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TMI Blog2018 (9) TMI 1008X X X X Extracts X X X X X X X X Extracts X X X X ..... that:- In view of the binding precedent of the Hon'ble jurisdictional High Court in the case of PCIT Vs. Kulwant Singh Bhatia [2018 (5) TMI 960 - MADHYA PRADESH HIGH COURT] we hereby set aside the order of Ld. CIT(A) and restore the issue to his file for deciding the facts in the light of the judgement - ITA No. 404/Ind/2012, ITA No.484/Ind/2012, ITA No.961/Ind/2016, ITA No.293/Ind/2016 And ITA No.752, 753 And 754/Ind/2016 - - - Dated:- 31-8-2018 - SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER For The Appellant : Shri Sumit Nema Shri Pankaj Shah, A.Rs For The Respondent : Shri K.G. Goyal, DR ORDER PER Bench: This bunch of appeals filed by the assessee are pertaining to the assessment years 2007-08, 2008-09, 2009-10, 2011-12 2012-13. Four appeals are related to quantum proceedings and three appeals are related to penalty proceedings. First we take up the appeals related to the quantum proceedings. The common issues involved in all the appeals pertaining to quantum proceedings were heard together and are being disposed of by this common order. First we take up ITA No.404/Ind/2012 pertaining to the assessment year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vimla Properties (ITA 7053/M/16), Khusboo Exports (ITA 3647/M/17) BCC Cargo P. Ltd. IT(SS)A 108/Ind/11, after considering the material available on record have deleted the additions. The facts are identical in the present case as well. In respect of the other parties, he fairly conceded that there is an adverse finding by the Investigation wing of the department. 5. Ld. D.R. opposed the submissions and supported the orders of the authorities below. 6. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The revenue has not disputed with regard to the fact that the co-ordinate benches of this Tribunal in respect of share application money received from Javda India Impex Ltd. found that the party is genuine and transaction was treated to be genuine. There is no change in the facts and circumstances. However, in respect of the other share applicants, assessee has not brought any material to rebut the finding arrived by the authorities below, hence we direct the A.O. to delete the addition of ₹ 25 lakhs in respect of share application money received from Javda India Impex Ltd. The ground raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not utilised for the purpose of invesment (calling it as trade investment) in share is not acceptable. As analysis of the balance sheet as on 31.3.2008 (relevant for this A.Y. i.e. 2008-09) shows the following:- Application of funds Source of Funds Fixed Asset including WIP 334.13 lac Share Capital 91.001 lac Current Asset including loans and advances inventory cash 1125.41 lac Reserve and surplus 287.65 lacs Share application 75.00 lacs Net deferred Tax lia. 33.17 lacs Current liability and provision 525.48 lacs Total 1459.54 lacs Total 1012.30 lacs Borrowed funds:- Investment 49.46 lacs Secured loans 389.62 lacs Total 496.70 lacs Grand Total 1509.00 lacs Grand Total 1509.00 lacs Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 14A of the Act. However, the contention of the Ld. Counsel for the assessee is that no exempt income has been earned, therefore, no disallowance was called for under the section 14A of the Act. In support of this contention, Ld. Counsel for the assessee submitted that the issue is covered in favour of the assessee. 22. Ld. D.R. could not controvert the contention of the Ld. Counsel for the assessee that there was no exempt income during the year under appeal, therefore, respectfully following the decision rendered by Hon'ble Delhi High Court in the case of Cheminvest Ltd. Vs. CIT-IV in ITA No.749 of 2014 dated 2.9.2015 and the decision held by Hon'ble Allahabad High Court in the case of CIT Vs. Shivam Motors (P) Ltd. in ITA No.88 of 2014 dated 5.5.2014, we direct the A.O. to delete the disallowance. 23. Ground No.2 is against confirming the disallowance of ₹ 7,58,272/- to ESI and PF. Ld. Counsel for the assessee submitted that this issue is no more res integra. The issue has already been decided in favour of the assessee by the judgement of Hon'ble Rajasthan High Court in the case of Principal Commissioner of Income Tax, Jaipur-2 V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue that the amounts were old and outstanding and the said amount was written off in accordance with the provisions contained in Sec.36 (1)(VII) of the Act. The CIT(A) as well as the Tribunal has taken into consideration the judgement of the Apex Court in the case of T.R.F. Ltd. Vs. CIT :(2010) 323 ITR 397 and recorded a finding of fact that the said amount having become irrecoverable, the assessee has rightly written off the same and merely because the assessee has not filed any claim, that could not be considered to be a ground for 4 disallowing a bad debt. 6.1 Admittedly, the amounts were lying outstanding for the last couple of years and the assessee has rightly written off the said amount in the books of accounts and merely because a suit was not filed and that cannot be considered to be a cogent reason to disallow the claim which became bad. One need not incur good money for recovery of the so called irrecoverable or a bad money, and file a suit which remains pending for years and with uncertainty. 7. In the light of the judgement in assessee s own case, the first two questions being covered against the revenue, no more remains substantial question of law which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 9,35,317/- on account of Delayed payment of Employee contribution to ESI and PF. 32. Ground No.1 is against addition made by invoking the provisions of section 14A of the Act. The facts related to this ground are that the assessee had invested in equity capital of Private Limited companies and in mutual funds. Thus, A.O. proceeded to make addition by invoking provisions of rule 8D. 33. Aggrieved by this, the assessee preferred an appeal before the Ld. CIT(A), who sustained the addition. Thus, the assessee is in appeal before this Tribunal. Ld. Counsel for the assessee submitted that the authorities were not justified in invoking the provisions of section 14A of the Act. However, the contention of the Ld. Counsel for the assessee is that no exempt income has been earned, therefore, no disallowance was called for under the section 14A of the Act. In support of this contention, Ld. Counsel for the assessee submitted that the issue is covered in favour of the assessee. 34. Ld. D.R. could not controvert the contention of the Ld. Counsel for the assessee that there was no exempt income during the year under appeal, therefore, respectfully following the decision rendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 1. Perusal of following notices giving show cause under Section 274 read with 271(1)(c) show that the same is issued without application of mind. There is no charge specified and stereotype notice is issued. A.Y. Notice Dated Enclosed as 2007-08 30.12.2009 Annexure-I 2008-09 24.12.2010 Annexure-II 2009-10 26.12.2011 Annexure-III 2. The Appellant humbly submits that the perusal of the notice issued under Section 274 read with Section 271(1)(c) was issued without striking either of two charges which is reproduced as : * have concealed the particulars of your income or furnished inaccurate particulars of income In this regards it is submitted that the show cause notice is not a mere formality but it has a definite purpose to make the assessee aware of the exact charges against him and the case which is required to be met out. Your kind attention is invited to the decision of Jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat particulars of income are inaccurate. The words 'concealment' or giving 'inaccurate particulars of income' have to be read strictly before penalty provisions u/s 271(1)(c) of the Act can be invoked. Reliance is also placed on the decision of Hon ble Indore Bench of ITAT in case of Keti Sangam Infrastructure (I) Ltd. vs. DCIT (ITA Nos. 516/Ind/2017) dated 27.06.2018 where it is upheld that such notice without specifying charge is not valid and consequent penalty is directed to be deleted. Levy of penalty on Incorrect Charge 4. At the outset the Appellant submits that penalty can be levied either on the charge of concealment or for furnishing inaccurate particulars of income . Both the charges are separate and cannot be used interchangeable. In the instant case no charge was specified in the Assessment order and penalty was levied on vague charge holding concealed the income by furnishing inaccurate particulars of income which is contrary to settled judicial position. On merits of facts Thus, it is submitted that the assessee had fully and truly disclosed all the material facts necessary for the purpose of assessment. Mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and identity of such investors has been accepted in following ITAT decisions ITO vs. Pyramid Realty P. Ltd. (ITA 3579/M/17) Komal Agrovat vs. ITO (ITA 437/Hyd/16) Bairagara Builders (ITA 4691/Mum/15) V. Vimla Properties (ITA 7053/M/16) Khusboo Exports (ITA 3647/M/17) BCC Cargo P. Ltd. (IT(SS)A 108/Ind/11) This clearly shows that the view taken by AO and CIT(A) is different from view taken by different Tribunals and therefore shows that the indtant case is that of clear divergence of opinions on which penalty is not called for. We submit that the present case is not that of any concealment or furnishing of inaccurate particulars, but is a case of difference of views between us and the Income Tax Department. As explained above, all the details were submitted alongwith the Return of Income and the Annual Accounts itself. The issue being that of difference of opinion on a legal subject, no penalty should be levied. In this regard, reliance is place on the following judicial pronouncements: 1. CIT Vs. Late G.D. Naidu and others (165 ITR 63) (Mad.) It was held that the Assessee cannot be penalized for ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of the foregoing, as can be seen, there was no fraud or willful neglect on our part. We further crave leave to rely upon the decision of the Hon'ble Bombay High Court in the of case CIT Vs. Shivlal Desai Sons (1978) (114 ITR 388) in which the Hon'ble Court has categorically held that merely because there are certain additions/ disallowances in the assessment proceedings, it will not bring in its wake the levy of penalty. Further, the Hon'ble Punjab Haryana High Court in case of CIT Vs. Ajaib Singh Co. (170 CTR 489) has held that merely because certain expenses claimed by the assessee has been disallowed it does not mean that the assessee has furnished incorrect particulars of its income. Further, in the decision of Hon'ble Calcutta High Court in Burmah-Shell Oil Storage and Distribution Co. of India Ltd. Vs. ITO (112 ITR 592) wherein it has been held that the rejection of the contention raised by the Assessee cannot lead to the conclusion that there has been concealment of particulars of income or furnishing of inaccurate particulars thereof by the Assessee. In case of Devi Dass Sukhani Vs ITO (101 TTJ 551) (Jodh) it was held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Return of Income, there is neither any furnishing of inaccurate particulars nor are the explanations offered by us are found to be false or unsustainable. Hence we most respectfully submit that the impugned penalty cannot be levied. 38. The Ld. Counsel also drew our attention to the notice u/s 271(1)(c) of the Act dated 30.12.2009 in support of the contention that the notices u/s 271(1)(c) of the Act dated 30.12.2009, 24.12.2010, 26.12.2011 and also placed reliance on the judgement of the Hon'ble jurisdictional High Court rendered in the case of Principal Commissioner of Income Tax Vs. Kushwant Singh Bhatia in ITA No.9 to 14 of 2015. 39. Ld. D.R. opposed the submissions and reiterated the submissions as made in the written submissions and placed reliance on the decision of coordinate bench. The synopsis of the Ld. D.R. is reproduced as under: l. That during the course of hearing in the aforesaid appeals, the 'Ld. Counsel of the appellant assessee has filed a synopsis and he has inter alia taken the ground that since the AO had not specified in the notice issued u/s 271 (l ) (c) whether the penalty was being initiated for concealment of income or filing inaccu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der reads as under: 5. Since inaccurate particulars of income furnished penalty proceedings u/s 271 (l)(c) are initiated for which notice is being given separately 6.Similarly while initiating penalty on the addition made uls 14A vide para 7.11, the Assessing Officer has recorded as under: 7. Since inaccurate particulars of income furnished penalty proceedings u/s 271 (1) ( c) are initiated for which notice is being given separately Thus there is specific charge levied for initiating penalty proceedings uls 271(1)(c) 8. That on perusal of the Assessment order for the A Y 2009-10 it can be seen that while initiating penalty on the additions made uls 68 on account of unexplained cash credits in the form of share application money received the charge was clearly mentioned while recording satisfaction for initiating penalty. The relevant para no. 2.8 of the assessment order reads as under: Since inaccurate particulars of income furnished penalty proceedings u/s 271 (l) (c) are initiated for which notice is being given separately Similarly while initiating penalty on the addition made uls 14A vide para 5.11, the Assessing Officer has reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned alternate charges at the stage of issue of notice u/s 274 r.w.s. 271 (l)(c ) of the Act which is a preliminary stage of initiating penalty proceedings, the proceedings cannot be held to be vitiated, as in the instant case, the AD has clearly recorded detailed satisfaction after application of mind in the assessment order dated 20.02.2014 .................. By no stretch of imagination it can be held that the assessee was not aware of the charge as framed by the AD in the assessment order dated 20.02.2014 framed u/s 143(3) of the Act with which he was burdened for initiating penalty proceedings u/s 271 (l)(c ) of the Act. We have also observed that in the order dated 26.08.2014 passed by the AD u/s 271 (l)(f;) of the Act levying penalty on the assessee, the A 0 after considering the explanation of the assessee has clearly recorded the charge on which penalty had been levied on the assessee u/s 2371 (J)(c ) of the Act .... )) (Copy of the said judgment is enclosed herewith) 12. That the facts of the instant case are exactly similar to the case of Mahesh M Gandhi referred to in above. The AO had clearly recorded the charge of filing inaccurate particulars while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stake in the notice would not invalidate penalty proceedings. (p. 751) 15. That in view of the above it is averred that the impugned penalty appeals may be heard on merit. 16. The Ld. Counsel of the assessee has cited various decisions in his support however they relate to inaccurate claim, cases where two views are possible, there is some law point involved and hence do not apply to the facts of the present case. 17. That in the instant case the penalty was imposed by the AO and confirmed by the Ld CIT(A) which is under appeal relate to the additions made on account unexplained share application money u/s 68. The assessment and additions therein was completely based on the findings of the fact. The para 5.3 of the Ld CIT(A) order while confirming the penalty reads as under: 18. The above observations strengthen the case for levy of penalty as it has been brought in the assessment order as well as the penalty order that the share application transaction was not genuine and it was only accommodation entry. It is to be noted that the share application is through private placement and thus involves active participation of the appellant company in organizing the same fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Assessing Officer. She during the course of the arguments very specifically admitted that tax effect in this case is only ₹ 2,84,090/- for the assessment year 2002-03. The total amount of penalty for the assessment year in all these appeals for the assessment years 2002-03 to 2007-08 is ₹ 24,39,753/- and the learned ITAT has decided all these3 appeals by composite order dated 11.8.2017. It is covered in para 5 of the Circular No.21 of 2015 dated 10.12.2015 and, therefore, the present appeals have been filed. 11. 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 Vs. Manjunatha Cotton Ginning Factory (supra) and CIT Vs. 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 appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side the order of Ld. CIT(A) and restore the issue to his file for deciding the facts in the light of the judgement of the Hon'ble jurisdictional Madhya Pradesh High Court in the case of PCIT Vs. Kulwant Singh Bhatia (supra) after verifying about the factum of notice dated 10.03.2004. The ground of the assessee s appeal in ITA No.752/Ind/2016 for the A.Y. 2007-08 is allowed for statistical purposes. ITA Nos.753 754/Ind/2016 for the A.Ys 2008-09 2009-10: 45. The only ground raised in both these appeals is with regard to the initiation of penalty proceedings and the facts are similar as discussed in ITA No.752/Ind/2016 for the A.Y. 2007-08 above. Accordingly, Ld. Counsel for the assessee submitted that the penalties so imposed are not sustainable as the notice issued u/s 271(1)(c) of the Act does not specify the charge. Ld. Counsel reiterated the submissions as made in the written synopsis which was reproduced above in para 37 while adjudicating ITA No.752/Ind/2016 for the assessment year 2007-08. Since the facts and circumstances are similar to that of the appeal filed by the assessee in ITA No.752/Ind/2016 and in view of the finding given above in para 44 ..... 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