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TMI Blog2021 (6) TMI 985X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 274 r.w.s. 271(1)(c) of the Act. 3. Since, the aforesaid issued raised in the cross objection is a purely legal and jurisdictional issue going to the root of the matter, in our considered opinion, such issue has to be decided at the very outset. However, before we proceed to decide the aforesaid issue, it must be observed, registry has pointed out a delay of 59 days in filing the cross objection. 4. The assessee has filed an application seeking condonation of delay accompanied by an affidavit. It is the submission of the assessee that the memorandum of appeal filed by the department as received by the assessee was handed over to the counsel, who generally appears for the assessee in tax litigations. It is submitted, though, the counsel for the assessee had advised for filing of the cross objection, in spite of the appeal having been decided in favour of the assessee on merits; however, the cross objection could not be filed in time as the officials of the assessee were tied up with the statutory and other audit going on at the bank between February, 2019 to August, 2019. Thus, due to inadvertence, the cross objection could not be filed in time. The learned departmental repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act in assessment years 2008-09 and 2009-10 were deleted by the Tribunal, learned Commissioner (Appeals) deleted the penalty imposed. 7. Learned Counsel for the assessee submitted, in the show cause notice issued under section 274 r.w.s. 271(1)(c) of the Act, the assessing officer has not specifically indicated which limb of section 271(1)(c) of the Act would be applicable. In this context, he drew our attention to a copy of the show cause notice placed at page 46 of the paper book. Thus, he submitted, by not mentioning the specific limb of section 271(1)(c) of the Act under which the assessing officer intended to impose penalty, the penalty order passed is vitiated. In support of such contention, he relied upon the Full Bench decision of the Hon'ble jurisdictional High Court in case of Mohammed Farhan A Shaikh vs DCIT (2021) 200 DTR (Bom)(FB) 65. He also relied upon a decision of the Division Bench of the Hon'ble jurisdictional High Court in case of Ventura Textiles Ltd vs CIT (2020) 426 ITR 478 (Bom). Further, he submitted, under identical facts and circumstances, due to defect in the show cause notice issued under section 274 of the Act, the Tribunal in assessee's own case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed to be rural branches. On scrutiny of population certificates and on admission by the assessee bank, three branches were established to be not rural branches. The aggregate advances made by the eligible rural branches was Rs. 29,04,18,518 against the claim of Rs. 33,00,42,399 by the assessee. At para 2.2, pp 2, the AO has detailed the excess claim of deduction of Rs. 33,24,91,638 and the restriction of the claim u/s 36(l)(viia) to the extent of provision made for expenditure debited to P and L account. From the discussion at para 4, pp 3, it is clear that the assessee was aware that the prevalent law was against it The reply of the assessee bank to the notice u/s 271(1) (c ) is reproduced at para 5. This reply dt 27.6.2017 clearly shows that the assessee has met both the limbs of concealment and furnishing of inaccurate particulars. Please see para 6 of the penalty order wherein the Ld AO has given his detailed reasoning for levy of penalty u/s 271(l)(c) on account of both concealment and furnishing of inaccurate particulars of income . The Ld AO states, " However the fact remains that the assessee consciously and deliberately made the following claims with a view to conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon'ble SC held that making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. The Ld CIT A has not given any reasoning as to how the repeated claim across AYs u/s 36(lJ(yiiaJ and also the fact of claim of non-rural branches as rural branches would not tantamount to furnishing of inaccurate particulars and concealment. It is amply evident that the Ld CIT A has demonstrated total non-application of mind and further lack of reasoning in arriving at his decision. 7. HON'BLE BOM HC : The decision of the Hon'ble HC of Bombay in Mohd. Farhan A Shaikh dt 11.03.2021 [[2021] 125 taxmann.com 253 ( Bombay)] unambiguously states that where assessment order clearly records satisfaction for imposing penalty on one or the other , or both grounds mentioned in Sec 271(lJ(c}, a mere defect in notice, not striking of relevant matter would vitiate penalty proceedings. Please see paras 32 to 39. The Hon'ble Bombay High Court in this decision has discussed threadbare all the decisions of various High Courts of the land on the issue of non-striking of limbs of penalty u/s 271(1)( c ) in the penalty notice. In these paras where the decision of the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions and perused materials on record. Undisputedly, the assessee has challenged the validity of the penalty order passed under section 271(1)(c of the Act because of the defective show cause notice issued by the assessing officer under section 274 r.w.s. 271(1)(c) of the Act. Pertinently, a perusal of the show cause notice dated 14-03-2017 issued under 274 r.w.s. 271(1)(c) of the Act, a copy of which is at page 46 of the paper book, makes it clear that the assessing officer has not mentioned the specific limb of section 271(1)(c) of the Act applicable to assessee, by striking off the inapplicable words. In fact, the assessing officer had again issued a notice dated 19-06-2017 to the assessee requiring to show cause why penalty under section 271(1)(c) of the Act should not be levied. However, a reference to the said notice, a copy of which is at page 47 of the paper book, would reveal that, though, the assessing officer has referred to his earlier show cause notice issued in the printed form; however, in the subsequent notice also he has not mentioned the specific limb of section 271(1)(c) of the Act for which he intended to impose penalty. Whereas, a perusal of the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant:- "The penalty notice has charged the assessee with both the limbs of concealment and furnishing of inaccurate particulars. The assessee has in fact met this charge in its reply at S no 2,4,7,9, and 10 reproduced at para 5 of the penalty order. The penalty order accordingly levied penalty u/s 271(1) (c] due to both the limbs of concealment and furnishing of inaccurate particulars being established." As could be seen from the above quoted portion, learned Departmental Representative has tried to make out a case that the assessing officer had intended to levy penalty under both the limbs of section 271(1)(c) of the Act. This submission of learned Departmental Representative is contrary to the facts on record. When the assessing officer has unequivocally accepted that penalty proceeding was initiated for the offence of furnishing inaccurate particulars of income, we are afraid, at this stage learned Departmental Representative cannot improve upon the admitted factual position. 13. Having dealt with the factual aspect, at this stage, it would be relevant to examine the Full Bench decision of the hon'ble jurisdictional High Court in case of Mohammed Farhan A Shaikh vs DCIT (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Goa Dourado Promotions and other cases have adopted an approach more in consonance with the statutory scheme. That means we must hold that Kaushalya does not lay down the coireet proposition of law. Question No. 2 : Has Kaushalya failed to discuss the aspect of 'prejudice'? 184. Indeed, Kaushalya did discuss the aspect of prejudice. As we have already noted, Kaushalya noted that the assessment orders already contained the reasons why penalty should be initiated. So, the assessee, stresses Kaushalya, "fully knew in detail the exact charge of the Revenue against him". For Kaushalya, the statutory notice suffered from neither non-application of mind nor any prejudice. According to it, "the so-called ambiguous wording in the notice (has not) impaired or prejudiced the right of the assessee to a reasonable opportunity of being heard". It went onto observe that for sustaining the plea 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". Kaushalya closes the discussion by observing that the notice issuing "is an administrative device for informing the assessee abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, "except in the case of a mandatory provision of law which is conceived not only in individual interest but also in the public interest". 190. Here, s. 271(l)(c) is one such provision. With calamitous, albeit the commercial, consequences, the provision is mandatory and brooks no trifling with or dilution. For a further precedential prop, we may that refer to Rqjesh Kumar & Ors. vs. CIT (2006) 206 CTR (SC) 175 : (2007) 2 SCC 181, in which the apex Court has quoted with approval its earlier judgment in State of Orissa us. Dr. Binapani Dei AIR 1967 SC 1269. According to it, when by reason of action on the part of a statutory authority, civil or evil consequences ensue, principles of natural justice must be followed. In such an event, although no express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue contravenes the principles of natural justice, it may also be held ultra vires Art. 14 of the Constitution. 191. As a result, we hold that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court in case of Ventura Textiles Ltd vs CIT (supra) (also taken note of by the hon'ble Full Bench) also propounded similar legal principles. 16. It will be relevant to observe, in assessee's own case in assessment year 2008-09 vide ITA No.3043/Mum/2015 dated 16-06-2017, the Tribunal taking note of the fact that the show cause notice issued under section 274 r.w.s. 271(1)(c) of the Act suffers from defect as inapplicable words were not struck off, has deleted the penalty. Similar view was expressed by the Tribunal while deciding assessee's appeal for assessment year 2009-10 vide ITA No.5038/Mum/2015 dated 15-11-2017. Although, at that relevant point of time the Full Bench decision of the hon'ble jurisdictional High Court (supra) was not available before the bench; however, the legal principle followed by the Co-ordinate Bench is in conformity with the ratio laid down by the Full Bench of the Hon'ble jurisdictional High Court (supra). 17. Thus, respectfully following the Full Bench decision of the hon'ble jurisdictional High Court in case of Mohammed Farhan A Shaikh vs DCIT (supra) and the decision of Hon'ble Supreme Court in the case of Dilip N Shroff (supra), we hold the impug ..... X X X X Extracts X X X X X X X X Extracts X X X X
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