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2015 (10) TMI 2006 - ITAT BANGALORE

2015 (10) TMI 2006 - ITAT BANGALORE - TMI - Penalty under Section 271(1)(c) - irregular notice - Held that:- The Assessing Officer has not specified the relevant portion of the clause (c) of the notice under Section 274 rws 271 of the Act for initiating penalty proceedings under Section 271(1)(c) of the Act for Assessment Years 2006-07 to 2008-09. Therefore, respectfully following the decision of CIT Vs. Manjunatha Cotton & Ginning Factory (2013 (7) TMI 620 - KARNATAKA HIGH COURT ) we hold that .....

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he Assessee : Shri K.R. Vasudevan, Advocate. For The Respondent : Shri E.S. Nagendra Prasad, CIT (D.R) ORDER Per Bench : These are five appeals, three by the assessee and two by revenue, directed against the order of the Commissioner of Income Tax (Appeals), LTU, Bangalore dt.27.6.2014 substantially confirming the levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961 (in short 'the Act') by the Assessing Officer for Assessment Years 2006-07 to 2008-09, with partial relief t .....

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years 2006-07 to 2008-09 were taken up for scrutiny and the assessments were completed under Section 143(3) of the Act; wherein the total income was computed by making various additions/disallowances to the income returned. The Assessing Officer also initiated penalty proceedings under Section 271(1)(c) of the Act in the orders of assessment by issue of notices under Section 274 rws 271 of the Act for the three assessment years under consideration. 2.2 The assessee preferred appeals against the .....

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s 271 of the Act, proceeded to levy penalty under Section 271(1)(c) of the Act for the three assessment years 2006-07 to 2008-09 under consideration. 2.4 Aggrieved by the orders levying penalty under Section 271(1)(c) of the Act for Assessment Years 2006-07 to 2008-09, the assessee preferred appeals before the CIT (Appeals), LTU, Bangalore. The learned CIT (Appeals) vide the impugned order dt.27.6.2014 passed a common order for the aforesaid three assessment years, confirming the levy of penalty .....

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dings u/s.271(1)(c) of the Act 2 Ground No.2 : Levy of penalty on claiming deduction u/s.36(1)(viia) of the Act for provision for standard assets. 7,33,92,000 14,32,90,620 7,50,87,309 3 Ground No.3 : Levy of penalty for claiming capital expenditure as revenue expenditure. 6,89,404 67,546 70,046 2.6.2 Appeals by Revenue S.No. Issue Penalty levied u/s.271(1)(c). Rs. A.Y. 2006-07 A.Y. 2008-09 1. Delay in remittance and non-deduction of TDS 18,26,077 - 2. Provision for LFC/HTC, Silver Jubillee Award .....

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nalty proceedings does not satisfy the requirement of assuming jurisdiction to initiate the proceedings. 3.1 The learned Authorised Representative was heard on the additional ground raised in the appeals for Assessment Years 2006-07 to 2008-09. Before us, the learned Authorised Representative for the assessee placed before the Bench a copy of the decision of the coordinate bench of this Tribunal in the case of M/s. Roadlinks India Pvt. Ltd. in ITA No.1485/Bang/2013 dt.27.2.2015 wherein the Tribu .....

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6.3.2015. The learned Authorised Representative also placed before the Bench, for our perusal the original notices issued under Section 274 rws 271 of the Act for Assessment Years 2006-07 to 2008-09 for initiating penalty under Section 271(1)(c) of the Act and placed copies of the same on record. 3.2 The learned Departmental Representative submitted that since the additional ground on the validity of the defective penalty notices is being raised for the first time before the Tribunal, the matter .....

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l High Court in the case of Sankeshwar Printers Pvt. Ltd. (2013) 218 Taxman 360 has laid down the law in this regard. It was also submitted that the Hon'ble Apex Court in the case of NTPC Ltd. reported in 229 ITR 383 (SC) has held that any question of law arising from the facts on record should be allowed to be raised. It was submitted that the additional ground rasied is in line with the decision of the Hon'ble Apex Court (supra), Hon'ble High Court of Karnataka (supra) and decision .....

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Tribunal in the case of Roadlinks India Pvt. Ltd. (supra) has held that the additional ground raised is a purely legal ground and since it goes to the very root of the matter relating to the levy of penalty under Section 271(1)(c) of the Act, it was admitted for consideration and adjudication. The relevant portion of the said order at para 5.1 thereof is extracted hereunder :- 5.1 We have heard both parties and perused and carefully considered the material on record. We find that the additional .....

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gh Court further held that when a legal question is raised, the Tribunal has to consider the same in accordance with law and cannot refuse to entertain the same. 3.4.3 As regards the decision cited by the learned Departmental Representative CIT V Tolaram Hassomal (298 ITR 22) (MP), the co-ordinate bench of this Tribunal in the case of Smt. K.R. Prabhavati in M.P. No.5/Bang/2014 (in ITA No.234/Bang/2011) had occasion to examine the said decision. The co-ordinate bench in its order dt.10.4.2015 ob .....

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High Court and is contrary to the law laid down by the jurisdictional High Court viz. Hon'ble High Court of Karnataka in the case of Sankeshwar Printers Pvt. Ltd. (supra) and is also contrary to the decision of the law laid down by the Hon'ble Supreme Court in the case of NTPC Ltd. (supra)……… 3.4.4 In fact, the Hon'ble Madhya Pradesh High Court itself has not followed the decision of Tolaram Hassomal (supra) in its subsequent decisions. The Hon'ble Madhya Pra .....

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fied in law in recording a finding on an issue which was not raised by the assessee either before the Assessing Officer or the learned CIT (Appeals) but was raised for the first time before the Tribunal. The said order has been affirmed by the Hon'ble Apex Court in 168 Taxmann 107. 3.4.5 The Indore Bench of the Tribunal in the case of Basantilal Jain in IT(SS)A No.64/Ind/2007 has examined both the aforesaid decisions of the Hon'ble Madhya Pradesh High Court and at para 4 of its order hel .....

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r of Income tax (Appeals). Similarly, Hon ble Madhya Pradesh High Court in the case of Steel Ingots; 135 CTR 379 held that additional ground requiring no appreciation of facts, Tribunal should have permitted the assessee to raise the question. It was observed that eventual destination of every litigation is justice and as such technicality should not be 12 permitted to prevail as a speed breaker in the case of dispension of justice. Similar view has been taken by the Hon ble High Court of Madhya .....

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mited (supra), which was after the date of decision cited by the learned CIT DR in the case of Tolaram Hassomal (supra), we 13 are inclined to follow the latest decision of the Hon ble jurisdictional High Court decided after considering the decision of Hon ble Supreme Court reported at 267 ITR 654. As all the facts relating the additional legal grounds taken before us are already on record, we are inclined to entertain the additional grounds which are purely legal in nature and accordingly proce .....

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he Act for initiation of penalty proceedings under Section 271(1)(c) of the Act for the three assessment years 2006-07 to 2008-09 in the case on hand were valid. In this regard, we have to examine whether the mandatory conditions for initiating the penalty proceedings were complied with or not. One of the mandatory conditions is that the notice under Section 274 rws 271 of the Act must be a valid notice. We, therefore, proceed to examine, consider and adjudicate this ground. 3.5.2 We find that t .....

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.2014) it is in the prescribed form with the blank spaces to be filled up with relevant information and also at the bottom of page 2 of the notice, it is mentioned that inappropriate words and paragraphs are to be deleted. We, however, find that the Assessing Officer except for mentioning the assessment year and striking off para 2 on page 1 of the notice has neither filled up any of the blanks nor struck off any other inappropriate words or portions or paragraphs. Para 4 of the notice on page 2 .....

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the printed form of notice under section 274 of the Act deals with two satisfactions; i.e. concealment of particulars of income or furnishing of inaccurate particulars of income. The Hon'ble Court has held that both these conditions are distinct and different, though at times they may overlap with each other. It was held by their Lordships that the Assessing Officer while issuing notice under section 274 r.w.s. 271 of the Act has to come to the conclusion as to whether it is a case of concea .....

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herein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision containe .....

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stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 sh .....

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but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those gr .....

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sing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority impo .....

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come are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in .....

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to non-application of mind. 4.3.3 We find that in the case before us also, the Assessing Officer has not specified the relevant portion of the clause ( c ) of the notice under section 274 r.w.s. 271 of the Act for initiating penalty proceedings under section 271(1)(c) of the Act and therefore, as held by the Hon'ble High Court in the case of Manjunatha Cotton & Ginning Factory (supra), the assessee could not have rebutted the initial presumption for initiation of penalty proceedings, whi .....

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s jurisdiction to levy the impugned penalty only by issuance of a valid notice and therefore when jurisdiction is not validly invoked, then the consequent proceedings are also not valid. Further, it cannot be that the Assessing Officer intended to initiate penalty proceedings for both concealment of particulars of income and furnishing of inaccurate particulars of income as the word used in the notice is OR and not and . In this view of the matter, the defect in issuing the notice under section .....

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