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TMI Blog2021 (12) TMI 763X X X X Extracts X X X X X X X X Extracts X X X X ..... ow is mechanical without proper application of mind. Hence, on the touchstone of above discussion and precedents we set aside the order of authorities below and direct that the penalty be deleted - Decided in favour of assessee. Penalty u/s 271AA - defective notice - Allegation of non strike of irrelevant words - assessee failed to keep and maintain any information as per the provisions of section 92D - HELD THAT:- We find that the notice in this also is an omnibus show-cause notice as it does not strike off/delete the inappropriate/irrelevant/not applicable portion. Such a generic notice betrays a non-application of mind. Hence, the penalty levied pursuant to such a notice is not legally sustainable in law. Hence relying on MR. MOHD. FARHAN A. SHAIKH case [ 2021 (3) TMI 608 - BOMBAY HIGH COURT] we hold that the Assessing Officer was bereft of valid jurisdiction as the notice issued to assessee is unsustainable in law. - Decided in favour of assessee. - I.T.A. No. 607 And 608/Mum/2020 - - - Dated:- 14-12-2021 - Shri Shamim Yahya, Accountant Member For the Assessee : Shri Niraj D. Sheth For the Department : Ms. Smita Verma ORDER PER SHRI SHAMIM YAH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ks. 7,18,50,000/- which exceeds the limit specified under section 92BA of the Income Tax Act, 1961. In this regard, we wish to submit your honor that, the assessee had purchased two plot of land from partnership firm in which one of the partners of the firm has substantial interest and he is also one of the partners in that firm. Your honour will appreciate that the land so purchased from. M/s Goverdhan Developers is at fair market value, i.e. the transaction has been taken place on Arm's Length Price which is evident that the agreement value and market value quoted in the Index-H shows the consideration price higher than the market value of the said plots of land. And the agreements have been duly registered on which stamp duty charges have been paid by the assessee. The taw relating to Transfer Price Index came into effect from the AY 2013-14 with limit of transaction exceeding ₹ 5.00 crore which has been amended to ₹ 20.00 crore in the budget of 2015 relevant to AY2016-17, The transaction relating to purchase of Land is at Arm's Length Price, which can be evidence from the Index-II issued by registration local government authority certifying the market value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal. 9. I have heard both the parties and perused the records. Ld. Counsel of the assessee has summarized his submission as under:- There is no failure to furnish any details in accordance with the provisions of section 92D{3) read with rule 10D(3) of the Income-tax Rules, 1962 ( the Rules ) as alleged at para 4 of the penalty order (page 47 of the paper book filed in appeal against penalty under section 271G). The Appellant further submits that there is general and substantial compliance of the provisions of Rule 10D inasmuch as all the requisite documents, details and submissions have been filed before the learned AO in the course of the assessment proceedings and no fault has been found with respect to the same. In the circumstances, before levying penalty under section 271G of the Act. the learned AO ought to have first issued a notice specifying the document or information to be furnished by the Appellant and only if the Appellant did not comply with such notice could the question of levying penalty under section 27IG arise. Since this was not done, penalty deserves to be deleted. Reliance is placed on the decision of the Hon'ble Tribunal in the case of Cadbury ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and liable to be penalized in accordance with section 271AA of IT Act. 14. The AO levied the penalty by holding as is under:- The above submissions are carefully considered. In his submission, the AR of the assessee has contended that firm has furnished all the details related to Specified Domestic transaction within time. Further, on going through Profit Loss Account, Balance-sheet and ITR, it is seen that the firm has not disclosed/mentioned any details in respect of specified domestic transaction carried out during the year in its ITR filed. As firm has purchased two lands amounting to Rs, 7,18,50,000/- from associated firm, it should have disclosed the transaction either in its ITR filed. However, the assessee failed to disclose the same. Thus, the contention of the assessee is not correct and liable to be penalized as per provisions of section 271AA of the IT Act. Therefore, in view of the above discussion and considering the fact case, I am satisfied that the assessee has committed default within the meaning of Section 92D r.w.s. 271AA of the I.T. Act, 1961 without any reasonable cause and accordingly, penalty of ₹ 14,37,000/- (being 2% of International tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the grounds of appeal of the appellant are hereby dismissed. 16. Against the above order assessee has filed this appeal. 17. I have heard both the parties and perused the records. Ld. Counsel of the assessee has summarized his submission as under:- It is submitted that penalty under section 271AA was initiated on the ground of failure to keep and maintain information and documents as required by sub-section (1) or sub-section (2) of section 92D. However, from a review of the impugned penalty order, it is seen that penalty is levied on a different ground, namely, that the Appellant did not disclose/mention details of specified domestic transaction in the return of income. It is respectfully submitted that levy of penalty is on a different ground as compared to initiation of penalty, which is not permissible. Moreover, non-disclosure of the details of specified domestic transaction in ITR cannot be a ground for levy of penalty under section 271AA of the Act. Penalty under section 271AA of the Act can only be levied if there is a failure to keep and maintain information and documents as required by section 92D(1) or 92D(2) of the Act. In the instant case, it is not spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerns the deductions a primary agricultural credit society can claim under section 80P(2)(a)(i) of the IT Act, after the introduction of section 80P(4) of that Act. Two Division Benches of Kerala High Court have taken 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 disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivision Bench has held: - 6. Besides, we note that the Division Bench of this Court in Samson(supra) as well as in New Era Sova Mine(supra) has held that the notice which is issued to the assessee 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l-versed in the nuances of tax law. So it sends a notice without specifying what the assessee, facing penalty proceedings, must meet. In justification of what it omits to do, it will 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts relating to the same and material to the computation of his total income have been disclosed by him, for the purposes of section 271(l)(c), the amount added or 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust be construed strictly. And ambiguity, if any, must be resolved in the affected assessee's favour. 183. Therefore, we answer the 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 non-application 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or implies prejudice. 189. In Sudhir Kumar Singh, the Supreme Court has encapsulated the principles of prejudice. 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 impli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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