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2018 (4) TMI 800

assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 does not strike out the inappropriate words. In imposition of penalty cannot be sustained. The plea of the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. We therefore hold that imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled. - Decided in favour of assessee. - I.T.A No. 147/Kol/2017 - Dated:- 13-4-2018 - Shri M. Balaganesh, Accountant Member And Shri S.S. Viswanethra Ravi, Judicial Member For the Appellant : Shri Somnath Ghosh, Advocate, ld.AR For the Respondent : Shri A. Bhattacharjee, Addl.CIT, ld.Sr.DR ORDER Shri S. S. Viswanethra Ravi, JM This appeal by the Assessee is directed against the order of the Commissioner of Income Tax (Appeals),6, Kolkata dt. 11-01-2017 for the A.Y 2011-12, wherein he confirmed the penalty of ₹ 6,79,432/- imposed u/s. 271(1)(c) of the Act by the AO. 2. The ld.AR submits that the issue raised in the appeal is covered by the decision of the Hon ble Supreme Court in the case of SSA s Emerald M .....

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at "mere not striking off specific limb cannot by itself invalidate notice issued u/ s.274 of the Act. The language 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 Hon'ble 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 for granting reasonable opportunity of being heard in the matter cannot be stretched to the 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 observed 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 imposing 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 th .....

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l having a binding force on us. Thus, with utmost regards to the judgment of Karnataka High Court in CIT Vs Manjunatha Cotton & Ginning Factory (supra) we are bound to follow the judgment of jurisdictional 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 Income 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 notice ujs.274 for initiating penalty proceedings ujs.271(1)(c) of the IT. Act, would constitute valid initiation of penalty proceedings and the case may be heard on merits. 5. In view of above, the Ld. DR prayed to dismiss the grounds raised in appeal and to confirm the penalty imposed by the AO and confirmed by the CIT-A respectively. 6. We have heard the rival submissions and considered the written submissions and the case laws relied upon by the Ld.DR. We find the same set of w .....

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CIT Vs. Kaushalya (supra), the Hon ble Bombay High Court held that section 274 or any other provision in the Act or the Rules, does not either mandate the giving of notice or its issuance in a particular 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 justice on the ground of absence of opportunity, it has to be established that prejudice is caused to the concerned person by the procedure followed. The issuance of notice is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done. Mere mistake in the language used or mere non-striking of the inaccurate 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 Jurisdictional Hon ble Bombay High court in the case of Kaushalya (supra) and chose not to follow decision of Hon ble Karnataka Hig .....

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olonger exists. If the Appellate Authority had initiated penal proceedings on the basis of the addition sustained under a new ground it has a legal sanctum. This was not so in this case and therefore, on both the grounds the impugned order passed by the Appellate Authority as well as the Assessing Authority was set-aside by its order dated 9th April, 2009. Aggrieved by the said order, the revenue filed appeal before High Court. The Hon ble High Court framed the following question of law in the said appeal viz., 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 concealment of income or on account of furnishing of inaccurate particulars is valid and legal? 2. Whether the proceedings initiated by the Assessing Authority was legal and valid? The Hon ble Karnataka High Court held in the negative and against the revenue on both the questions. Therefore the decision rendered by the ITAT Mumbai in the case of Earthmoving Equipment Service Corporation (supra) is of no assistance to the plea of the revenue before us. 11. In the case of M/S.Maharaj Garage & Co. Vs. CIT dated 22.8. .....

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and Patna being subordinate to the Hon ble Bombay High Court and Patna High Court are bound to follow the aforesaid view. The Tribunal Benchs at Bangalore have to follow the decision of the Hon ble Karnataka High Court. As far as benches of Tribunal in other jurisdictions are concerned, there are two views on the issue, one in favour of the Assessee rendered by the Hon ble Karnataka High Court in the case of Manjunatha Cotton & Ginning (supra) and other of the Hon ble 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 Assessee has to be followed. We therefore prefer to follow the view expressed by the Hon ble Karnataka High Court in the case of Manjunatha Cotton & Ginning (supra). 15. We have already observed that the show cause notice 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 .....

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