Learned counsel for the appellant, so also considering the fact that the ground mentioned in show cause notice would not satisfy the requirement of law, as notice was not specific, we are of the view that Learned Tribunal has rightly relying on the decision of CIT V/s Manjunatha Cotton Ginning Factory (supra) and CIT V/s SSA'S Emerald Meadows rightly allowed the appeal of the assessee and set aside the order of penalty imposed by the authorities. No substantial question of law is arising in these appeals. ITA. No(s) 912018, 1012018, 11/2018, 12/2018, 13/2018 and 14/2018, filed by the appellant have no merit and are hereby dismissed."
It is observed that facts of the present case under appeal before me are identical to that of the case of Kulwant Singh Bhatia (Supra) in so far as additional income was offered by the appellant in the returns filed after the search/survey. In that case also, it was the observation of the AO that the assessee has offered additional income only due to search and the additional income was not declared in the return filed u/s 139 and therefore, penalty proceedings u/s 271(1)(c) were initiated. The penalties were also confirmed by the CIT (A) but were deleted by the Tribunal holding the same as not sustainable in law, as no specific charge was levied in penalty show cause notice, later the order of the Honourable I.T.A.T. was affirmed by the Honourable Jurisdictional High Court.” 7. The Ld. AR submitted that due to the binding nature of decision of Hon’ble jurisdictional High Court, it is very much clear that the whole penalty- proceeding conducted by Ld. AO is illegal and unsustainable. Hence the Ld. CIT(A) has rightly deleted the penalty and his order must be upheld.
We have considered the submissions of both sides, perused the record and considered the legal judgement cited before us. On perusal of the show- cause notice dated 26.12.2018 issued by Ld. AO, we observe that the notice contains both of the charges viz. “concealed the particulars of income” or “furnished inaccurate particulars of income” and the Ld. AO has not stricken- off any one. Therefore the whole proceeding of penalty conducted by the Ld. AO
M/s Ariba Foods Pvt. Ltd. ITA No.02/Ind/2020 is illegal as per the decision of Hon’ble jurisdictional High Court in Kulwant Singh Bhatia (supra). The Ld. DR could not controvert the facts of the case or applicability of the judgement. Therefore, we are satisfied that the Ld. CIT(A) has rightly deleted the penalty. Accordingly, we do not find any merit in this appeal of revenue.
In the result the appeal of revenue is dismissed.
Order pronounced as per Rule 34 of I.T.A.T. Rules 1963 on 28.06.2022.
Sd/- Sd/- (MAHAVIR PRASAD) (BHAGIRATH MAL BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER
Indore; �दनांक Dated : 28/06/2022
Patel/Sr. PS Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order Sr. Private Secretary, Indore
M/s Ariba Foods Pvt. Ltd. ITA No.02/Ind/2020
Date of taking dictation 6.5.22 2. Date of typing & draft order placed before the Dictating Member 3. Date on which the approved draft comes to the Sr. P.S./P.S. 4. Date on which the fair order is placed before the Dictating Member for pronouncement 5. Date on which the file goes to the Bench Clerk 6. Date on which the file goes to the Head Clerk 7. Date on which the file goes to the Assistant Registrar for signature on the order 8. Date of despatch of the Order