TMI Blog2020 (2) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... s not covered by the CBDT Circular in view of para 10(d) of the above Circular. In my opinion, in the present case, the penalty was levied by the Assessing Officer on account of unexplained investments in construction of building, on receipt of valuation report from the DVO and further the addition is not related to any items mentioned in para 10(d). Being so, the department is precluded from filing the appeal in view of the monetary limit of filing the appeal before the Tribunal is ₹ 50 lakh, as prescribed by the CBDT. There is no useful purpose would be served in remitting the appeals to the files of the CIT(A). In the totality of the facts and circumstances of the case, we are inclined to confirm the order of the CIT(A) in deleting the penalty for all the assessment years. - Decided against revenue - ITA No.564 to 568/Coch/2019 - - - Dated:- 10-2-2020 - Shri Chandra Poojari, AM For the Appellant : Sri.Mrithunjaya Sharma, Sr.DR For the Respondent : Sri.S.Rajagopal, CA ORDER These five appeals filed by the Revenue are directed against different orders of the CIT(A), Thiruvananthapuram, all dated 02.08.2019 for the assessment years 2000-2001 to 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 65,800 3. Against this, the assessee carried the appeal before the CIT(A) challenging the above levy of penalty, raising following grounds:- (a) The Assessing Officer has erred in levying a concealment penalty u/s 271(1)(c) of the I.T.Act in the facts and circumstances of the case. (b) The Assessing Officer ought to have found that the non-filing of the explanation was due to the absence of the Appellant from India and not on account of any deliberate or willful act. (c) The Assessing Officer should have found that the addition on account of unexplained investment in construction of shopping complex has been made on an estimate basis relying on the District Valuation Officer s report and the addition was substantially reduced by the ITAT in second appeal. Such being the case the Appellant should not have been held to be guilty of concealment. (d) The Assessing Officer should have found that there is no concealment of income in the facts and circumstances of the case. The alleged concealed income is nothing but the estimated addition sustained by the ITAT on account of unexplained investment in the cost of construction. (e) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the show cause notice under section 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Following the decision of the Hon ble Karnataka High Court, we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. 14. We may also add that the provisions of section 292B of the Act cannot cure the basic defect in assumption of jurisdiction and only cure the mistake, defect or omission in return of income, assessment, notice or the proceedings is in substance and effect in conformity with or according to intent and purpose of the Act. As we have already seen that the Hon ble Karnataka High Court in the decision referred to earlier view the show cause notice and the reasons mentioned in the show cause notice are part of the process of the natural justice and the defect in such notice cannot be overlooked. In view of the aforesaid decision we do not find any infirmity in the arguments advanced by the learned AR before us. 4.5 In view of the decision of Hon ble jurisdictional Tribunal, it is evident that the notice issued under section 274 r.w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ex court in [2018] 99 taxmann.com 152 (SC). (ii) [2019] 109 taxmann.com 175 (Delhi Trib) in the ITAT, Delhi Bench-G in the case of Vijay Aggarwal Vs DCIT, Central Circle-1, Faridabad. 6. For these and other grounds that may be advanced at the time of hearing the order of the learned Commissioner of Income tax (Appeals), Thiruvananthapuram on the above points may be set aside and that of the Assessing Officer restored. 6. The learned Departmental Representative submitted that the only issue involved is whether levy of penalty u/s.271(1)(c) is valid in law keeping in view the decision of the Hon ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory (359 ITR 565-Kar). The contention of the assessee is that since the Assessing Officer had not struck off the irrelevant portion in the show cause notice, it goes to prove that the Assessing Officer had not reached satisfaction before initiating proceedings u/s.271(1)(c). According to the AR, the contention that the relevant column has not been ticked, cannot be accepted as it is found from A.O. and penalty orders for all the years, the concealment of income has been mentioned by the Assessing Officer. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any mistake, defect or omissions, either in return of income, assessment, notice, summons or other proceedings. In other words, a notice cannot be invalidated by reason of any mistake, such as the one occurred in the present case, namely, the period of filing return of income was not specified as contemplated by Section 148 of the Act. If such a defect is not allowed to be cured, or treated as invalid so as to declare the notice invalid, despite the fact that assessee had taken that notice as valid and responded to it in letter and spirit and participated in the proceedings, the very purpose/objective of the provisions contained in Section 292B of the Act would stand frustrated/defeated. The intent of the Legislature is clear from the language employed in this provision which states that a defective notice, such as the one in the present case, cannot be declared invalid by reason of any mistake, defect or omission, if the notice in `substance' and in `effect' is in conformity with or according to the intent of purpose of this Act. The intent or purpose of issuing the notice is to call upon the assessee to file return, if the Assessing Officer finds that income has escape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned AR submitted that this issue is squarely covered by the earlier order of the Cochin Bench of the Tribunal in the case of DCIT v. M/s.R.R. Holidays Homes (P) Ltd. in ITA No.513/Coch/2019 order dated 08.11.2019, wherein the Tribunal held that penalty proceedings initiated by the Assessing Officer is void ab initio in view of the non-striking of the irrelevant portion of the notice issued by the A.O. u/s 274 r.w.s. 271(1)(c) of the I.T.Act, since it cannot be known whether the penalty was levied for concealment of income or furnishing of inaccurate particulars of income. The learned AR also relied on the judgment of the Hon ble Karnataka High Court in the case of CIT Anr. v. SSA s Emerald Meadows (2015) (11) TMI 1620 and also the judgment of the Hon ble Supreme Court in SLP in the case of CIT Anr. v. SSA s Emerald Meadows reported in (2016) (8) TMI 1145. 7.1 The learned AR further submitted that clause 10(d) of CBDT Circular No.3/2018 dated 11th July, 2018, cannot be applied in the present case since in the present case, the penalty levied towards unexplained investment in construction of a building and the addition is nowhere related to any item mentioned in claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther notice u/s 142(1) and a pre assessment notice dated 9.7.2007 were issued posting the case for hearing on 24.7.2007. These were served on 10.7.2007. By letter dt. 24.7.07, Sri T.S.Suresh Kumar, ITP has requested for one month s time for filing the return on the ground that the assessee is expected to be in India by 5th August, 2007. Return of income was ultimately filed on 31.8.07 declaring total income at Rs.Nil. This return was posted for evidence on 24.09.2007 by notice u/s 143(2) dated 10.9.2007. 8.2 By reading of the penalty order also, it is not clear that whether he has levied the penalty for concealment of income or furnishing inaccurate particulars of income. Hence, in my opinion, the ratio laid down by the ITAT Cochin Bench in the case of M/s.R.R. Holidays Homes (P) Ltd. (supra) clearly applies, wherein the Tribunal held as under:- 6. We have heard the rival submissions and perused the record. The main contention of the ld. DR is that penalty was levied by the Assessing Officer for concealment of particulars of income and furnishing inaccurate particulars of such income. We have gone through the assessment order dated 27/12/2016. As seen from the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther, I also make it clear that the CBDT Circular No.3/2018 clearly applies to the present case of the assessee. There is no merit in the argument of the learned DR that the assessee is not covered by the CBDT Circular in view of para 10(d) of the above Circular. In my opinion, in the present case, the penalty was levied by the Assessing Officer on account of unexplained investments in construction of building, on receipt of valuation report from the DVO and further the addition is not related to any items mentioned in para 10(d). Being so, the department is precluded from filing the appeal in view of the monetary limit of filing the appeal before the Tribunal is ₹ 50 lakh, as prescribed by the CBDT. 8.4 Further even on merit, the learned DR submitted that the issue may be remitted to the CIT(A) to be decided afresh on merits. In my opinion, even on merit also the issue is covered in favour of the assessee by the judgment of Hon ble Madras High Court in the case of CIT v. Apsara Talkies [(1985) 155 ITR 303 (Mad.)] 4. We agree with the reasoning and conclusion of the Tribunal. The whole basis for rejecting the assessee's return was the Departmental Valuer's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... text of its reference to the decision in CIT v. Mohammed Kunhi [1973] 87 ITR 198 ? 9. The question is somewhat unusually framed with a citation of case law in it, CIT v. Mohammed Kunhi [1973] 87 ITR 189 is a decision by the Kerala High Court. It contains a clear ruling that a penalty cannot be levied on the basis merely of an estimate of cost of construction of a building built by an assessee with his funds. In the case before that High Court, an addition was made to the income returned on the score that the cost of construction as disclosed in the assessee's books was lower than the estimated cost of the building as rendered by a valuer. The learned judges held that a mere estimate of cost cannot constitute material on which a finding of concealment can be rendered. In that case, some explanation had been offered by the assessee as to why the construction was at an economical cost. This explanation was not accepted by the ITO. The learned judges held that even if the assessee's explanation was not acceptable, it would still require some further material to support the finding that the assessee had concealed its taxable income. We respectfully agree with this vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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