9911796707
TMI Blog2022 (8) TMI 1079X X X X Extracts X X X X X X X X Extracts X X X X ..... ssly erred in sustaining the action of the Ld. DCIT, Circle 13(1), New Delhi to record his satisfaction towards furnishing of inaccurate particulars of income in the course of assessment proceedings as required by the provisions of section 271(l)(c) of the Income Tax Act, 1961. 4. That the Ld. CIT(A) was not justified in deciding the appeal against the appellant on the basis of notice issued u/s 274 r.w.s. 271 (l)(c) of the IT Act, 1961 ,which is bad in law as it does not specify under which limb of section 271 (l)(c) of the Income Tax Act, 1961 the penalty proceeding had been initiated i.e. whether for concealment of particulars of income or furnishing inaccurate particulars of income. 5. That the appellant craves, leave to add, amend or alter any grounds of appeal either before or at the time of hearing of appeal." FACTS OF THE CASE 2. Facts giving rise to the present appeal are that the assessment was framed by the Assessing Officer ["AO"] vide order dated 08.03.2013 u/s 143(3) of the Income tax Act, 1961 ["the Act"]. Thereby, the AO made addition of Rs.15,69,500/- on account of cash credits u/s 68 of the Act. Further, the AO made addition of Rs.17,83,073/- on account of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee and even if assessee agreed to addition with a condition that penalty could not be imposed, department is not precluded from initiating penalty proceedings 5. B.A. Balasubramaniam & Bros. Co Vs CIT [116 Taxman 842, 236 ITR 977, 157 CTR 556] where Hon'ble Supreme Court held that difference between income assessed and income returned being more than 20 per cent, Explanation to section 271(1)(c) became applicable and assessee having failed to discharge onus being cast on assessee by virtue of said Explanation, Assessing Officer was justified in imposing penalty 6. CIT vs Gates Foam & Rubber Co [91 ITR 467] CIT vs India Seafood M05 ITR 708] where Hon'ble Kerala High Court held that Claiming excessive deduction also amounts to concealment of income 7. Steel Ingots Ltd vs. CIT [296 ITR 228] where Hon'ble Madhya Pradesh High Court held that in case of concealment of true income chargeable to tax by making bogus claim, levy of penalty u/s 271(1 )(c) read with Explanation 1 is justified 8. CIT Vs Escorts Finance Ltd [183 Taxman 453 (Delhi)/[2010] 328 ITR 44 (Delhi)/[2009] 226 CTR 105] where Hon'ble Delhi High Court held that if claim made in return of income appears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , also notes that as per subsequent Karnataka HC ruling in case of Sri. Durga Enterprises, it was held that in a case where the assessee participated in the entire proceedings, if such a defect in the notice was not allowed to be cured, the purpose/intent of sec.292B would be defeated; Thus remarks that, "... we are of the considered opinion that Id. CIT(A) ought not have deleted the penalty based on the decision of Manjunatha Cotton and Ginning Factory.": ITAT In Manjunatha Cotton case [TS-936-HC-2012(KAR)1, Karnataka HC had held that ground of initiation of penalty should be clearly stated in notice for initiation. Last year, Revenue had filed a SLP before SC. regarding Karnataka HC interpretation of Sec. 271(1) (c) in State Bank of Mysore case [TS-6803-HC-2017(KARNATAKA)-Q) which relied upon Manjunatha Cotton decision. The issue is still pending adjudication. 2. Sundaram Finance Ltd. Vs CIT T20181 99 taxmann.com 152 (SC) SLP dismissed against High Court ruling that where assessee claimed depreciation on non-existent assets, penalty under section 271(1)(c) was to be levied for filing inaccurate particulars of income 3. Sundaram Finance Ltd. Vs CIT [2018[ 93 taxmann.com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tage. 17. Thus, for the above reasons, Substantial Questions of law Nos. 1 and 2 are answered against the assessee and in favour of the revenue. The additional substantial question of law, which was framed is rejected on the ground that on facts the said question does not arise for consideration as well as for the reasons set out by us in the preceding paragraphs. In the result, Tax Case Appeals are dismissed. No costs." 4. CIT Vs Smt. Kaushalya T19941 75 Taxman 549 (Bombav)/[1995] 216 ITR 660 (Bombay) In the above case, IAC had issued show-cause notice dated 28-3-1972 under section 274(2). Assessee had no knowledge of exact charge against him. Not only word 'or' had been used between two groups of charges but there was use of word 'deliberately' also. IAC imposed penalty of Rs. 13,000 for assessment year 1967-68 and ITO imposed penalty of Rs. 22,000 and Rs. 10,000 for assessment years 1968-69 and 1969-70, respectively. Tribunal quashed penalties and held that there was absence of reasonable opportunity of hearing because three show-cause notices were ambiguous and defeated very purpose of giving reasonable opportunity of hearing as contemplated under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the assessment order on page nos. 27 to 29. The finding of the AO in respect of the first addition is that cash flow statement filed by the assessee is nothing but an afterthought and a colourable devise to avoid tax. This cash flow statement was sought to be supported by cash flow statement in respect of two partners, Shri N.S. Panwar and Shri Y.S. Panwar. These statements were also examined and various defects were noticed. Coming to advances for job work, it is inter-alia mentioned that most of the entries are above Rs. 20,000/-, but in the reconciliation statement the entries have been bifurcated so that each one of them is less than Rs. 20,000/-, which seems to have been done to avoid penalties under sections 271D and 271E of the Act. The assessee has not done any job work and no income has been shown although an amount of Rs. 16.25 lakh is stated to have been taken from a single party on a number of occasions. Finally, it has been recorded in respect of both the additions that the amount is treated as income from undisclosed sources. All these observations made by the AO show that it was his case that particulars of income have been concealed. It is not a case where any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings following pre-requisites should obtain. (i) The Assessing Officer should be satisfied that:- a) The assessee has either concealed particulars of his income; or b) furnished inaccurate particulars of his income; or c) infracted both (a) and (b) above (ii) This satisfaction should be arrived at during the course of any proceedings. These could be assessment; reassessment or rectification proceedings, but not penalty proceedings. (Hi) If ingredients contained in (i) and (ii) are present a notice to show cause under Section 274 of the Act shall issue setting out therein the infraction the assessee is said to have committed. The notice under Section 274 of the Act can be issued both during or after the completion of assessment proceedings, however, the satisfaction of the Assessing Officer that there has been an infraction of clause (c) of sub-section (1) of Section 271 should precede conclusion of the proceedings pending before the Assessing Officer. (iv) The order imposing penalty can be passed only after assessment proceedings are completed. The time frame for passing the order is contained in Section 275 of the Act. To summarize: the Supreme Court held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty proceedings. (iii) Prima facie' satisfaction of the Assessing Officer that the case may deserve the imposition of penalty should be discernible from the order passed during the course of the proceedings. Obviously, the Assessing Officer would arrive at a decision, i.e., a final conclusion only after hearing the assessee. (iv) At the stage of initiation of penalty proceeding the order passed by the Assessing Officer need not reflect satisfaction vis-a-vis each and every item of addition or disallowance if overall sense gathered from the order is that a further prognosis is called for. (v) However, this would not debar an assessee from furnishing evidence to rebut the prima facie satisfaction of the Assessing Officer; since penalty proceeding are not a continuation of assessment proceedings. [See Jain Brothers v. Union of India (1970) 77ITR 107(SC)] (vi) Due compliance would be required to be made in respect of the provisions of Section 274 and 275 of the Act. (vii) the proceedings for initiation of penalty proceeding cannot be set aside only on the ground that the assessment order states penalty proceedings are initiated separately' if otherwise, it confor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of Hon'ble High court, which in turn, relied upon the judgment rendered in Manjunatha Cotton & Ginning Factory (supra). The decision rendered by Hon'ble Bombay High court in Samson Perinchery (supra) also placed the reliance on this judgment. After perusing the ratio of the judgment rendered in Manjunatha Cotton & Ginning Factory (supra), we find that the assessee's appeal was allowed by Hon'ble High court after considering the multiple factors and not solely on the basis of defect in notice u/s 274. Therefore, we are of the opinion that the penalty could not be deleted merely on the basis of defect pointed by the Ld. AR in the notice and therefore, the legal grounds raised are rejected." 8. DCIT Vs Shah Rukh Khan [2018] 93 taxmann.com 320 (Mumbai - Trib.) Where Hon'ble ITAT Mumbai held as follows: 13. The Id. A.R further to support his contention that because of the failure on the part of the A.O to strike off the irrelevant default in the body of the 'SCN', the assessee had remained divested of any opportunity of putting forth its case before the A.O that no penalty under the aforesaid statutory provision was liable to be imposed in his hands, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in any way affected the validity of the penalty imposed by the A.O under Sec. 271(l)(c). The Ld. D.R. in support of his said contention relied on the following judicial pronouncements:- (i) M/s. Maharaj Garage & Company v. The Commissioner of Inc Nagpur (Income tax reference No. 21 of 2008, dated 22.08.2017. (ii) Commissioner of Income tax v. Smt. Kaushalya & Others (1995) 216 ITR 660 (Bom.). (iii) Earthmoving Equipment Service Corporation v. DCIT 22(2), Mumbai (ITA No.6617/Mum/2014, dated 02.05.2017). (iv) Dhaval K. Jain v. ITO. Ward 16(3)(1), Mumbai (ITA No. 996/Mum/2014, dated 30.09.2016). 19...We are of the considered view that in the backdrop of the aforesaid judgment of the Hon'ble High Court of Jurisdiction, allowing the assessee respondent to proceed with his objection which was for the very first time orally raised during the course of hearing of the appeal before us, undoubtedly would be nothing short of proceeding with the hearing of the appeal, without affording an opportunity of being heard to the appellant revenue in context of the issue under consideration. 9. Dhanraj Mills Pvt. Ltd. Vs ACIT ITA Nos.3830 & 3833/Mum/2009 Where Hon'ble ITAT Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd separate aspect of proceeding. All the other decisions relied by the Ld counsel for the assessee is based on the decision of CIT \/s Manjunatha Cotton & Ginning Factory (supra), wherein the decision of CIT Vs Kaushlya (supra) was not brought in the notice of coordinate bench of Mumbai Tribunal. 2.18. The Hon'ble Karnataka High Court in CIT Versus SSA'S Emerald Meadows in ITA No. 380 of 2015 order dated 23/11/2015, while dismissing the appeal of Revenue followed the decision of CIT Versus Manjunatha Cotton & Ginning Factory (supra). Against the judgment of Karnataka High Court the Revenue filed Special Leave Petition before the Hon'ble Apex Court and the same was dismissed vide SLP (CC No. 11485/2016) on 05/08/2016. There is no dispute to the settled proposition of law that dismissal of the Special Leave Petition in limineby Hon'ble Apex Court does not mean that the reasoning of the judgment of the High Court against which the Special Leave Petition has been filed before this Court stands affirmed or the judgment and order impugned merges with such order of this Court on dismissal of the petition. It simply means that Apex Court did not consider the case for wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The first stage is up to the disposal of prayer for special leave to file an appeal. The second stage commences if and when the leave to appeal is granted and the special leave petition is converted into an appeal. (iii) Doctrine of merger is not a doctrine of universal or unlimited application. It will depend on the nature of jurisdiction exercised by the superior forum and the content or subject-matter of challenge laid or capable of being laid shall be determinative of the applicability of merger. The superior jurisdiction should be capable of reversing, modifying or affirming the order put in issue before it. Under Article 136 of the Constitution the Supreme Court may reverse, modify or affirm the judgment-decree or order appealed against while exercising its appellate jurisdiction and not while exercising the discretionary jurisdiction disposing of petition for special leave to appeal. The doctrine of merger can therefore be applied to the former and not to the latter. (iv) An order refusing special leave to appeal may be a nonspeaking order or a speaking one. In either case it does not attract the doctrine of merger. An order refusing special leave to appeal does not st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is defective. The AO failed to strike down the correct limb under which he sought to impose penalty. Undisputedly, the AO was required to specify the charge. Ld. Counsel for the assessee has placed reliance on the judgement of Hon'ble Supreme Court in the case of Pr.CIT vs GOA Coastal Resorts and Recreation Pvt. Ltd. [2021] 282 Taxman 463 (SC) and further placed reliance on the judgement of Hon'ble Delhi High Court in the case of CIT & Ors vs Sahara India Life Insurance Company Ltd. & Ors. [2021] 432 ITR 84 (Del.). 7.1. The Revenue has not pointed out from the record that any notice u/s 271(1)(c) of the Act specifying the particular charge was issued to the assessee. A notice dated 08.03.2013 has been placed on record by the assessee at page 39 of the Paper Book. For the sake of clarity, the same is reproduced herein below:- Date-08.03.2013 To, Sh. George Kutty C/o Oasis Tours Pvt. Ltd. C-40, Middle Connaught Place, New Delhi - 110001 Sir/Madam, Whereas in the course of proceedings before me for the assessment year 2010-11 it appears to me that you:- *have without reasonable cause failed to furnish the return of income which you were required to furnish by a noti ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
