Swastik Developers Pvt Ltd Kolkata v. Dcit Cir 3 Kolkata Kolkata

1 Ita No 1229 Kol 2015 In The Income Tax Appellate Tribunal D Bench Kol Kata Before Shri Waseem Ahmed Accountant Member And Shri S S Viswanethra Ravi Jud Icial Member I T A No 1229 K Ol 2015 A Y 2005 06 Swastik Developers Vs Dy C I T Cir 3 Kolkata Pvt Ltd Pan Aadcs 9427 R Appellant Responden T For The Appellant Shri V N Purohit Fca Ld Ar For The Respondent Shri Arindam Bhattacharjee Addl Cit Ld Sr Dr Date Of Hearing 31 10 2017 Date Of Pronouncement 13 12 2017 Order Shri S S Viswanethra Ravi Jm This Appeal By The Assessee Is Directed Against The Order Of The Commissioner Of Income Tax Appeals 5 Kolkata D T 14 08 2015 For The A Y 2005 06 Wherein He Confirmed The Penal Ty Of Rs 18 90 250 Imposed U S 271 1 C Of The Act By T He Ao 2 The Ld Ar Submits That The Issue Raised In The A Ppeal Is Covered By The Decision Of The Honble Supreme Court In The Case Of Ssas Emerald Meadows He Also Submits That The Ao Imposed Penalty On Defective Notice Issued U S 274 R W S 271 1 C O F The Act On 05 12 2007 Copy Of The Same Is On Record And In View Of The Decision Supra The Imposition On Defective Notice Is Not Maintain Able 3 The Ld Ar Of The Assessee Further Submits That T He Statutory Notice Dt 05 12 2007 Issued By The Ao I T O Kol Kata U S 274 R W S 271 Of The Act Is Defective He Further Argue D That The Issue In Hand As Raised By The Assessee Is Squarely Covered In Favour Of Assessee By The Decision Of The Honble Supreme Cou Rt In The Case Of Ssas Emerald Meadows In Support Of His Contention He Placed 2 Ita No 1229 Kol 2015 Reliance On The Decision Of The Honble Karnataka H Igh Court In The Case Of Cit Vs Ssas Emerald Meadows Supra In Ita No 380 Of 2015 Dated 23 11 2015 Which Was Approved By The Honble Supreme Court By Dismissal Of Special Leave Petition Slp Filed By The Revenue In Cc No 11485 2016 Dated 5 8 2016 4 On The Other Hand The Ld Dr Relied On The Or Der Of The Cit A In Confirming The Impugned Penalty Imposed U S 271 1 C Of The Act In Support Of His Contention He Also Submitted A D Etailed Written Submission Dt 30 10 2017 Copy Of The Same Is On R Ecord Along With Case Laws Which Extracted As Under 1 The Honble Itat D Bench Kolkata In The Cou Rse Of Hearing Of Appeal Of M S Swastik Developers Pvt Ltd Vs Dcit Circle 3 Fo R A Y 2005 06 At The Request Of The Dr Allowed The Department To Make A Written Submis Sion On The Issue Of Whether Non Marking Upon Concerned Detail In The Notice U S 274 Outlining The Type Of Default Would Constitute Grounds For Rejection Of Satisfaction An D Levy Of Penalty U S 271 1 C Of The It Act 2 The Judgement Of The Honble Calcutta High Court In The Case Dr Syamal Baran Mondal Vs Cit 2011 244 Ctr 631 States That Secti On 271 Nowhere Mandates That Recording Of Satisfaction About Concealment Of Asse Ssees Income Must Be In Specific Terms And Words Satisfaction Of Ao Must Reflect Fr Om The Order Either With Expressed Words Recorded By The Assessing Officer Himself Or By His Overt Act And Action 3 The Ld Itat Mumbai In Its Order The Case Of Tri Shul Enterprises Vs Dcit Ita Nos 384 385 Mum 2014 For A Yrs 2006 07 2007 08 Dt 10 02 2017 Dismissed The Contention Of The Assessee Regarding Failure Of The Ao To Strike Off The Relevant Part Of The Notice U S 274 For Initiating Proceedings U S 2 71 1 C The Itat Relied Upon The Judgement Of The Honble Bombay High Court In The C Ase Of Cit Vs Smt Kaushalya 1992 Wherein It Was Held That Mere Not Striking Off Specific Limb Cannot By Itself Invalidate Notice Issued U S 274 Of The Act The L Anguage Of The Section Does Not Speak About The Issuance Of Notice All That Is Required That The Assessee Be Given An Opportunity Of Show Cause 4 The Honble Bombay High Court Nagpur Bench In The Case Of M S Maharaj Garage Company Vs Cit In Its Judgement Dt 22 08 2017 Has Also Held That 15 The Requirement Of Section 274 Of The Income Tax Act Fo R Granting Reasonable Opportunity Of Being Heard In The Matter Cannot Be Stretched To Th E Extent Of Framing A Specific Charge Or Asking The Assessee An Explanation In Respect Of The Quantum Of Penalty Proposed To Be Imposed As Has Been Urged It Further Ob Served That 16 It Is Not In Dispute That A Reasonable Opportunity Of Being Heard In The Matter As Required By Section 274 Of The Said Act Was Given To The Assessee Before Im Posing The Penalty By The Income Tax Officer 5 Honble Mumbai E Bench In The Case Of Earthmoving Equipment Service Corporation Vs Dcit 22 2 Mumbai 2017 84 Taxmann Com 51 Looked Into The Issue Very Closely And Opined That After Perusing The Ratio Of The Judgeme Nt Rendered In Manjunatha Coton And Ginning Factory We Find That The Assessees Appeal W As Allowed By The Honble High Court After Considering The Multiple Factors And Not Sole Ly On The Basis Of Defect In Notice U S 274 Therefore We Are Of The Opinion That The Penal Ty 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 6 Therefore It Is Submitted That Service Of Notic E U S 274 For Initiating Penalty Proceedings U S 271 L C Of The I T Act Would Constitute Valid Initiation Of Penalty Proceedings And The Case May Be Heard On Merits 3 Ita No 1229 Kol 2015 5 In View Of Above The Ld Dr Prayed To Dismiss T He Grounds Raised In Appeal Of Assessee By Confirming The Pena Lty Imposed And Confirmed By The Ao And Cit A Respectively 6 We Have Heard The Rival Submissions And Consider Ed The Written Submissions Dt 30 10 2017 And The Case Laws Relied Upon By The Ld Dr We Find The Same Set Of Written Submissions Were Filed Before The Coordinate Bench Of This Tribunal In The Case O F Jeetmal Choraria In Ita 956 Kol 16 For Ay 2010 11 Wherein The Coor Dinate Bench Elaborately Discussed The Facts In The Decisions As Relied Upon By The Ld Dr And The Principle Laid Down By The Respectiv E Honble High Courts At Bombay And Patna And Preferred To Follow The Ratio Laid Down By The Honble High Court Of Karnataka In The Case Of Manjunatha Cotton And Ginning Supra By Taking Suppo Rt Of The Established Principle For A Proposition When There Are Two Views On The Issue One In The Favouring Of Assessee Should Be Adopted Which Enunciated By The Honble Supreme Court In The Cas E Of Vegetable Products Ltd Reported In 88 Itr 192 Sc We Are In Agreement With The Reasoning Of The Co Ordinate Ben Ch In Its Order Dt 01 12 2017 In The Case Of Jeetmal Choraria And The Same Is Reproduced Herein Below For Ready Referenc E 7 The Learned Dr Submitted That The Honble Ca Lcutta High Court In The Case Of Dr Syamal Baran Mondal Vs Cit 2011 244 Ctr 631 Cal Has Taken A View That Sec 271 Does Not Mandate That The Recording Of Sati Sfaction About Concealment Of Income Must Be In Specific Terms And Words And That Satisfaction Of Ao Must Reflect From The Order Either With Expressed Words Recorded By The Ao Or By His Overt Act And Action In Our View This Decision Is On The Qu Estion Of Recording Satisfaction And Not In The Context Of Specific Charge In The Ma Ndatory Show Cause Notice U S 274 Of The Act Therefore Reference To This De Cision In Our View Is Not Of Any Help To The Plea Of The Revenue Before Us 8 The Learned Dr Relied On Three Decisions Of Mu Mbai Itat Viz I Dhanraj Mills Pvt Ltd Vs Acit Ita No 3830 3833 Mum 2009 Date D 21 3 2017 Ii Earthmoving Equipment Service Corporation Vs Dcit 22 2 Mumbai 2017 84 Taxmann Com 51 Iii Mahesh M Gandhi Vs Acit Vs A Cit Ita No 2976 Mum 2016 Dated 27 2 2017 Reliance Was Placed On Two Decisi Ons Of The Honble Bombay High Court Viz I Cit Vs Kaushalya 216 Itr 660 Bom And Ii M S Maharaj Garage Co Vs Cit Dated 22 8 2017 This Decisio N Was Referred To In The Written Note Given By The Learned Dr This Is An Unreporte D Decision And A Copy Of The Same Was Not Furnished However A Gist Of The Rati O Laid Down In The Decision Has Been Given In The Written Note Filed Before Us 9 In The Case Of Cit Vs Kaushalya Supra The H Onble Bombay High Court Held That Section 274 Or Any Other Provision In The Act Or The Rules Do Es Not Either Mandate The Giving Of Notice Or Its Issuance In A P Articular Form Penalty Proceedings Are Quasi Criminal In Nature Section 274 Contains The Principle Of Natural Justice Of The Assessee Being Heard Before Levying Penalty Rules Of Natural Justice Cannot Be Imprisoned In Any Straight Jacket Formula For Sustaining A 4 Ita No 1229 Kol 2015 Complaint Of Failure Of The Principles Of Natural J Ustice On The Ground Of Absence Of Opportunity It Has To Be Established That Prejudic E Is Caused To The Concerned Person By The Procedure Followed The Issuance Of N Otice Is An Administrative Device For Informing The Assessee About The Proposa L To Levy Penalty In Order To Enable Him To Explain As To Why It Should Not Be Do Ne Mere Mistake In The Language Used Or Mere Non Striking Of The Inaccurat E Portion Cannot By Itself Invalidate The Notice The Itat Mumbai Bench In The Case Of Dhanraj Mills Pvt Ltd Supra Followed The Decision Rendered By The Juris Dictional Honble Bombay High Court In The Case Of Kaushalya Supra And Chose No T To Follow Decision Of Honble Karnataka High Court In The Case Of Manjunatha Cott On Ginning Factory Supra Reliance Was Also Placed By The Itat Mumbai In This Decision On The Decision Of Honble Patna High Court In The Case Of Cit V Mithila Motor S P Ltd 1984 149 Itr 751 Patna Wherein It Was Held That Under Section 274 Of The Income Tax Act 1961 All That Is Required Is That The Assessee Sho Uld Be Given An Opportunity To Show Cause No Statutory Notice Has Been Prescribed In This Behalf Hence It Is Sufficient If The Assessee Was Aware Of The Charges He Had To Meet And Was Given An Opportunity Of Being Heard A Mistake In The Not Ice Would Not Invalidate Penalty Proceedings 10 In The Case Of Earthmoving Equipment Service C Orporation Supra The Itat Mumbai Did Not Follow The Decision Rendered In The Case Of Manjunatha Cotton Ginning Factory Supra For The Reason That Penalty In That Case Was Deleted For So Many Reasons And Not Solely On The Basis Of Defect In Show Cause Notice U S 274 Of The Act This Is Not Factually Correct One Of The Parties Before The Group Of Assessees Before The Karnataka High Court In The Ca Se Of Manjunatha Cotton Ginning Supra Was An Assessee By Name M S Veerabh Adrappa Sangappa Co In Ita No 5020 Of 2009 Which Was An Appeal By The Reve Nue The Tribunal Held That On Perusal Of The Notice Issued Under Section 271 1 C Of The Act It Is Clear That It Is A Standard Proforma Used By The Assessing Author Ity Before Issuing The Notice The Inappropriate Words And Paragraphs Were Neither Struck Off Nor Deleted The Assessing Authority Was Not Sure As To Whether She Had Proceeded On The Basis That The Assessee Had Either Concealed Its Income O R Has Furnished Inaccurate Details The Notice Is Not In Compliance With The R Equirement Of The Particular Section And Therefore It Is A Vague Notice Which I S Attributable To A Patent Non Application Of Mind On The Part Of The Assessing Au Thority Further It Held That The Assessing Officer Had Made Additions Under Section 69 Of The Act Being Undisclosed Investment In The Appeal The Said Finding Was Set Aside But Addition Was Sustained On A New Ground That Is Under Valuation Of Closing Stock Since The Assessing Authority Had Initiated Penalty Proceedin Gs Based On The Additions Made Under Section 69 Of The Act Which Was Struck Down By The Appellate Authority The Initiated Penal Proceedings Nolonger Exists If Th E Appellate Authority Had Initiated Penal Proceedings On The Basis Of The Addition Sust Ained Under A New Ground It Has A Legal Sanctum This Was Not So In This Case And T Herefore On Both The Grounds The Impugned Order Passed By The Appellate Authorit Y As Well As The Assessing Authority Was Set Aside By Its Order Dated 9th Apri L 2009 Aggrieved By The Said Order The Revenue Filed Appeal Before High Court The Honble High Court Framed The Following Question Of Law In The Said Appeal Vi Z 1 Whether The Notice Issued Under Section 271 1 C In The Printed Form Without Specifically Mentioning Whether The Proceedings Are Initiated On The Ground Of Conc Ealment Of Income Or On Account Of Furnishing Of Inaccurate Particulars Is Valid An D Legal 2 Whether The Proceedings Initiated By The Assessing Authority Was Legal And Valid The Honble Karnataka High Court Held In The Negative And Against The Rev Enue On Both The Questions Therefore The Decision Rendered By The Itat Mumbai In The Case Of Earthmoving Equipment Service Corporation Supra Is Of No Assi Stance To The Plea Of The Revenue Before Us 11 In The Case Of M S Maharaj Garage Co Vs Ci T Dated 22 8 2017 Referred To In The Written Note Given By The Learned Dr Which Is An Unreported Decision And A Copy Of The Same Was Not Furnished The Same Prop Osition As Was Laid Down By The Honble Bombay High Court In The Case Of Smt Ka Ushalya Supra Appears To Have Been Reiterated As Is Evident From The Extrac Ts Furnished In The Written Note Furnished By The Learned Dr Before Us 12 In The Case Of Trishul Enterprises Ita No 384 385 Mum 2014 The Mumbai Bench Of Itat Followed The Decision Of The Honble Bombay High Court In The Case Of Smt Kaushalya Supra 13 In The Case Of Mahesh M Gandhi Supra The Mum Bai Itat The Itat Held That The Decision Of The Honble Karnataka High Court In The Case Manjunatha Cotton Ginning Supra Will Not Be Applicable To The Facts Of That Case Because The Ao In The Assessment Order While Initiating Penalty Proce Edings Has Held That The Assessee Had Concealed Particulars Of Income And Me Rely Because In The Show 5 Ita No 1229 Kol 2015 Cause Notice U S 274 Of The Act There Is No Mentio N Whether The Proceedings Are For Furnishing Inaccurate Particulars Or Concealing Particulars Of Income That Will Not Vitiate The Penalty Proceedings In The Present Case There Is No Whispher In The Order Of Assessment On This Aspect We Have Pointe D Out This Aspect In The Earlier Part Of This Order Hence This Decision Will Not Be Of Any Assistance To The Plea Of The Revenue Before Us Even Otherwise This Decision Does Not Follow The Ratio Laid Down By The Honble Karnataka High Court In The Cas E Of Manjunatha Cotton Ginning Supra In As Much As The Ratio Laid Down I N The Said Case Was Only With Reference To Show Cause Notice U S 274 Of The Act The Honble Court Did Not Lay Down A Proposition That The Defect In The Show Caus E Notice Will Stand Cured If The Intention Of The Charge U S 271 1 C Is Discerni Ble From A Reading Of The Assessment Order In Which The Penalty Was Initiated 14 From The Aforesaid Discussion It Can Be Seen T Hat The Line Of Reasoning Of The Honble Bombay High Court And The Honble Patna Hig H Court Is That Issuance Of Notice Is An Administrative Device For Informing Th E Assessee About The Proposal To Levy Penalty In Order To Enable Him To Explain As T O Why It Should Not Be Done Mere Mistake In The Language Used Or Mere Non Striking O F The Inaccurate Portion Cannot By Itself Invalidate The Notice The Tribunal Benc Hes At Mumbai And Patna Being Subordinate To The Honble Bombay High Court And Pa Tna High Court Are Bound To Follow The Aforesaid View The Tribunal Benchs At Bangalore Have To Follow The Decision Of The Honble Karnataka High Court As Far As Benches Of Tribunal In Other Jurisdictions Are Concerned There Are Two Vi Ews On The Issue One In Favour Of The Assessee Rendered By The Honble Karnataka High Court In The Case Of Manjunatha Cotton Ginning Supra And Other Of Th E Honble Bombay High Court In The Case Of Smt Kaushalya It Is Settled Legal Position That Where Two Views Are Available On An Issue The View Favourable To The A Ssessee Has To Be Followed We Therefore Prefer To Follow The View Expressed By Th E Honble Karnataka High Court In The Case Of Manjunatha Cotton Ginning Supra 15 We Have Already Observed That The Show Cause N Otice Issued In The Present Case U S 274 Of The Act Does Not Specify The Charge Against The Assessee As To Whether It Is For Concealing Particulars Of Income Or Furnishing Inaccurate Particulars Of Income The Show Cause Notice U S 274 Of The Act Does Not Strike Out The Inappropriate Words In These Circumstances We Are Of The View That Imposition Of Penalty Cannot Be Sustained The Plea Of The Ld Co Unsel For The Assessee Which Is Based On The Decisions Referred To In The Earlier P Art Of This Order Has To Be Accepted We Therefore Hold That Imposition Of Pena Lty In The Present Case Cannot Be Sustained And The Same Is Directed To Be Cancell Ed 7 We Find That The Notice Dt 05 12 2007 Issued U S 274 R W S 271 Of The Act Does Not Specify The Charge Of Offence C Ommitted By The Assessee Viz Whether Had Concealed The Particulars Of Income Or Had Furnished Inaccurate Particulars Of Income Hence T He Said Notice Is To Be Held As Defective 8 Further We Find That Revenue Had Preferred A Sl P Before The Honble Supreme Court Against This Judgment Which W As Dismissed In Cc No 11485 2016 Dated 5 8 2016 By Observing As Un Der Upon Hearing The Counsel The Court Made The Follow Ing Order Delay Condoned We Do Not Find Any Merit In This Petition The Spe Cial Leave Petition Is Accordingly Dismissed Pending Application If Any Stands Disposed Of 9 Respectfully Following The Aforesaid Judicial P Recedents We Cancel The Penalty Levied Of Rs Rs 18 90 250 By The A O U Sec 271 1 C 6 Ita No 1229 Kol 2015 Of The Act And Confirmed By The Cit A Accordingly The Grounds Raised By The Assessee In The Appeal For The A Y Un Der Consideration Are Allowed 10 In The Result The Appeal Of The Assessee I S Allowed Order Pronounced In The Open Court On 13 12 2017 Sd Sd Waseem Ahmed S S Viswanethra Ravi Accountant Member Judicial Member Dated 13 12 2017 Pp Sr P S Copy Of The Order Forwarded To 1 Appellant Assessee M S Swastik Developers Pvt Lt D M S Saraf Chandra Ca Ashoka House Suit No 501 3 A Hare Street Kolkata 700 001 2 Respondent Deputy Commissioner Of Income Dcit C Ircle 3 Aaykar Bhawan Kolkata 700 001 3 The Cit A Kolkata 4 5 Cit Kolkata Dr Kolkata Benches Kolkata True Copy By Order Sr Ps H O O Itat Kolkata