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M/s Safina Hotels Pvt Ltd, Formerly M/s Safina Hotels Ltd Versus The Commissioner of Income Tax, The Deputy Commissioneer of Income Tax

2016 (2) TMI 128 - KARNATAKA HIGH COURT

Validity of penalty order under Section 271(1)(c) - failure to comply with a notice - Held that:- Assessing Officer had no jurisdiction to pass the penalty order under Section 271(1)(c) of the Act without issuing a proper notice as required under law and moreover, when the particulars are disclosed in the return of income. Assessing Officer has not applied his mind at the time of issuing notice under Section 274 R/W Section 271(1)(b) of the Act. This view is fortified by the order passed under S .....

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l expenses’. In our considered opinion, for the reasons stated above, the order passed by the ITAT is not sustainable. Accordingly, we set aside the order of the ITAT and restore the order passed by the CIT(A) answering the substantial questions of law in favour of the assessee and against the revenue. - ITA No. 240/2010 - Dated:- 25-1-2016 - N. K. Patil And S. Sujatha, JJ. For the Appellant : Sri K K Chythanya, Adv For the Respondent : Sri Jeevan J Neeralgi, Adv JUDGMENT This appeal is directed .....

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ration before this Court. Now, the relevant substantial questions of law which arises for consideration in this appeal reads thus: 1. Whether on the facts and in the circumstances of the case, the Honouable Tribunal was right in law in upholding the penalty levied under Section 271 (1) (c) although the notice was issued for levy of penalty under section 271 (1) (b)? 2. Whether on the facts and in the circumstances of the case, the Honourable Tribunal was right in law in upholding the penalty lev .....

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74,416/- Action was initiated under Section 132 of the Income Tax Act, 1961 (the Act for short) and orders were passed under Section 143(3) read with Section 158(b)(c) of the Act. The appellant had claimed ₹ 28,40,409/- as loss on sale of investment under the financial charges as revenue expenditure. The Assessing Officer held the above income to be in the nature of capital expenditure and disallowed the claim made by the assessee. Accordingly, assessments were concluded. The Assessing Off .....

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issioner who allowed the appeal after hearing the parties. Being aggrieved, the revenue preferred an appeal before the ITAT which was allowed setting aside the order passed by the Appellate Commissioner and restoring the order of the Assessing Officer. Aggrieved by the same, the appellant is before this Court raising the substantial questions of law as stated above. 4. We have heard Sri A Chaitanya, learned counsel appearing for the appellant and Sri Jeevan J Neeralgi, Learned counsel appearing .....

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hich relates to Section 271(1)(c) of the Act has been deleted by the Assessing Officer which reads thus, has concealed the particulars of his income or furnished inaccurate particulars of such income . However the Assessing Officer though issued notice under Section 271(1)(b) of the Act proceeded to pass the order under Section 271(1)(c) of the Act. Further, it is submitted that Section 271(1B) of the Act contemplates recording of satisfaction for levy of penalty under Section 271(1)(c) of the A .....

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s, learned counsel placed reliance on the following judgment: (1) COMMISSIONER OF INCOME-TAX AND ANOTHER VS MANJUNATHA COTTON AND GINNING FACTORY AND ORS reported in ((2013) 350 ITR 565. It is also further submitted that even on merits, the Assessing Officer had no reason to levy penalty under Section 271(1)(c) of the Act. According to him, the assessee has not concealed the particulars of his income or furnished inaccurate particulars of such income. It was made clear in the return submitted by .....

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ing of income or filing of inaccurate particulars. 5. On the other hand, Sri Jeevan J Neeralgi, learned counsel appearing for revenue submits that the Assessing Officer in the notice dated 30.08.2006 issued under Section 274 read with Section 271 of the Act has deleted only a portion of the contents of para relating to Section 271(1)(c), i.e., the deletion is made only with respect to, have concealed the particulars of your income , the remaining portion furnished inaccurate particulars of such .....

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l expenditure. In such circumstances, levying of penalty under Section 271(1)(c) of the Act is mandatory and authorities have no discretionary power to waive off the penalty, even if there is any technical error in issuing the notice, it cannot be turned down only on the technicalities. What could be inferred from the notice issued relates to the provision of Section 271(1)(c). Accordingly, the ITAT having found that the appellant has deliberately brought a capital expenditure as the revenue exp .....

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n deductions as revenue expenditure disclosing the same under the head financial expenses in the return of income filed by him. This return was taken for scrutiny and after adjudication, the Assessing Officer has held that the claim made by the assessee as revenue expenditure is capital in nature and allowed the deduction claimed by the assessee. Having held so, separate proceedings were initiated under Section 271(1)(c) of the Act to levy penalty for willful concealment of the particulars of in .....

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er 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 which corresponds to Section 271(1)(b) of the Act. Thus, it is clear that the notice is issued proposing to levy penalty under Section 271(1)(b) of the Act whereas the order is passed by the Assessing Officer under Section 271(1)(c) of the Act which clearly indicates that there was no application of mind by the Assessing Officer while issuing the notice under Section 274 of the Ac .....

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y particulars were available in the return of income. 8. Thus, it clearly indicates that the Assessing Officer had no jurisdiction to pass the penalty order under Section 271(1)(c) of the Act without issuing a proper notice as required under law and moreover, when the particulars are disclosed in the return of income. 9. The Judgment of Manjunath Cotton and Ginning s case (supra) is squarely applicable to the facts of the present case wherein, it is held that the levy of penalty is not automatic .....

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