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TMI Blog2021 (9) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... deshi ORDER Per Shamim Yahya, AM :- This is Revenue s appeal and cross objection filed by the assessee against the order of learned Commissioner of Income Tax (Appeals) [in short learned CIT(A)] dated 19.8.2019 pertain to assessment year 2014-15. 2. Grounds of appeal raised by the Revenue read as under :- 1. Whether on the facts and circumstances of the case, and in law, learned CIT(A) is justified in deleting the penalty under section 271(1)(c) levied on disallowance of interest which has been accepted by the assessee in quantum order ? 2. The appellant craves leave to add, to amend and/or to alter any of the grounds of appeal, if need be. 3. The appellant, therefore, prays that on the grounds stated above the order of learned CIT(A)-48, Mumbai may be set aside and that of the Assessing Officer restored. 3. Grounds of appeal raised by the assessee in cross objection read as under :- 1. On the fads and in the circumstances of the case and in law, the Ld. CIT(A) has erred in failing to adjudicate the second ground preferred of the Grounds of Appeal namely The Ld. Assessing Officer has failed to specify in the notice u/s.274 r.w. Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l learned CIT(A) deleted the penalty by observing as under : (1) The perusal of return of income for A.Y. 2014-15 clearly shows that assessee has disclosed the profit/loss from the movie Ishque in Paris during the year. The entire expenses of various heads for making of this movie as well as income from Satellite rights, theatre income and T-series music rights of the movie totaling to ₹ 23,56,22,915/- have been computed, which have been debited 7 credited to the P L account. 7. Thereafter she reproduced the film project account prepared. She concluded as under : (2) There is no separate finding by AO that the expenses claimed by assessee are bogus. Therefore, it is not a case that the expenses have been held to be bogus or non-genuine. (3) Since the entire expenses and income from the movie (spread over three years of making), resulting in Net Loss has been claimed and allowed by AO as a whole (except for interest). Separate treatment to interest claim by AO is not in consonance with allowing of other expenses by AO, which also pertained to earlier financial years. Having allowed a large part of other expenses, AO cannot hold interest claim only as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the circumstances of the case and in law, learned CIT(A) has erred in failing to adjudicate the second ground preferred of the Grounds of appeal namely the learned Assessing Officer has fialed to specify in the notice under section 274 r.w. section 271(1)(c) the reasons/justification for levy of penalty by mentioning have concealed the particulars of your income or furnishing inaccurate particulars of such income thereby being ambiguous on reasons/justification for levying penalty. Thereby violating the principle of natural justice by failing to give the appellant a reasonable opportunity of being heard. 9. In this regard learned Counsel of the assessee Shri Kersy Lalkaka submitted that the issue is squarely covered in favour of the assessee by the decision of Full Bench of Hon'ble Jurisdictional High Court in Mohammed Farhan A. Shaikh Vs. PCIT (125 taxamnn.com 253) vide order dt. 11.3.2021. 10. Per contra learned Departmental Representative Ms. Shreekala Pardeshi could not dispute the proposition that the jurisdiction issue is in favour of the assessee by the aforesaid decision of Hon'ble Bombay High Court. 11. Upon careful consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conflicting views the latter decision being unaware of the former one. Finally, that precedential conflict stood resolved through a Full Bench decision in Maviluyi Service. Co-operative Bank Ltd. v. Commissioner of Income Tax, Caticut [2019 (2) KHC 287]. This Full Bench decision was taken to Supreme Court. That is how, on 12 January 2021, a three-Judge Bench of the Supreme Court has decided Mavilayi. 165. Mavilayi has noted that the Full Bench of Kerala High Court has reached its conclusion based on the Supreme Court's judgment Citizen Cooperative Society Ltd. v, Asst. CIT, Hyderabad [(2017) 9 SCC 364]. Indeed, Mavilayi acknowledges that the Kerala High Court's Full Bench did follow Citizen Cooperative. But it holds that in Citizen Cooperative Society Ltd., the counsel for the assessee advanced no argument that the assessing officer and other authorities under the IT Act could not go behind the registration of the I co-operative society in order to discover as to whether it was conducting business in accordance with its j bye-laws . That sets Citizen Cooperative apart, according to Mavilayi. 166. In this context, Mavilayi holds that only the ratio decidendi of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee must indicate whether the Assessing Officer is satisfied that the case of the assessee involves concealment of particulars of income or furnishing of inaccurate particulars of income or both, with clarity. If the notice is issued in the printed form, then the necessary portions which are not applicable are required to be struck off, so as to indicate with clarity the nature of the satisfaction recorded. In both Samson Perinchery and New Era Sova Mine, the notices issued had not struck of the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or proper application of mind in a matter of initiation of penalty proceedings. 7. In the present case, as well if the notice dated 30/09/16 (at page 33) is perused, it is apparent that the relevant portions have not been struck off. This coupled with the fact adverted to in paragraph (5) of this order, leaves no ground for interference with the impugned order. The impugned orders are quite consistent by the law laid down in the case of Samson Perinchery and New Era Sova Mine and therefore, warrant no interference. 170. Samson Perinchery, too, has held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill ask, rather expect, the assessee to look into previous proceedings for justification of its action in the later proceedings, which are, undeniably, independent. It forgets that a stitch in time saves nine. Its one cross or tick mark clears the cloud, enables the assessee to mount an effective defence, and, in the end, its diligence avoids a load of litigation. Is not prejudice writ large on the face of the mechanical methods the Revenue adopts in sending a statutory notice to the assessee under section 271 (1) (c) read with section 274 of the Act? Pragmatically speaking, Kaushalya casts an extra burden on the assessee and assumes expertise on his part. It wants the assessee to make up for the Revenue's lapses. Ex Post and Ex Ante Approaches of Adjudication: 174. In ex-post adjudication, the Court looks back at a disaster or other event after it has occurred and decides what to do about it or how to remedy it. In an ex-ante adjudication, the Court looks forward, after an event or incident, and asks what effects the decision about this case will have in the future - on parties who are entering similar situations and have not yet decided what to do, and whose choic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r disallowed in computing the total income is deemed to represent the concealed income. 177. That is, even if the assessment order does not contain a specific finding that the assessee has concealed income or he is deemed to have concealed income because of the existence of facts which are set out in Explanation 7, if a mere direction to initiate penalty proceedings under clause (c) of subsection (1) is found in the said order, by legal fiction, it shall be deemed to constitute satisfaction of the Assessing Officer for initiation of penalty proceedings under the said clause (c). In other words, the Assessing Officer's satisfaction as to be spelt out in the assessment order is only prima facie. Even if the assessment order gives no reason, a mere direction for penalty proceedings triggers the legal fiction as contained in the Explanation (1). 178. Therefore, in every instance, it is a question of inference whether the assessment order contained any grounds for initiating the penalty proceedings. Then, whenever the notice is vague or imprecise, the assessee assails it as bad; the Revenue defends it by saying that the assessment order contains the precise charge. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e first question to the effect that Goa Dourado Promotions and other cases have adopted an approach more in consonance with the statutory scheme. That means we must hold that Kaushalya does not lay down the correct proposition of law. Question No. 2: Has Kaushalya failed to discuss the aspect of prejudice'? 184. Indeed, Kaushalya did discuss the aspect of prejudice. As we have already noted, Kaushalya noted that the assessment orders already contained the reasons why penalty should be initiated. So, the assessee, stresses Kaushalya, fully knew in detail the exact charge of the Revenue against him . For Kaushalya, the statutory notice suffered from neither nonapplication of mind nor any prejudice. According to it, the so-called ambiguous wording in the notice [has not] impaired or prejudiced the right of the assessee to a reasonable opportunity of being heard . It went onto observe that for sustaining the plea of natural justice on the ground of absence of opportunity, it has to be established that prejudice is caused to the concerned person by the procedure followed . Kaushalya closes the discussion by observing that the notice issuing is an administrative devic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. 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 . 190. Here, section 271(l)(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) 2 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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