Jiwanram Sheoduttrai Inds Pvt Ltd Kolkata v. Dcit Cir 8 Kolkata Kolkata

1 Ita No 743 Kol 2016 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 743 Ko L 2016 A Y 2009 10 M S Jiwanram Sheoduttarai Vs D C I T Cir 8 Kol Kata Industries Pvt Ltd Pan Aaacj 7420 L Appellant Responden T For The Appellant Shri Somen Dutta Advocate Ld Ar For The Respondent Shri Saurabh Kumar Addl Ci T Ld Dr Date Of Hearing 24 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 18 Kolkata Dt 05 02 2016 For The A Y 2009 10 Wherein He Confirmed The Penal Ty Of Rs 2 06 165 Imposed U S 271 1 C Of The Act By The Ao 2 The Ld Ar Submits That The Issue Raised In The A Ppeal Is Covered In Favour Of Assessee By The Decision Of The Honbl E 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 Of The Act On 25 11 2011 Copy Of The Same Is On Re Cord And In View Of The Decision Supra The Imposition Of Penalty On Defective Notice Is Not Maintainable 3 The Ld Ar Of The Assessee Further Submits That T He Statutory Notice Dt 25 11 2011 Issued By The Ao Jcit Osd Cir 8 Kolkata U S 274 R W S 271 Of The Act Is Defective He Furt Her Argued That The Issue In Hand As Raised By The Assessee Is Squarel Y Covered In Favour Of Assessee By The Decision Of The Honble Supreme Court In The Case 2 Ita No 743 Kol 2016 Of Ssas Emerald Meadows In Support Of His Content Ion He Placed 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 In Vi Ew Of Above He Prayed To Allow The Appeal Of Assessee 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 Which Is Reproduced Herein Below For Re Ady Reference 1 The Honble Itat D Bench Kolkata In The Cou Rse Of Hearing Of Appeal Of M S Jiwanram Sheoduttarai Industries P Ltd For A Y 2009 10 At The Request Of The Dr Allowed The Department To Make A Written Submission 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 Hon Ble Mumbai E Bench In The Case Of Earthmovi Ng Equipment Service Corporation Vs Dcit 22 2 Mumbai 2017 84 Taxmann Com 51 Look Ed Into The Issue Very Closely And Opined That After Perusing The Ratio Of The Jud Gement Rendered In Manjunatha Coton And Ginning Factory We Find That The Assessees Appe Al Was Allowed By The Honble High Court After Considering The Multiple Factors And No T Solely On The Basis Of Defect In Notice U S 274 Therefore We Are Of The Opinion That The P Enalty Could Not Be Deleted Merely On The Basis Of Defect Pointed By The Ld Ar In The Not Ice And Therefore The Legal Grounds Raised Are Rejected 6 The Mumbai Bench Of Tat In A Recent Decision I N The Case Of Mahesh M Gandhi Vs Acit Ts 5465 Itat 2017 Mumbai Ol Also Dealt With This Aspect The Taxpayer Had Not Offered Directors Fees And Income From Short Term Capital Gains To Tax In The Return Of Income During The Course Of Assessment Proceedings When These Incomes Were Picked 3 Ita No 743 Kol 2016 Up By The Tax Officer The Taxpayer Admitted Earnin G Of The Incomes And Filed A Revised Computation Of Income Based On This Finding The T Ax Officer Mentioned In The Assessment Order That Penalty Proceedings Under Sec Tion 271 1 C Of The Act Will Be Initiated For Furnishing Of Inaccurate Particulars Of Income Subsequently The Tax Officer Issued A Notice Under Section 274 Read With Section 271 1 C Of The Act Wherein The Reason For Penalty Was Not Mentioned The Taxpayer Filed An Appeal Before The Cit A Which Ruled In Favour Of The Revenue The Cit A Pl Aced Reliance On The Decision Of The Khc In The Case Of Cit Vs Manjunatha Cotton And Gin Ning Factory Supra The Cit A Ruled In Favour Of The Revenue Aggrieved The Taxpa Yer Preferred An Appeal Before The Itat The Itat After Observing The Facts Of The Cas E Held That The Tax Officer Had Recorded Satisfaction In The Assessment Order In Re Lation To Invoking Penalty Provisions The Tax Officer Had Applied His Mind While Detailin G The Reasons For Initiation Of Penalty Proceedings In The Assessment Order Accordingly N Ot Mentioning The Reasons In The Penalty Notice Cannot Invalidate The Penalty Procee Dings 7 Honble Mumbai High Court In The Case Of Dhanraj Mills P Ltd Vs Acit Osd Central Range R Mumbai On 21 March 2017 Has Stated As Ther E Is No Declaration Of Law Which May Be Governed By Article 1 A 1 Of The Constitution Of India In The Case Of Cit Versus Ssas Emerald Meadows Dismissed By Honble Apex Cou Rt Vide Slp Cc No 11485 2016 On 05 08 2016 The Judgment Of Honble Jurisdictional High Court In Cit Vs Kaushalya Supra Is Still Having A Binding Forc E On Us Thus With Utmost Regards To The Judgment Of Karnataka High Court In Cit Vs Manj Unathacotton Ginning Factory Supra We Are Bound To Follow The Judgment Of Juri Sdictional High Court In Cit Vs Kaushalya Supra Our View Also Find Support From A Decision Of The Mumbai Bench Of The Tribunal In The Case Of Dhawal K Jain Vs Incom E Tax Officer Ita No 996 Mum 2014 Order Dated 30 09 2016 With These Observations The Argument Of Id Counsel Of The Assessee On The Legal Technical Ground Is Rejected Thus All These Four Appeals Are Therefore Dismissed And The Stand Of The Ld Commissioner Of Income Tax Appeal Is Affirmed 8 Therefore It Is Submitted That Service Of Notic E U S 274 For Initiating Penalty Proceedings Ujs 271 1 C Of The Lt Act Would Con Stitute Valid Initiation Of Penalty Proceedings And The Case May Be Heard On Merits 5 In View Of Above He Prayed To Dismiss The Appea L Of Assessee By Confirming The Penalty Imposed And Confirmed By The Ao And Cit A Respectively 6 We Have Heard The Rival Submissions And Consider Ed The Submissions And The Case Laws Relied Upon By The Ld Dr We Find The Same Set Of Written Submissions Were Filed Before T He Coordinate Bench Of This Tribunal In The Case Of Jeetmal Chora Ria In Ita 956 Kol 16 For Ay 2010 11 Wherein The Coordinate Bench Elaborately Discussed The Facts In The Decisions As Relied Upon By The Ld Dr And Principle Laid Down By The Respective Ho Nble High Courts At Bombay And Patna And Preferred To Follow The Rat Io Laid Down By The Honble High Court Of Karnataka In The Case Of Manjunatha Cotton And Ginning Supra By Taking Support Of The Establis Hed Principle 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 In Its Order Dt 01 12 4 Ita No 743 Kol 2016 2017 Of Coordinate Bench In The Case Of Jeetmal Cho Raria And The Same Is Reproduced For Ready Reference 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 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 5 Ita No 743 Kol 2016 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 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 6 Ita No 743 Kol 2016 7 We Find That The Notice Dt 25 11 2011 Issued U S 274 R W S 271 Of The Act Does Not Specify The Charge Of Offen Ce Committed By The Assessee Viz Whether Had Concealed The Particul Ars Of Income Or Had Furnished Inaccurate Particulars Of Income He Nce The Said Notice Is To Be Held As Defective 8 Further We Find That The Revenue Had Preferre D A Slp 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 2 06 165 By The Ao U Se C 271 1 C Of The Act And Confirmed By The Cit A Accordingly The G Rounds Raised By The Assessee In The Appeal For The A Y Under Consid Eration Are Allowed 10 In The Result The Appeal Of The Assessee Is Allowed Order Pronounced In The Open Court On 13 1 2 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 Jiwanram Sheoduttrai Indus Tries Pvt Ltd 30 J L Nehru Road Kolkata 16 2 Respondent Revenue The Dcit Cir 8 Aaykar Bhawan 5 Th Floor Chowringhee Sq Kolkata 69 3 The Cit A Kolkata 4 5 Cit Kolkata Dr Kolkata Benches Kolkata True Copy By Order Sr Ps H O O Itat Kol 7 Ita No 743 Kol 2016