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TMI Blog2021 (9) TMI 1081X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue s appeals directed against respective orders of learned CIT(A) for respective assessment years. 2. Since the issues are common and connected and the appeals were heard together, these have been consolidated and disposed off together for the sake of convenience. 3. Since, grounds are identical, we are referring to grounds from ITA No. 324/Mum/2020 for AY 2008-09. The grounds of appeal are read as under:- 1. Whether on the facts and circumstances of the case and in Law, the Ld.CIT(A) was correct in deleting the penalty u/s 271(1)(c) of the IT Act, 1961 on technical ground by holding that penalty notice was not valid as the relevant portion was not struck off, without considering that in the assessment order penalty was initiated for 'furnishing inaccurate particulars of income' and in the penalty order also the penalty was imposed for the same default? 2. Whether Ld. CIT(A) is correct in law holding that the notice is invalid due to non-striking of irrelevant column in the notice when no prejudice is caused to the assesses, as the assessee was fully aware of his default regarding furnishing of inaccurate particulars of income as is clearly mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchases booked in the relevant year, were capitalized as Closing work in progress (CWIP). The AO, therefore did not make any addition to the total income of the assessee but only reduced the amount of the bogus purchases from the CWIP shown by the assessee for the relevant year. While completing the assessment, the AO also initiated penalty for furnishing inaccurate particulars of income. The assessee did not file any appeal against the assessment order u/s. 143(3) r.w.s.153Afor the relevant year, and to give effect to the amount of bogus purchases, the assessee appropriately reduced its opening WIP in the year relevant to A.Y.2011-12. In the penalty proceedings, the AO observed that the assessee has furnished inaccurate particulars of income in its return for the relevant year, by claiming bogus purchases in its books and thereby inflating its CWIP. He further observed that the assessee has admitted that it had claimed bogus purchases for the said various years, which were reversed in its books in the year to relevant to A.Y.2011-12, This leaves little doubt that the purchase entries originally made were inaccurate and therefore the assessee is liable for penalty u/s.271(1)(c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 271(1). The FAA also rejected the reliance placed by the assesse on the decision in the case of Nalwa Sons Investments Ltd. (327 ITR 543) by distinguishing that in the said case, the income was assessed as per provisions of MAT u/s.115JB and not as per the normal provisions of the Act. Finally, the FAA confirmed the penalty levied by the AO u/s.271(1)(c) for furnishing of inaccurate particulars of income. Aggrieved by the order of the FAA confirming the penalty levied by the AO, the assessee preferred further appeal before the Hon'ble ITAT. The Hon'ble ITAT agreed with the findings of the FAA that the provisions of Explanation 5A are attracted in the case of the assessee. The Hon'ble ITAT also agreed with the view of the FAA that the ratio of the decision in the case of Nalwa Sons Investments Ltd. (supra) cannot be applied since in the said case the income was computed under the provisions of MAT u/s.115JB whereas, in the instant case, the income was computed as per the normal provisions of the Act. However, in course of the proceedings before the Hon'ble ITAT, the assessee had also raised an additional ground that the penalty order is bad in law si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Property Developers P. Ltd. be followed in the case of the assessee also, since as discussed in the initial paras that the facts are almost identical with the facts of the said 2 cases and emerging from the same search action on the Assessee Group. In view of the aforesaid discussion, though in principle the undersigned does not agree that the penalty in the case of the assessee is bad in law on account of not striking off the irrelevant limb of the notice issued u/s.271(1)(c), however in view of of the Hon'ble ITAT in the cases of the related concerns of the assessee, M/s. Sarang Property Developers P. Ltd. and M/s. Kanakia Hospitality P. Ltd., the penalty levied u/s.271(1)(c) for the relevant year in the case of the assessee on the same set of facts, is deleted. 7. Against the above order assessee is in appeal before us. 8. We have heard both the parties and perused the record. Ld. Counsel of the assessee submitted that issue is fully covered in favour of the assessee by Hon ble Bombay High Court decision in Mohammed Farhan A. Shaikh Vs. PCIT (125 taxamnn.com 253). Ld.DR stated that this decision was not cited before Ld.CIT(A). However, he did not dispute t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it actually decides. What is of the essence in a decision is its ratio and not every observation found therein, nor what logically follows from the various observations made in it. Then, it quotes Dalbir Singh v. State of Punjab[1919) 3 SCR 1059]. Though it was from the dissenting judgment, Mavilayi points out, it remained uncontradicted by the majority: According to the well-settled theory of precedents every decision contains three basic ingredients: (i) findings of material facts, direct and inferential. An inferential finding of facts is the inference which the Judge draws from the direct or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the combined effect of (i) and (ii) above. For the purposes of the parties themselves and their privies, ingredient (Hi} is the material element in the decision for it determines finally their rights and liabilities in relation to the subject-matter of the action. It is the judgment that estops the parties from reopening the dispute. However, for the purpose of the doctrine of precedents, ingredient (ii) is the vital e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any specific charge, that is to say, for concealment of particulars of income or furnishing of inaccurate particulars . In fact, Samson Perincherry relies on Karnataka High Court's SSA's Emerald Meadows, which, as we have already seen, has followed Manjunatha. So, in a sense, it is a conflict between Kaushalya and Manjunatha if we take comity, rather than stare decisis, as the reckoning factor. 171. That said, as Mavilayi found distinguishing features in Citizen Cooperative; here, too, the fact situation as obtained in Kaushalya has been seen in none of these decisions: Goa Dourado Promotions, Goa Coastal Resorts and Recreation, Samson Perinchery, New Era Sova Mine-not even in Manjunatha pointed, in both sets of cases, the proposition is this: To an assessee facing penalty proceedings, the Revenue must supply complete, unambiguous information so that he may defend himself effectually. This proposition has given rise to this question: Where should the assessee gather the required information from? 172. Goa Dourado Promotions and other cases have held that the information must be-gathered from the notice under section 271(l)(c) read with section 274 of the IT Act. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is dynamic since it assumes their behaviour may change in response to what others do, including judges, (for a detailed discussion, see Ward Farnsworth's Legal Analyst: A Toolkit for Thinking about the Law). 175. Kaushalya has adopted an ex-post approach to the issue resolution; Goa Dourado Promotions, an ex-ante approach. Kaushafya saves one single case from further litigation. It asks the assessee to look back and gather answers from whatever source he may find, say, the assessment order. On the other hand, Goa Dourado Promotions saves every other case from litigation. It compels the Revenue to be clear and certain. To be more specific, we may note that if we adopt Kaushalya's approach to the issue, it requires the assessee to look for the precise charge in the penalty proceedings not only from the statutory note but from every other source of information, such as the assessment proceedings. That said, first, penalty proceedings may originate from the assessment proceedings, but they are independent; they do not depend on the assessment proceeding for their outcome. Assessment proceedings hardly influence the penalty proceedings, for assessment does not automatical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order need not always translate into actual penalty proceedings. These proceedings, in fact, commence with the statutory notice under section 271(l)(c) read with section 274. Again, whether this prima facie opinion is sufficient to inform the assessee about the precise charge for the penalty is a matter of inference and, thus, a matter of litigation and adjudication. The solution, again, is a tick mark; it avoids litigation arising out of uncertainty. 180. One course of action before us is curing a defect in the notice by referring to the assessment order, which may or may not contain reasons for the penalty proceedings. The other course of action is the prevention of defect in the notice-and that prevention takes just a tick mark. Prudence demands prevention is better than cure. Answers: Question No. 1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(l)(c), does a mere defect in the notice-not striking off the irrelevant matter-vitiate the penalty proceedings? 181. It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate non-application of mind by the authority and/or ultimate prejudice to the right of opportunity of hearing contemplated under sect7orT274. So asserts Kaushalya. In fact, for one assessment year, it set aside the penalty proceedings on the grounds of non-application of mind and prejudice. 186. That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or justification, avoids prejudice to the assessee. That is where, we reckon, the reasoning suffers. Kaushalya's insistence that the previous proceedings supply justification and cure the defect in penalty proceedings has not met our acceptance. Question No. 3: What is the effect of the Supreme Court's decision in Dilip N. Shroff on the issue of non-application of mind when the irrelevant portions of the printed notices are not struck off? 187 In Dilip N. Shroff, for the Supreme Court, it is of some significance that in the standard Pro-forma used by the assessing officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done . Then, Dilip N. Shroff, on facts, has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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