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TMI Blog2019 (12) TMI 1231X X X X Extracts X X X X X X X X Extracts X X X X ..... s 274 r.w.s 271(1) ( c) of the Act is defective for not mentioning the specific charge and placed reliance on the decision of the Hon'ble Supreme Court in the case of SSA's Emerald Meadows. 3. We note 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 Meadows. We note that the AO imposed penalty on defective notice issued u/s. 274 of the Act on 14/12/2015 and the imposition/confirmation of penalty on defective notice is not maintainable in the eye of law. 4. The ld. DR stated that the written submission filed by the Department on earlier occasions with regard to this issue may kindly be taken on record which is reproduced hereunder:- "1. The Hon'ble ITAT, 'D' bench, Kolkata, in the course of hearing of appeal of M/s. Dadheech Furniture Pvt. Limited Vs.ITO, Ward 7(3), Kolkata for the A.Y 2012-13 , 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 and levy of penalty u/s.271(1)(c) of the IT. Act. 2. The judgem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice and therefore the legal grounds raised are rejected. 6. The Mumbai bench of ITAT in a recent decision in the case of Mahesh M Gandhi vs ACIT [TS-5465-ITAT-2017(MUMBAI)-O] also dealt with this aspect. The taxpayer had not offered Director's 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 up by the tax officer, the taxpayer admitted earning of the incomes and filed a revised computation of income. Based on this finding, the tax officer mentioned in the assessment order that penalty proceedings under section 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) placed reliance on the decision of the KHC in the case of CIT vs Manjunatha Cotton and Ginning Factory (supra), the CIT(A) ruled in favour of the revenue. Aggrieved the taxpayer preferred an appeal before the ITAT. The ITAT after o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles of natural justice were violated on account of not being able to submit an effective reply, it would be a different matter. This was never the plea of the assessee either before the Assessing Officer or before the first Appellate Authority or before the Tribunal or before this Court when the Tax Case Appeals were filed and it was only after 10 years, when the appeals were listed for final hearing, this issue is sought to be raised. Thus on facts, we could safely conclude that even assuming that there was defect in the notice, it had caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued under Section 274 r/w, Section 271 of the Act. Therefore, principles of natural justice cannot be read in abstract and the assessee, being a limited company, having wide network in various financial services, should definitely be precluded from raising such a plea at this belated stage. 9. The assessee filed Special Leave Petition before the Hon'ble Supreme Court against the order of Hon'ble Madras High Court in the case of Sundaram Finance Ltd. (supra). The Hon'ble Supreme Court dismissed the SLP observing the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dopted, which enunciated by the Hon'ble Supreme Court in the case of Vegetable Products ltd repor ted in 88 ITR 192 (SC). We are in agreement with the reasoning of the Co-ordinate Bench in i ts order dt : 01-12-2017 in the case of Jeetmal Choraria and the same is reproduced herein below for ready reference: "7. The learned DR submitted that the Hon'ble Calcutta 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 satisfaction 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 question of recording satisfaction and not in the context of specific charge in the mandatory show cause notice u/s.274 of the Act. Therefore reference to this decision, 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 Mumbai ITAT viz., (i) Dhanraj Mills Pvt. Ltd. Vs. ACIT ITA No.3830 & 3833/Mum/2009 dated 21.3.2017; (ii) Earthmoving Equipment Service Corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invalidate penalty proceedings. 10. In the case of Earthmoving Equipment Service Corporation (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 case of Manjunatha Cotton & Ginning (supra) was an Assessee by name M/s.Veerabhadrappa Sangappa & Co., in ITA NO.5020 OF 2009 which was an appeal by the revenue. 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 Authority. 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 or has furnished inaccurate details. The notice is not in compliance with the requirement of the particular section and therefore it is a vague not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the decision of the Hon'ble 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 proceedings has held that the Assessee had concealed particulars of income and merely because in the show cause notice u/s.274 of the Act, there is no mention 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 pointed 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 Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning (supra) in as much as the ratio laid down in the said case was only with reference to show cause notice u/s.274 of the Act. The Hon'ble Court did not lay down a proposition that the defect in the show cause notice will stand cured if the intention of the charge u/s.271(1) (c ) is discernibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Supreme Court against this judgment which was dismissed in CC No. 11485/2016 dated 5.8.2016 by observing as under:- "UPON hearing the counsel, the Court made the following ORDER Delay condoned. We do not find any merit in this petition. The special leave petition is , accordingly dismissed. Pending application, if any, stands disposed of." We also find that the Hon'ble Jurisdictional High Court in its recent decision in the case of PCIT vs. Dr. Murari Mohan Koley in ITAT No. 306 of 2017, G.A. No. 2968 of 2017 dated 18.07.2018 had endorsed the aforesaid view. 9. We note that Hon'ble Supreme Court has dismissed the SLP of assessee in the case of Sundaram Finance Ltd. (supra), on the same since the Hon'ble Supreme Court also dismissed the SLP of Revenue in the case of CC No. 11485/2016 dated 05.08.2016, mentioned in Para 8 of this order. Thus, we note that on the same issue there is two conflicting judgments of Hon'ble Supreme Court. In this scenario, we take the support of the established principle for a proposition that when there are two views on the issue, one in the favouring of the assessee should be adopted for that we rely on the judgment of the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X
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