AUTORIDERS INDIA P. LTD, MUMBAI v. ASST CIT 9(1), MUMBAI

ITA 2805/MUM/2012 | 2004-2005
Pronouncement Date: 17-11-2017 | Result: Allowed

Appeal Details

RSA Number 280519914 RSA 2012
Assessee PAN AAACA8939R
Bench Mumbai
Appeal Number ITA 2805/MUM/2012
Duration Of Justice 5 year(s) 6 month(s) 22 day(s)
Appellant AUTORIDERS INDIA P. LTD, MUMBAI
Respondent ASST CIT 9(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 17-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Allowed
Bench Allotted A
Tribunal Order Date 17-11-2017
Date Of Final Hearing 11-02-2015
Next Hearing Date 11-02-2015
First Hearing Date 11-02-2015
Assessment Year 2004-2005
Appeal Filed On 25-04-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE D.T. GARASIA JUDICIAL MEMBER AND SHRI G. MANJUNATHA ACCOUNTANT MEMBER ITA NO.2803/M/2012 ASSESSMENT YEAR: 1997-98 ITA NO.2804/M/2012 ASSESSMENT YEAR: 1999-2000 ITA NO.2805/M/2012 ASSESSMENT YEAR: 2004-05 M/S. AUTORIDERS INDIA PVT. LTD. 4-A VIKAS CENTRE 104 S.V. ROAD SANTACRUZ MUMBAI 400 054 PAN: AAACA8939R VS. THE ASST. COMM. OF INCOME TAX-9(1) AAYAKAR BHAVAN MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI VIJAY MEHTA A.R. REVENUE BY : SHRI R.P. MEENA D.R. & SHRI RAJESH KUMAR YADAV D.R. DATE OF HEARING : 10.11.2017 DATE OF PRONOUNCEMENT : 17.11.2017 O R D E R PER D.T. GARASIA JUDICIAL MEMBER: THE ABOVE TITLED APPEALS HAVE BEEN PREFERRED BY TH E ASSESSEE AGAINST THE ORDER DATED 13.02.2012 OF THE COMMISSIONER OF INCOM E TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 1997-98 1999-2000 & 2004-05 WHICH HAVE BEEN ARISEN OUT OF T HE ORDER PASSED BY ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE A O) UNDER SECTION 271(1)(C) OF THE ACT. 2. IN THESE APPEALS SOLITARY GRIEVANCE OF THE ASSE SSEE IS WITH REGARDS TO IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF TH E ACT. THE RELEVANT FACTS ARE THAT ASSESSEE COMPANY WAS INCORPORATED UNDER TH E PROVISIONS OF ITA NO.2803/M/2012 ITA NO.2804/M/2012 & ITA NO.2805/M/2012 M/S. AUTORIDERS INDIA PVT. LTD. 2 COMPANIES ACT 1956. FOR THE YEAR UNDER CONSIDERATI ON ASSESSEE HAS FILED THE RETURN OF INCOME AT LOSS OF RS.1 41 74 329/- IN ASS ESSMENT YEAR 1997-98 WHICH WAS SUBJECTED TO SCRUTINY UNDER SECTION 143(3) OF T HE ACT AND VIDE ORDER DATED 26.03.02 THE FINAL INCOME WAS AT RS2 75 48 670/-. THE RELEVANT ISSUE FOR OUR PURPOSE IS THE DISALLOWANCE ON ACCOUNT OF FOREIGN T RAVELLING EXPENSES OF RS.7 29 580/- INTEREST PAYMENT OF RS.1 25 155/- C ASH CREDITS OF RS.21 LAKHS AND INTEREST ON INVESTMENTS WITH AUTORIDERS FINANCE RS.1 06 81 976/-. THUS THE TOTAL DISALLOWANCE OF RS.1 36 36 711/- MADE IN ORIGINAL ORDER UNDER SECTION 143(3) DATED 29.03.2000 WAS WITHIN THE MEANING OF S ECTION 271(1)(C) OF THE ACT READ WITH EXPLANATION 1. BY VIRTUE OF DISALLOW ANCE OF RS.5 53 58 771/- WHICH IS DISALLOWED IS DEEMED TO REPRESENT THE INCO ME IN RESPECT OF WHICH THE PARTICULARS HAVE BEEN CONCEALED. THE MINIMUM PENAL TY 100% OF THE TAX EVADED ON ACCOUNT OF CONCEALED INCOME OF RS.5 53 58 771/- WAS WORKED OUT TO RS.2 38 04 246/- AND PENALTY OF RS.2 38 04 246/- WA S LEVIED. SIMILARLY PENALTY OF RS.2 20 85 000/- AND RS.4 08 34 150/- WAS WORKED OUT FOR A.Y. 1999-2000 AND FOR A.Y. 2004-05 RESPECTIVELY. 3. MATTER CARRIED TO LD. CIT(A) AND LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. 4. AGGRIEVED BY THE LD. CIT(A)S ORDER UPHOLDING TH E PENALTY UNDER SECTION 271(1)(C) OF THE ACT ASSESSEE HAS RAISED T HE FOLLOWING COMMON GROUNDS: 1. THE LD. CIT(A) ERRED IN AFFIRMING/CONFIRMING T HE ORDER OF AO LEVYING PENALTY U/S 271(1)(C) OF THE ACT OF RS.2 38 04 246/- FOR A.Y. 1997-98 RS.2 20 85 000/- FOR A.Y. 1999-2000 AND RS.4 08 34 150/- FOR A.Y. 2004-0 5 RESPECTIVELY. 2. THE LD. CIT(A) FURTHER ERRED IN HOLDING THAT THE ORDER OF AO IS NOT BAD IN LAW. 3. THE APPELLANT SUBMITS THAT THE ORDER OF AO DATED 29.08.08 IS BAD IN LAW AS THE OFFICIAL LIQUIDATOR WAS APPOINTED BY THE HONBL E BOMBAY HIGH COURT AND HENCE NO PROCEEDINGS CAN BE INITIATED AGAINST THE APPELLA NT WITHOUT THE LEAVE OF THE COURT. 4. THE LD. CIT(A) HAS NOT CONSIDERED ANY OF THE JUD ICIAL DECISIONS SUBMITTED DURING THE COURSE OF APPELLANT PROCEEDINGS. ITA NO.2803/M/2012 ITA NO.2804/M/2012 & ITA NO.2805/M/2012 M/S. AUTORIDERS INDIA PVT. LTD. 3 5. THE APPELLANT PRAYS THAT THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT BE DELETED. 5. FURTHER THE ASSESSEE HAS ALSO TAKEN THE ADDITIO NAL GROUND WHICH IS REPRODUCED AS UNDER: THE PENALTY ORDER IS BAD IN LAW AS THE LD. AO HAD NOT STRUCK-OFF THE IRRELEVANT CLAUSE IN THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C ) OF THE ACT AND ASSESSEE WAS NOT MADE AWARE AS TO WHICH OF THE TWO LIMBS OF SEC. 271 (1)(C) OF THE ACT WAS TO BE RESPONDED TO. ALONG WITH THIS ADDITIONAL GROUND (SUPRA) THE ASSE SSEE HAS ALSO PLEADED THAT THE BENCH CONSIDER ADMISSION OF THIS GROUND FO R ADJUDICATION SINCE IT IS A LEGAL GROUND OF JURISDICTION WHICH GOES TO THE ROOT OF THE PROCEEDINGS FACTS OF WHICH ARE ALREADY AVAILABLE ON RECORD. RELIANCE IN THIS REGARD WAS PLACED ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF NTPC LTD. VS. CIT (229 ITR 383 (SC). LEARNED D.R. FOR REVENUE OPPOSED ADMI SSION OF THIS ADDITIONAL GROUND. 6. WE HAVE HEARD THE RIVAL CONTENTIONS ON THE ISSUE OF ADMISSION OF THE ADDITIONAL GROUND (SUPRA). WE FIND THAT SINCE THE I SSUE RAISED THEREIN IS A LEGAL ONE PERTAINING TO THE ISSUE OF JURISDICTION WHICH G OES TO THE VERY ROOT OF THE MATTER AND ALL THE RELEVANT FACTS IN THIS REGARD AR E ALREADY AVAILABLE ON RECORD WE THEREFORE FOLLOWING THE RATIO OF THE DECISION O F THE HON'BLE APEX COURT IN THE CASE OF NTPC LTD. (SUPRA) ADMIT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE FOR CONSIDERATION/ADJUDICATION IN THIS APP EAL. 7. AT THE TIME OF HEARING THE LD. REPRESENTATIVE O F THE ASSESSEE POINTED OUT THAT ASSESSEE HAS NOT GONE INTO THE TRIBUNAL AG AINST THE QUANTUM ORDER PASSED BY THE LD. CIT(A). THE LD. A.R. SUBMITTED T HAT DURING THE COURSE OF ASSESSMENT PROCEEDING THE ASSESSEE HAS SUBMITTED A LL THE EVIDENCES. THE ANOTHER PERTINENT POINT RAISED BY THE ASSESSEE WAS THAT PENALTY NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(C) OF THE ACT DATED 29.03.2000 A COPY OF ITA NO.2803/M/2012 ITA NO.2804/M/2012 & ITA NO.2805/M/2012 M/S. AUTORIDERS INDIA PVT. LTD. 4 WHICH HAS BEEN PLACED ON RECORD REVEALS NON-APPLIC ATION OF MIND BY AO INASMUCH AS THE IRRELEVANT PORTION OF THE NOTICE HA S NOT BEEN STRUCK OFF. IT WAS THEREFORE CONTENDED THAT THE LEVY OF PENALTY IS IL LEGAL AND DESERVES TO BE SET ASIDE. IN SUPPORT OF SAID PROPOSITION THE RELIANC E IS PLACED ON FOLLOWING DECISIONS: 1. M/S. SSAS EMERALD MEADOWS ITA NO.380/2015 DATE D 23.11.2015 (HONBLE KARNATAKA HIGH COURT) 2. MANJUNATHA COTTON AND GINNING FACTORY & ORS. 35 9 ITR 565 (KAR.) 3. DILIP N. SHROFF 161 TAXMAN 218 (SC) 4. DR. SARITA MILIND DAVARE ITA NO.2187 & 1789/MUM /2014 DATED 21.12.2016. 5. SHRI SAMSON PERINCHERY ITA NO.4625 TO 4630/MUM/ 2013 DATED 11.10.2013. 6. CIT V. RELIANCE PETROPRODUCTS (P.) LTD. [2010] 3 22 ITR 158 (SC) AT THE TIME OF HEARING THE LD. REPRESENTATIVE OF THE ASSESSEE POINTED OUT THAT THE COMPANY WAS INCORPORATED TO CARRY OUT THE BUSINESS OF DEALERSHIP IN AUTOMOBILE VEHICLES. THE COMPANY COULD NOT CARR Y ON BUSINESS ACTIVITY DUE TO SUDDEN DEMISE OF PROMOTER DIRECTOR MR. MUKESH R. PATEL. THE HONBLE BOMBAY HIGH COURT HAS APPOINTED AN OFFICIAL LIQUIDA TOR AS A PROVISIONAL LIQUIDATOR. AS THE PROVISIONAL LIQUIDATOR HAS APPOI NTED THE PROCEEDING AGAINST COMPANY CANNOT BE TAKEN WITHOUT THE LEAVE OF THE CO URT AS PROVIDED UNDER SECTION 446 OF THE COMPANIES ACT. IN VIEW OF THIS THE PENALTY LEVIED UNDER SECTION 271(1)(C) IS BAD IN LAW. THE LD. A.R. SUBM ITTED THAT IN RESPECT OF DISALLOWANCE OF FOREIGN TRAVEL EXPENDITURE OF RS.7 29 580/- IT WAS EXPLAINED DURING THE ASSESSMENT PROCEEDING THAT MRS. JAYSHREE PATEL I WIFE OF MR. AMRISH PATEL BROTHER OF MR. MUKESH PATEL. MRS. KE TKI PATEL WAS WIFE OF MR. MUKESH PATEL WHO EXPIRED SUDDENLY ON 15.06.2002. I T WAS EXPLAINED DURING THE ASSESSMENT PROCEEDINGS THAT FOREIGN TRIPS WERE UNDERTAKEN AS THE ASSESSEE COMPANY HAD INCURRED HUGE LOSSES AND THEY WERE EXPL ORING FOR ARISING FINANCE SO THAT THEY CAN CONTINUE THEIR BUSINESS. MRS. JAY SHREE PATEL AND MRS. KETKI ITA NO.2803/M/2012 ITA NO.2804/M/2012 & ITA NO.2805/M/2012 M/S. AUTORIDERS INDIA PVT. LTD. 5 PATELS VISIT WAS FOR BUSINESS. IN RESPECT OF INTE REST PAYMENT THE LD. A.R. SUBMITTED THAT ASSESSEE COMPANY HAS ACCOUNTED INTER EST ON TDS CERTIFICATE AND RECONCILIATION CHART HAS BEEN SUBMITTED. IN RESPEC T OF CASH CREDIT IT WAS EXPLAINED THAT AMOUNT RECEIVED FROM SHIRPUR EDUCATI ON SOCIETY WHICH IS A CHARITABLE TRUST UNDER BOMBAY PUBLIC TRUST ACT AND IS ASSESSED TO TAX AND LETTER OF CONFIRMATION WAS SUBMITTED. THE ACCOUNTS OF THE SAID SOCIETY ARE AUDITED AND AMOUNT APPEARED AS A LOAN TO THE ASSESSEE. IN RESPECT OF INTEREST ON ADVANCE TO AUTORIDERS FINANCE IT WAS EXPLAINED THAT THE TRANSACTION WITH THE AUTORIDERS FINANCE WHICH WAS A GROUP COMPANY WAS A BUSINESS TRANSACTION AND DOES NOT AMOUNT FOR CHARGING OF INTEREST THERE FORE NO PENALTY CAN BE LEVIED. THE LD. A.R. ALSO POINTED OUT THAT IN ASSESSMENT YE AR 1999-2000 THE PENALTY WAS INITIATED UNDER SECTION 143(3) READ WIT H SECTION 147 OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME. WHILE PASSING THE PENALTY ORDER THE AO HAS LEVIED THE PENALTY FOR CONCEALMENT OF IN COME. THE LD. A.R. HAS SUBMITTED THE CHART BEFORE US WHICH READS AS UNDER: A.Y. 1997-98 SR. NO. PARTICULARS AMOUNT OF PENALTY PENALTY INITIATED IN ASSESSMENT ORDER PASSED PENALTY LEVIED BY ASSESSING OFFICER U/S 143(3) U/S 143(3) R.W.S. 147 1. INTEREST ON AMOUNT BORROWED FOR PURPOSE OF ACQUISITION OF LAND 1 79 40 460 - FURNISHING OF INACCURATE PARTICULARS OF INCOME CONCEALME NT OF INCOME 2. TRANSACTIONS WITH AUTORIDERS FINANCE LTD. 45 93 250 FURNISHING OF INACCURATE PARTICULARS OF INCOME - CONCEALME NT OF INCOME 3. CASH CREDIT 9 03 000 NO SPECIFIC CHARGE - CONCEALME NT OF INCOME 4. FOREIGN TRAVELLING EXPENSES 3 13 719 NO SPECIFIC CHARGE - CONCEALME NT OF INCOME ITA NO.2803/M/2012 ITA NO.2804/M/2012 & ITA NO.2805/M/2012 M/S. AUTORIDERS INDIA PVT. LTD. 6 5. INTEREST PAYMENT (NOTE 2) 53 817 NO SPECIFIC CHARGE - CONCEALME NT OF INCOME NOTE 1: IN PRINTED SHOW CAUSE NOTICE ISSUED U/S 271 (1)(C) OF THE ACT ON 29.03.2000 ALONG WITH ASSESSMENT ORDER U/S 143(3) OF THE ACT NO PARTICULAR LIMB HAS BEEN STRUCK OFF. NOTE 2: PENALTY HAS BEEN INITIATED ON RS.39 959/- O UT O THE TOTAL DISALLOWANCE OF INTEREST OF RS.1 25 155/-. A.Y. 1999-2000 NOTE: IN PRINTED SHOW CAUSE NOTICE ISSUED U/S 271(1)(C) O F THE ACT ON 23.03.2002 ALONG WITH ASSESSMENT SR. NO. PARTICULARS AMOUNT PENALTY INITIATED IN ASSESSMENT ORDER PASSED PENALTY LEVIED BY ASSESSING OFFICER 1. INTEREST ON AMOUNT BORROWED FOR PURPOSE OF ACQUISITION OF LAND 2 20 85 000 FURNISHING OF INACCURATE PARTICULARS OF INCOME CONCEALMENT OF INCOME ORDER U/S 143(3) OF THE ACT NO PARTICULAR LIMB HAS BEEN STRUCK OFF (COPY ENCLOSED) A.Y. 2004-05 SR. NO. PARTICULARS AMOUNT PENALTY INITIATED IN ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT PENALTY LEVIED BY ASSESSING OFFICER 1. LOSS ON DIMUNITION IN VALUE OF INVESTMENTS 3 69 09 480 FURNISHING INACCURATE PARTICULARS OF INCOME CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME 2. OTHER EXPENSES 39 24 670 FURNISHING INACCURATE PARTICULARS OF INCOME CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME NOTE: IN PRINTED SHOW CAUSE NOTICE ISSUED U/S 271(1)(C) O F THE ACT ON 25.08.2006 ALONG WITH ASSESSMENT ORDER U/S 143(3) OF THE ACT NO PARTICULAR LIMB HAS BEEN STRUCK OFF (COPY ENCLOSED) ITA NO.2803/M/2012 ITA NO.2804/M/2012 & ITA NO.2805/M/2012 M/S. AUTORIDERS INDIA PVT. LTD. 7 THE LD. A.R. SUBMITTED THAT FROM THE ABOVE CHART IT CAN BE SEEN THAT FOR A.Y. 1997-98 THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT IN WHICH THE PENALTY HAS BEE N INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME WHILE THE AO HAS L EVIED THE PENALTY FOR CONCEALMENT OF INCOME. IN RESPECT OF TRANSACTION W ITH AUTORIDERS THE PENALTY HAS BEEN INITIATED FOR FURNISHING OF INACCURATE PAR TICULARS OF INCOME WHILE THE PENALTY HAS BEEN LEVIED FOR CONCEALMENT OF THE INCO ME. IN RESPECT OF CASH CREDIT IN FOREIGN TRAVELLING AND INTEREST PAYMENT N O SPECIFIC CHARGE HAS BEEN DONE IN ASSESSMENT ORDER WHILE THE PENALTY IS LEVIE D FOR CONCEALMENT OF THE INCOME. IN RESPECT OF A.Y. 1999-2000 THE PENALTY I NITIATED IN THE ASSESSMENT ORDER FOR FURNISHING OF INACCURATE PARTICULARS OF I NCOME WHILE THE PENALTY IS LEVIED FOR CONCEALMENT OF INCOME. SIMILARLY IN A. Y. 2004-05 THE PENALTY HAS BEEN INITIATED FOR FURNISHING OF INACCURATE PARTICU LARS OF INCOME WHILE THE PENALTY HAS BEEN LEVIED FOR CONCEALMENT OF INCOME. THE LD. A.R. SUBMITTED THAT WHEN THE AO IS NOT SURE WHETHER PENALTY IS FOR CONCEALMENT OF INCOME OF FOR FURNISHING INACCUR ATE PARTICULARS OF INCOME THEN NO PENALTY CAN BE LEVIED. HE RELIED UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF NEW SORATHIA ENGG. CO. VS . CIT 282 ITR 614 (GUJ.) AND SUBMITTED THAT AO WAS NOT CERTAIN AS TO WHAT WA S THE FINDING ON THE STAND OF WHICH HE IMPOSED THE PENALTY. HE FURTHER SUBMIT TED THAT IN CIT GUJARAT-III VS. MANU ENGINEERING WORKS A DIVISION BENCH OF THE GUJARAT HIGH COURT OBSERVED THAT THE AO MUST GIVE A POSITIVE FINDING A S TO WHETHER THERE IS CONCEALMENT OF INCOME BY THE ASSESSEE OR WHETHER AN Y INACCURATE PARTICULARS OF SUCH INCOME HAD BEEN FURNISHED BY THE ASSESSEE. IN THE EVENT THERE WAS NO SUCH CLEAR-CUT FINDING THE PENALTY ORDER WAS HELD LIABLE TO BE STRUCK DOWN. THE LD. A.R. SUBMITTED THAT IN THIS CASE ASSESSEE H AS FURNISHED ALL THE DETAILS OF EXPENDITURE BEFORE AO. THE LD. A.R. SUBMITTED THAT WHEN ALL THE EVIDENCES HAVE BEEN SUBMITTED RELATING TO THE EXPENDITURE CLA IMED BUT ASSESSEE COULD NOT SUBSTANTIATE HIS CLAIM DOES NOT LEAD TO IMPOSITION OF PENALTY. ITA NO.2803/M/2012 ITA NO.2804/M/2012 & ITA NO.2805/M/2012 M/S. AUTORIDERS INDIA PVT. LTD. 8 THE LEARNED A.R. OF THE ASSESSEE AT THE OUTSET RAIS ED THE ISSUE IN THE ADDITIONAL GROUND (SUPRA) CHALLENGING THE VALIDITY OF THE NOTICE ISSUED UNDER SECTION 274 R.W.S. 271 OF THE ACT DATED 11.03.2015. ACCORDING TO THE LEARNED A.R. THE AO HAS ISSUED THIS NOTICE WITHOUT SPECIFY ING THE DEFAULT COMMITTED BY THE ASSESSEE FOR WHICH PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT ARE INITIATED (COPY OF NOTICE DATED 11.03.2015 IS PLACED ON RECORD); I.E. WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT IS SUBMITTED T HAT A PERUSAL OF THE SAID NOTICE WOULD EVIDENCE TOTAL NON-APPLICATION OF MIND ON THE PART OF THE AO SINCE HE HAS NEITHER DELETED THE INAPPROPRIATE WORDS/PORTION S OF THE NOTICE WHEREBY IT IS NOT CLEAR WHETHER PENALTY IS SOUGHT TO BE LEVIED UN DER SECTION 271(1)(C) OF THE ACT; FOR CONCEALMENT OF PARTICULARS OF INCOME OR FU RNISHING OF INACCURATE PARTICULARS OF INCOME. IT IS CONTENDED THAT THE SAI D PENALTY PROCEEDINGS SEEM TO HAVE BEEN INITIATED AND LEVIED ON ALL POSSIBLE GROU NDS. HE SUBMITTED THAT VARIOUS COURTS HAVE HELD THAT NON SPECIFICATION OF THE SPECIFIC CHARGE WILL VITIATE THE PENALTY PROCEEDINGS I.E. THE ASSESSEE SHOULD BE APPRAISED OF THE SPECIFIC REASON/ CHARGE FOR WHICH PENALTY UNDER SEC TION 271(1)(C) OF THE ACT IS TO BE LEVIED. IN THIS REGARD THE LEARNED A.R. OF T HE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNA L IN THE CASE OF DR. SARITA MILIND DAVARE IN ITA NO. 2187/MUM/2014 DATED 21.12. 2016 WHEREIN AFTER INTER ALIA CONSIDERING THE DECISIONS OF THE HON'BL E BOMBAY HIGH COURT IN THE CASE OF SMT. B. KAUSHALYA AND OTHERS (216 ITR 660) AND THE DECISIONS OF THE HON'BLE APEX COURT IN DILIP N. SHROFF (291 ITR 519) (SC) DHARMENDRA TEXTILE PROCESSORS (306 ITR 277) (SC) AND RELIANCE PETRO PRODUCTS P. LTD. ((322 ITR 158) (SC) AND OF THE HON'BLE KARNATAKA HI GH COURT IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 IT R 565 (KAR) THE BENCH HAS HELD THAT SINCE THE AO IN THAT CASE HAD NOT SPE CIFIED IN THE SAID NOTICE UNDER SECTION 274 R.W.S. 271 OF THE ACT THE LIMB U NDER WHICH THE PENALTY IS TO BE LEVIED THE ASSESSEE HAS NOT BEEN APPRAISED OF A NY CHARGE FOR WHICH THE ITA NO.2803/M/2012 ITA NO.2804/M/2012 & ITA NO.2805/M/2012 M/S. AUTORIDERS INDIA PVT. LTD. 9 PENALTY PROCEEDINGS HAS BEEN INITIATED AND THEREFOR E THE SAID NOTICE DATED 11.03.2015 ISSUED UNDER SECTION 274 R.W.S. 271 OF T HE ACT OF INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT IS I NVALID AND BAD IN LAW. 8. ON THE OTHER HAND THE LD. D.R. SUBMITTED THAT I N THE ASSESSEE COMPANY OFFICIAL LIQUIDATOR WAS APPOINTED. HE FURTHER SUBM ITTED THAT IN CASE OF PENALTY ON FOREIGN EXPENSES AT THE TIME OF ASSESSMENT PROC EEDINGS ASSESSEE COULD NOT PRODUCE ANY EVIDENCE REGARDING THE EXPENDITURE INCU RRED ON FOREIGN TRAVEL WAS FOR THE BUSINESS WHICH IS WELL SETTLED PRINCIPLE TH AT WHATEVER EXPENSE IS DEBITED TO P & L ACCOUNT ASSESSEE HAS TO CORROBORATE THEM W ITH SUPPORTING EVIDENCE THAT IT WAS INCURRED FOR BUSINESS PURPOSE. THE LD. DR APPEARING FOR THE REVENUE HAS DEFENDED THE ACTION OF THE INCOME-TAX A UTHORITIES AND POINTED OUT THAT THE LOSS WAS DISALLOWED BY THE ASSESSING OFFIC ER NOTICING THAT THE SHARES WERE PURCHASED AT A PREMIUM WHEREAS THE REDEMPTION PRICE WAS AGREED AT A DISCOUNT. THE LD. CIT-DR CONTENDED THAT THE BASIS F OR ARRIVING AT THE REDEMPTION PRICE HAS NOT BEEN JUSTIFIED BY THE ASSE SSEE AND THEREFORE THE GENUINENESS OF THE TRANSACTION WAS REJECTED BY THE INCOME-TAX AUTHORITIES. IT WAS THEREFORE CONTENDED THAT UNDER THESE CIRCUMST ANCES THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT IS QUITE JUSTIFIED. WITH R EGARD TO THE PLEA OF ASSESSEE THAT NOTICE ISSUED U/S 274 R.W.S 271(1)(C) OF THE A CT WAS LEGALLY UNTENABLE THE LD. CIT-DR POINTED OUT THAT IN THE ASSESSMENT ORDER ITSELF THE ASSESSING OFFICER IN PARA 4 HAS RECORDED THAT THE PENALTY U/S 271(1)( C) OF THE ACT WAS INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT WAS THEREFORE CONTENDED THAT THE ASSESSMENT ORDER ITSELF SHOWS DUE APPLICATION O F MIND BY THE ASSESSING OFFICER FOR INITIATION OF PROCEEDINGS U/S 271(1)(C) OF THE ACT AND THAT THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT DATED 10 .12.2010 CANNOT BE SOLELY EXAMINED TO SEE WHETHER THE ASSESSING OFFICER HAS D ULY APPLIED HIS MIND TO THE INITIATION OF PROCEEDINGS U/S 271(1)(C) OF THE ACT. THE LD. CIT-DR HAS ALSO REFERRED TO THE OBSERVATIONS OF THE CIT(A) IN PARA 2.12 OF HIS ORDER WHEREIN THE TENABILITY AND THE BONA FIDE OF THE EXPLANATION REN DERED BY THE ASSESSEE HAVE ITA NO.2803/M/2012 ITA NO.2804/M/2012 & ITA NO.2805/M/2012 M/S. AUTORIDERS INDIA PVT. LTD. 10 BEEN REJECTED. IT WAS THEREFORE CONTENDED THAT TH E PENALTY HAS BEEN RIGHTLY LEVIED U/S 271(1)(C) OF THE ACT IN THE PRESENT CASE . THE LEARNED D.R. SUBMITTED THAT THE PROVISIONS OF SECTION 274 OF THE ACT STIPU LATE THAT THE ASSESSEE SHOULD BE AFFORDED AN OPPORTUNITY OF BEING HEARD BEFORE PE NALTY IS IMPOSED. ACCORDING TO THE LEARNED D.R. IN THE CASE ON HAND THE ASSESSEE HAS BEEN PROVIDED WITH AN OPPORTUNITY OF BEING HEARD AND HAD ALSO PARTICIPATED IN THE PENALTY PROCEEDINGS AND THEREFORE THE DEFICIENCIES IF ANY IN THE PENALTY PROCEEDINGS IS AUTOMATICALLY CURED BY THE PROVISION S OF SECTION 292B/292BB OF THE ACT. RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SMT. KAUSHALYA AND OTHERS (216 ITR 660) SUBMITTING THAT THE HON'BLE COURT HAS HELD THAT MERE MISTAKE IN THE LANGUAGE USED OR MERE NON-STRIKING OF THE INAPPROPRIATE PORTION CANNOT BY ITSELF INVALIDATE THE NOTICE. 9. IN REJOINDER THE LEARNED A.R. CONTENDS THAT IN THE CASE ON HAND THE AO ISSUED THE SAID NOTICE DATED 11.03.2015 WITHOUT IND ICATING THE LIMB OF SECTION 271(1)(C) THAT THE PENALTY PROCEEDINGS WERE INITIAT ED. SINCE THE MATTER RAISED IN THIS GROUND GOES TO THE VERY ROOT OF THE MATTER OF THE INITIATION PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT THE SAME CANNOT BE CURED BY THE PROVISIONS OF SECTION 292B/292BB OF THE ACT. IN SUPPORT OF THIS PROPORTION RELIANCE WAS PLACED ON THE DECISION RENDERED BY THE ITAT BANGALORE BENCH IN THE CASE OF K. PRAKASH SHETTY VS. ACIT IN ITA NOS. 265 TO 267/BANG/2014 DATED 05.06.2014. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. THE ISSUE FOR CONSIDERATION BEFORE US IS TO EXAMINE WHETHER OR NOT PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS EXIGI BLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE ON HAND. IN OUR CONSIDERE D VIEW PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT CAN BE INITIATED ONLY IF THE AO IN THE COURSE OF PROCEEDINGS UNDER THE ACT IS SATIS FIED THAT ANY PERSON HAS ITA NO.2803/M/2012 ITA NO.2804/M/2012 & ITA NO.2805/M/2012 M/S. AUTORIDERS INDIA PVT. LTD. 11 'CONCEALED PARTICULARS OF INCOME' OR HAS 'FURNISHED INACCURATE PARTICULARS' OF INCOME. 11. IN THIS REGARD FOR THE SAKE OF CONVENIENCE TH E SAID NOTICE DATED 11.03.2015 ISSUED UNDER SECTION 274 R.W.S. 271 OF T HE ACT IS EXTRACTED BELOW: - 'NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE INCOME-TAX ACT 1961. PENALTY U/S. 271(1)(C) OFFICE OF THE PEN/32/PG.31 DY.COMMISSIONER OF INCOME TAX- I 3( 1)(2) 2014-05 ROOM NO.218 2'' FLOOR AAYAKAR BHAVAN MUMBAI - 20. PAN: AAFCP8573K DATE: 11-03-2015 TO THE PRINCIPAL OFFICER M/S PRINCE CONSULTANCY PVT. LTD. 1203 EMP 48 EVERSHINE HALLEY THAKUR VILLAGE KANDIVALI (EAST) MUMBAI - 400 101. WHEREAS IN THE COURSE OF PROCEEDING BEFORE ME FOR T HE ASSESSMENT YEAR 2012-13 IT APPEARS TO ME THAT YOU: - HAVE WITHOUT REASONABLE CAUSE FAILED TO FURNISH M E RETURN OF INCOME WHICH YOU WERE REQUIRED TO FURNISH BY A NOTICE GIVEN UNDER SECTION 22(1) / 22(2) 34 OF THE INDIAN INCOME-TAX ACT 1922 OR WHICH YOU WERE REQUIRED TO FURNISH UNDER SECTION 139(1) OR BY A NOTICE GIVEN UNDER SECTION 139(2) / 148 OF THE INCOME TAX ACT 1961 NO ___________________ DATED ____________________ OR H AVE WITHOUT REASONABLE CAUSE FAILED TO FURNISH IT WITHIN THE TIME ALLOWED AND THE MANNER REQUIRED BY THE SAID SECTION 139(1) OR BY SUCH NOTICE. HAVE WITHOUT REASONABLE CAUSE FAILED TO COMPLY WI TH A NOTICE UNDER SECTION 22(4) / 23(2) OF THE INDIAN INCOME-TAX ACT 1922 OR UNDER SECTION 142(1) / 143(2) OF THE INCOME TAX ACT 1961. HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR _____________ FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. ITA NO.2803/M/2012 ITA NO.2804/M/2012 & ITA NO.2805/M/2012 M/S. AUTORIDERS INDIA PVT. LTD. 12 YOU ARE HEREBY REQUESTED TO APPEAR BEFORE ME WITH I N SEVEN DAYS FROM THE RECEIPT OF THIS ORDER AND HOW CAUSE WHY AN ORDER IM POSING A PENALTY ON YOU SHOULD NOT BE MADE UNDER SECTION 271 OF THE INCOME-TAX ACT 1961. IF YOU DO NOT WISH TO AVAIL YOURSELF OF THIS OPPORTUNITY OF BEING HEARD IN PERSON OR THROUG H AUTHORIZED REPRESENTATIVE YOU MAY SHOW CAUSE IN WRITING ON OR BEFORE THE SAID DATE WH ICH WILL BE CONSIDERED BEFORE ANY SUCH ORDER IS MADE UNDER SECTION 271(1)(C) . SEAL SD/- (ALOK SINGH) DY. COMMISSIONER OF INCOME TAX-13(1)(2) MUMBAI ' 12. A CAREFUL PERUSAL OF THE SAID NOTICE WOULD SHOW THAT IT WOULD HAVE ISSUED EITHER FOR FAILURE TO FURNISH THE INACCURATE PARTICULARS OF INCOME UNDER SECTION 139(1) 139(2)/148 OF THE ACT OR FAILURE TO COMPLY WITH THE NOTICE ISSUED UNDER SECTION 143(1)/143(2) OF THE ACT OR FO R CONCEALMENT OF INCOME. IN OUR VIEW THERE SHOULD NOT BE ANY DOUBT ABOUT WHI CH OF THE TWO LIMBS OF SECTION 271(1) FOR THE PENALTY IS SOUGHT TO BE LEVI ED VIS--VIS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. IN THE SAID NOTICE FOR ALL THE THREE YEARS AO HAS NOT SPEC IFIED AS TOW WHICH TWO LIMBS OF SECTION 271(1)(C) HAS BEEN INITIATED. 13. SEC. 271(1)(C) OF THE ACT EMPOWERS THE AO TO I MPOSE PENALTY TO THE EXTENT SPECIFIED IF IN THE COURSE OF ANY PROCEEDIN GS UNDER THE ACT HE IS SATISFIED THAT ANY PERSON HAS CONCEALED THE PARTICU LARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IN OTHER WORDS WHAT SEC. 271(1)(C) OF THE ACT POSTULATES IS THAT THE PENALTY CAN BE LEVIED ON THE EXISTENCE OF ANY OF THE TWO SITUATIONS NAMELY FOR CONCEALING THE PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THEREFORE IT IS OBVIOUS FROM THE PHRASEOLOGY OF SEC. 271(1)(C) OF T HE ACT THAT THE IMPOSITION OF PENALTY IS INVITED ONLY WHEN THE CONDITIONS PRES CRIBED U/S 271(1)(C) OF THE ACT EXIST. IT IS ALSO A WELL ACCEPTED PROPOSITION T HAT CONCEALMENT OF THE PARTICULARS OF INCOME AND FURNISHING OF INACCURAT E PARTICULARS OF INCOME ITA NO.2803/M/2012 ITA NO.2804/M/2012 & ITA NO.2805/M/2012 M/S. AUTORIDERS INDIA PVT. LTD. 13 REFERRED TO IN SEC. 271(1)(C) OF THE ACT DENOTE DIF FERENT CONNOTATIONS. IN FACT THIS DISTINCTION HAS BEEN APPRECIATED EVEN AT THE L EVEL OF HON'BLE SUPREME COURT NOT ONLY IN THE CASE OF DILIP N. SHROFF (SUPR A) BUT ALSO IN THE CASE OF T.ASHOK PAI 292 ITR 11 (SC). THEREFORE IF THE TWO EXPRESSIONS NAMELY CONCEALMENT OF THE PARTICULARS OF INCOME AND FUR NISHING OF INACCURATE PARTICULARS OF INCOME HAVE DIFFERENT CONNOTATIONS IT IS IMPERATIVE FOR THE ASSESSEE TO BE MADE AWARE AS TO WHICH OF THE TWO IS BEING PUT AGAINST HIM FOR THE PURPOSE OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT SO THAT THE ASSESSEE CAN DEFEND ACCORDINGLY. IT IS IN THIS BACKGROUND THAT O NE HAS TO APPRECIATE THE PRELIMINARY PLEA OF ASSESSEE WHICH IS BASED ON THE MANNER IN WHICH THE NOTICE U/S 274 R.W.S. 271(1)(C) OF THE ACT DATED 10.12.201 0 HAS BEEN ISSUED TO THE ASSESSEE COMPANY. A COPY OF THE SAID NOTICE HAS BEE N PLACED ON RECORD AND THE LEARNED REPRESENTATIVE CANVASSED THAT THE SAME HAS BEEN ISSUED BY THE ASSESSING OFFICER IN A STANDARD PROFORMA WITHOUT S TRIKING OUT THE IRRELEVANT CLAUSE. IN OTHER WORDS THE NOTICE REFERS TO BOTH T HE LIMBS OF SEC. 271(1)(C) OF THE ACT NAMELY CONCEALMENT OF THE PARTICULARS OF I NCOME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. QUITE CLEARLY NON-STRIKING-OFF OF THE IRRELEVANT LIMB IN THE SAID NOTICE DOES NOT CONVEY TO THE ASSESSEE AS TO WHICH OF THE TWO CHARGES IT HAS TO RESPOND. THE AFORESAID IN FIRMITY IN THE NOTICE HAS BEEN SOUGHT TO BE DEMONSTRATED AS A REFLECTION OF NON-AP PLICATION OF MIND BY THE ASSESSING OFFICER AND IN SUPPORT REFERENCE HAS BE EN MADE TO THE FOLLOWING SPECIFIC DISCUSSION IN THE ORDER OF HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA):- 83. IT IS OF SOME SIGNIFICANCE THAT IN THE STANDAR D PROFORMA USED BY THE ASSESSING OFFICER IN ISSUING A NOTICE DESPITE THE FACT THAT T HE SAME POSTULATES THAT INAPPROPRIATE WORDS AND PARAGRAPHS WERE TO BE DELET ED BUT THE SAME HAD NOT BEEN DONE. THUS THE ASSESSING OFFICER HIMSELF WAS NOT SURE AS TO WHETHER HE HAD PROCEEDED ON THE BASIS THAT THE ASSESSEE HAD CONCEA LED HIS INCOME OR HE HAD FURNISHED INACCURATE PARTICULARS. EVEN BEFORE US T HE LEARNED ADDITIONAL SOLICITOR GENERAL WHILE PLACING THE ORDER OF ASSESSMENT LAID EMPHASIS THAT HE HAD DEALT WITH BOTH THE SITUATIONS. ITA NO.2803/M/2012 ITA NO.2804/M/2012 & ITA NO.2805/M/2012 M/S. AUTORIDERS INDIA PVT. LTD. 14 84. THE IMPUGNED ORDER THEREFORE SUFFERS FROM NON -APPLICATION OF MIND. IT WAS ALSO BOUND TO COMPLY WITH THE PRINCIPLES OF NATURAL JUSTICE. (SEE MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 2 SCC 718] WE FURTHER FIND THAT AT PARA 9 OF THE ORDER IN REL IANCE PETROPRODUCTS P. LTD. (SUPRA) THE HONBLE SUPREME COURT HAS HELD AS UNDER: 9. THEREFORE IT IS OBVIOUS THAT IT MUST BE SHOWN THAT THE CONDITIONS UNDER SECTION 271(1)(C) MUST EXIST BEFORE THE PENALTY IS IMPOSED. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BECAU SE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF H IS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE THE LIABILITY WOULD ARI SE. IN DILIP N. SHROFF V. JOINT CIT [2007] 6 SCC 329**** THIS COURT EXPLAINED THE TERM S 'CONCEALMENT OF INCOME' AND 'FURNISHING INACCURATE PARTICULARS'. THE COURT WENT ON TO HOLD THEREIN THAT IN ORDER TO ATTRACT THE PENALTY UNDER SECTION 271(1)(C) MEN S REA WAS NECESSARY AS ACCORDING TO THE COURT THE WORD 'INACCURATE' SIGNI FIED A DELIBERATE ACT OR OMISSION ON BEHALF OF THE ASSESSEE. IT WENT ON TO HOLD THAT CLAUSE (III) OF SECTION 271(1)(C) PROVIDED FOR A DISCRETIONARY JURISDICTION UPON THE ASSESSING AUTHORITY INASMUCH AS THE AMOUNT OF PENALTY COULD NOT BE LESS THAN THE AM OUNT OF TAX SOUGHT TO BE EVADED BY REASON OF SUCH CONCEALMENT OF PARTICULARS OF INCOME BUT IT MAY NOT EXCEED THREE TIMES THEREOF. IT WAS POINTED OUT THAT THE TERM 'INACCURATE PARTICULARS' WAS NOT DEFINED ANYWHERE IN THE ACT AN D THEREFORE IT WAS HELD THAT FURNISHING OF AN ASSESSMENT OF THE VALUE OF THE PRO PERTY MAY NOT BY ITSELF BE FURNISHING INACCURATE PARTICULARS. IT WAS FURTHER H ELD THAT THE ASSESSING OFFICER MUST BE FOUND TO HAVE FAILED TO PROVE THAT HIS EXPLANATI ON IS NOT ONLY NOT BONA FIDE BUT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME WERE NOT DISCLOSED BY HIM. IT WAS THEN HELD THAT TH E EXPLANATION MUST BE PRECEDED BY A FINDING AS TO HOW AND IN WHAT MANNER THE ASSE SSEE HAD FURNISHED THE PARTICULARS OF HIS INCOME. THE COURT ULTIMATELY WEN T ON TO HOLD THAT THE ELEMENT OF MENS REA WAS ESSENTIAL. IT WAS ONLY ON THE POINT OF MENS REA THAT THE JUDGMENT IN DILIP N. SHROFF V. JOINT CIT* WAS UPSET. IN UNION O F INDIA V. DHARAMENDRA TEXTILE PROCESSORS** AFTER QUOTING FROM SECTION 271 EXTENS IVELY AND ALSO CONSIDERING SECTION 271(1)(C) THE COURT CAME TO THE CONCLUSION THAT SINCE SECTION 271(1)(C) INDICATED THE ELEMENT OF STRICT LIABILITY ON THE AS SESSEE FOR THE CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WHILE FILING RETURN THERE WAS NO NECESSITY OF MENS REA. THE COURT WENT ON TO HOLD THAT THE OBJECTIVE BEHIND THE ENACTMENT OF SECTION 271(1)(C) READ WITH EXPLANATIONS INDICATED WITH THE SAID SECTION WAS FOR PROVIDING REMEDY FOR LOSS OF REVENUE AND SUCH A PENALTY WAS A CIVIL LIABILITY AND THEREFORE WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT F OR ATTRACTING CIVIL LIABILITY AS WAS THE CASE IN THE MATTER OF PROSECUTION UNDER SECTION 276C OF THE ACT. THE BASIC REASON WHY DECISION IN DILIP N. SHROFF V. JOINT CIT WAS OVERRULED BY THIS COURT IN UNION OF INDIA V. DHARAMENDRA TEXTILE PROCESSORS2 WAS THAT ACCORDING TO THIS COURT THE EFFECT AND DIFFERENCE BETWEEN SECTION 271(1)(C) AND SECTION 276C OF THE ACT WAS LOST SIGHT OF IN THE CASE OF DILIP N. SHROFF V. JOINT CIT1. HOWEVER IT MUST BE POINTED OUT THAT IN UNION OF INDIA V. DHARAMENDRA T EXTILE PROCESSORS** NO FAULT WAS FOUND WITH THE REASONING IN THE DECISION IN DIL IP N. SHROFF V. JOINT CIT* WHERE THE COURT EXPLAINED THE MEANING OF THE TERMS 'CONCE AL' AND 'INACCURATE'. IT WAS ONLY THE ULTIMATE INFERENCE IN DILIP N. SHROFF V. J OINT CIT1 TO THE EFFECT THAT MENS ITA NO.2803/M/2012 ITA NO.2804/M/2012 & ITA NO.2805/M/2012 M/S. AUTORIDERS INDIA PVT. LTD. 15 REA WAS AN ESSENTIAL INGREDIENT FOR THE PENALTY UND ER SECTION 271(1)(C) THAT THE DECISION IN DILIP N. SHROFF V. JOINT CIT* WAS OVERR ULED. 14. FACTUALLY SPEAKING THE AFORESAID PLEA OF ASSE SSEE IS BORNE OUT OF RECORD AND HAVING REGARD TO THE PARITY OF REASONING LAID D OWN BY THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA) THE N OTICE IN THE INSTANT CASE DOES SUFFER FROM THE VICE OF NON-APPLICATION OF MIND BY THE ASSESSING OFFICER. IN FACT A SIMILAR PROPOSITION WAS ALSO ENUNCIATED BY THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF M/S. SSAS EMERALD MEADOWS (SU PRA) AND AGAINST SUCH A JUDGMENT THE SPECIAL LEAVE PETITION FILED BY THE REVENUE HAS SINCE BEEN DISMISSED BY THE HON'BLE SUPREME COURT VIDE ORDER D ATED 5.8.2016 A COPY OF WHICH IS ALSO PLACED ON RECORD. 15. IN FACT AT THE TIME OF HEARING THE LD. CIT-D R HAS NOT DISPUTED THE FACTUAL MATRIX BUT SOUGHT TO POINT OUT THAT THERE IS DUE APPLICATION OF MIND BY THE ASSESSING OFFICER WHICH CAN BE DEMONSTRATED FRO M THE DISCUSSION IN THE ASSESSMENT ORDER WHEREIN AFTER DISCUSSING THE REAS ONS FOR THE DISALLOWANCE HE HAS RECORDED A SATISFACTION THAT PENALTY PROCEEDING S ARE INITIATED U/S 271(1)(C) OF THE ACT FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN OUR CONSIDERED OPINION THE ATTEMPT OF THE LD. CIT-DR TO DEMONSTRA TE APPLICATION OF MIND BY THE ASSESSING OFFICER IS NO DEFENCE INASMUCH AS THE HON'BLE SUPREME COURT HAS APPROVED THE FACTUM OF NON-STRIKING OFF OF THE IRRELEVANT CLAUSE IN THE NOTICE AS REFLECTIVE OF NON-APPLICATION OF MIND BY THE ASSESSING OFFICER. SINCE THE FACTUAL MATRIX IN THE PRESENT CASE CONFORMS TO THE PROPOSITION LAID DOWN BY THE HON'BLE SUPREME COURT WE PROCEED TO REJECT THE ARGUMENTS ADVANCED BY THE LD. CIT-DR BASED ON THE OBSERVATIONS OF THE ASS ESSING OFFICER IN THE ASSESSMENT ORDER. FURTHER IT IS ALSO NOTICEABLE TH AT SUCH PROPOSITION HAS BEEN CONSIDERED BY THE HON'BLE BOMBAY HIGH COURT ALSO IN THE CASE OF SHRI SAMSON PERINCHERY ITA NOS. 1154 953 1097 & 1126 OF 2014 DATED 5.1.2017 (SUPRA) AND THE DECISION OF THE TRIBUNAL HOLDING LEVY OF PE NALTY IN SUCH CIRCUMSTANCES BEING BAD HAS BEEN APPROVED. ITA NO.2803/M/2012 ITA NO.2804/M/2012 & ITA NO.2805/M/2012 M/S. AUTORIDERS INDIA PVT. LTD. 16 16. APART FROM THE AFORESAID THE LD. CIT-DR MADE AN ARGUMENT BASED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN TH E CASE OF SMT. KAUSHALYA & OTHERS 216 ITR 660 (BOM.) TO CANVASS SUPPORT FOR HIS PLEA THAT NON-STRIKING OFF OF THE IRRELEVANT PORTION OF NOTICE WOULD NOT I NVALIDATE THE IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT. WE HAVE CAREFULLY CONSIDERED THE SAID ARGUMENT SET-UP BY THE LD. CIT-DR AND FIND THAT A S IMILAR ISSUE HAD COME UP BEFORE OUR COORDINATE BENCH IN THE CASE OF DR. SARI TA MILIND DAVARE (SUPRA). OUR COORDINATE BENCH AFTER CONSIDERING THE JUDGMEN T OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SMT. KAUSHALYA & ORS. (S UPRA) AS ALSO THE JUDGMENTS OF THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N . SHROFF (SUPRA) AND DHARMENDRA TEXTILE PROCESSORS 306 ITR 277 (SC) DED UCED AS UNDER :- 12. A COMBINED READING OF THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT. B KAUSHALYA AND OTHERS (SUPRA) AND THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF DILIP N SHROFF (SUPRA) WOULD MAKE IT CLEAR THAT THERE SHOULD BE APPLICATION OF MIND ON THE PART OF THE AO AT THE TIME OF ISSUING NOTICE. IN THE CASE OF LAKHDIR LALJI (SUPRA) THE A O ISSUED NOTICE U/S 274 FOR CONCEALMENT OF PARTICULARS OF INCOME BUT LEVIED PEN ALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE HONBLE GUJARAT HIGH COU RT QUASHED THE PENALTY SINCE THE BASIS FOR THE PENALTY PROCEEDINGS DISAPPEARED W HEN IT WAS HELD THAT THERE WAS NO SUPPRESSION OF INCOME. THE HONBLE KERALA HIGH C OURT HAS STRUCK DOWN THE PENALTY IMPOSED IN THE CASE OF N.N.SUBRAMANIA IYER VS. UNION OF INDIA (SUPRA) WHEN THERE IS NO INDICATION IN THE NOTICE FOR WHAT CONTRAVENTION THE PETITIONER WAS CALLED UPON TO SHOW CAUSE WHY A PENALTY SHOULD NOT BE IMPOSED. IN THE INSTANT CASE THE AO DID NOT SPECIFY THE CHARGE FOR WHICH P ENALTY PROCEEDINGS WERE INITIATED AND FURTHER HE HAS ISSUED A NOTICE MEANT FOR CALLING THE ASSESSEE TO FURNISH THE RETURN OF INCOME. HENCE IN THE INSTANT CASE T HE ASSESSING OFFICER DID NOT SPECIFY THE CHARGE FOR WHICH THE PENALTY PROCEEDING S WERE INITIATED AND ALSO ISSUED AN INCORRECT NOTICE. BOTH THE ACTS OF THE AO IN OU R VIEW CLEARLY SHOW THAT THE AO DID NOT APPLY HIS MIND WHEN HE ISSUED NOTICE TO THE ASSESSEE AND HE WAS NOT SURE AS TO WHAT PURPOSE THE NOTICE WAS ISSUED. THE HONB LE BOMBAY HIGH COURT HAS DISCUSSED ABOUT NON-APPLICATION OF MIND IN THE CASE OF KAUSHALYA (SUPRA) AND OBSERVED AS UNDER:- ....THE NOTICE CLEARLY DEMONSTRATED NON-APPLICATIO N OF MIND ON THE PART OF THE INSPECTING ASSISTANT COMMISSIONER. THE VAGUENES S AND AMBIGUITY IN THE NOTICE HAD ALSO PREJUDICED THE RIGHT OF REASONABLE OPPORTUNITY OF THE ASSESSEE SINCE HE DID NOT KNOW WHAT EXACT CHARGE HE HAD TO FACE. IN THIS BACK GROUND QUASHING OF THE PENALTY PROCEEDINGS FO R THE ASSESSMENT YEAR 1967-68 SEEMS TO BE FULLY JUSTIFIED. ITA NO.2803/M/2012 ITA NO.2804/M/2012 & ITA NO.2805/M/2012 M/S. AUTORIDERS INDIA PVT. LTD. 17 IN THE INSTANT CASE ALSO WE ARE OF THE VIEW THAT T HE AO HAS ISSUED A NOTICE THAT TOO INCORRECT ONE IN A ROUTINE MANNER. FURTHER THE NOT ICE DID NOT SPECIFY THE CHARGE FOR WHICH THE PENALTY NOTICE WAS ISSUED. HENCE IN OUR VIEW THE AO HAS FAILED TO APPLY HIS MIND AT THE TIME OF ISSUING PENALTY NOTICE TO T HE ASSESSEE. 17. THE AFORESAID DISCUSSION CLEARLY BRINGS OUT AS TO THE REASONS WHY THE PARITY OF REASONING LAID DOWN BY THE HON'BLE SUPREM E COURT IN THE CASE OF DILIP N. SHROFF (SUPRA) IS TO PREVAIL. FOLLOWING TH E DECISION OF OUR COORDINATE BENCH IN THE CASE OF DR. SARITA MILIND DAVARE (SUPR A) WE HEREBY REJECT THE AFORESAID ARGUMENT OF THE LD. CIT-DR. 18. APART FROM THE AFORESAID DISCUSSION WE MAY AL SO REFER TO THE ONE MORE SEMINAL FEATURE OF THIS CASE WHICH WOULD DEMONSTRAT E THE IMPORTANCE OF NON- STRIKING OFF OF IRRELEVANT CLAUSE IN THE NOTICE BY THE ASSESSING OFFICER. AS NOTED EARLIER IN THE ASSESSMENT ORDER DATED 10.12.2010 T HE ASSESSING OFFICER RECORDS THAT THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE A CT ARE TO BE INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. HOW EVER IN THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT OF EVEN DATE B OTH THE LIMBS OF SEC. 271(1)(C) OF THE ACT ARE REPRODUCED IN THE PROFORMA NOTICE AND THE IRRELEVANT CLAUSE HAS NOT BEEN STRUCK-OFF. QUITE CLEARLY THE OBSERVATION OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND NON-STRIKING OF F OF THE IRRELEVANT CLAUSE IN THE NOTICE CLEARLY BRINGS OUT THE DIFFIDENCE ON THE PART OF ASSESSING OFFICER AND THERE IS NO CLEAR AND CRYSTALLISED CHARGE BEING CON VEYED TO THE ASSESSEE U/S 271(1)(C) WHICH HAS TO BE MET BY HIM. AS NOTED BY THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA) THE Q UASI-CRIMINAL PROCEEDINGS U/S 271(1)(C) OF THE ACT OUGHT TO COMPLY WITH THE PRINC IPLES OF NATURAL JUSTICE AND IN THE PRESENT CASE CONSIDERING THE OBSERVATIONS O F THE ASSESSING OFFICER IN THE ASSESSMENT ORDER ALONGSIDE HIS ACTION OF NON-STRIKI NG OFF OF THE IRRELEVANT CLAUSE IN THE NOTICE SHOWS THAT THE CHARGE BEING MA DE AGAINST THE ASSESSEE QUA SEC. 271(1)(C) OF THE ACT IS NOT FIRM AND THEREFOR E THE PROCEEDINGS SUFFER FROM NON-COMPLIANCE WITH PRINCIPLES OF NATURAL JUSTICE I NASMUCH AS THE ASSESSING ITA NO.2803/M/2012 ITA NO.2804/M/2012 & ITA NO.2805/M/2012 M/S. AUTORIDERS INDIA PVT. LTD. 18 OFFICER IS HIMSELF UNSURE AND ASSESSEE IS NOT MADE AWARE AS TO WHICH OF THE TWO LIMBS OF SEC. 271(1)(C) OF THE ACT HE HAS TO RE SPOND. 19. THEREFORE IN VIEW OF THE AFORESAID DISCUSSION IN OUR VIEW THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S 274 R.W.S. 271( 1)(C) OF THE ACT DATED 10.12.2010 IS UNTENABLE AS IT SUFFERS FROM THE VICE OF NONAPPLICATION OF MIND HAVING REGARD TO THE RATIO OF THE JUDGMENT OF THE H ON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA) AS WELL AS THE JUDG MENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SHRI SAMSON PERINCHERY (S UPRA). THUS ON THIS COUNT ITSELF THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT IS LIABLE TO BE DELETED. WE HOLD SO. SINCE THE PENALTY HAS BEEN DELETED ON THE PRELIMINARY POINT THE OTHER ARGUMENTS RAISED BY THE APPELLANT ARE NOT BEING DEA LT WITH. 20. IN THE RESULT ALL THE THREE APPEALS FILED BY THE ASSESSEE ARE ALLOWED AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 17.11.2017. SD/- SD/- ( G. MANJUNATHA) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 17.11.2017. * KISHORE SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT (A) CONCERNED MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR ITAT MUMBAI.