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TMI Blog2021 (9) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal raised by the assessee in cross objection read as under :- 1. On the fads and in the circumstances of the case and in law, the Ld. CIT(A) has erred in failing to adjudicate the second ground preferred of the "Grounds of Appeal" namely "The Ld. Assessing Officer has failed to specify in the notice u/s.274 r.w. Section 271(l)(c) the reasons/justification for levy of penalty by mentioning "have concealed the particulars of your income OR furnished inaccurate particulars of such income thereby being ambiguous on reasons/justification for levying penalty"". thereby violating the principle of natural justice by failing to give the Appellant a reasonable opportunity of being heard. 4. Brief facts are that in this case assessment u/s. 143(3) was completed on 13.12.2016 assessing loss of Rs. 20,07,86,722/- as against returned loss of Rs. 22,59,74,821/-. The major disallowance was on account of interest of Rs. 1,72,70,635/-, which pertain to F.Y. 2012-13 relevant to A.Y. 2013-14 and not for the year under consideration i.e. A.Y. 2014-15. Penalty proceedings were initiated by issue of notice u/s. 271(1)(c) for furnishing inaccurate particulars of income. Order u/s. 271(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO as a whole (except for interest). Separate treatment to interest claim by AO is not in consonance with allowing of other expenses by AO, which also pertained to earlier financial years. Having allowed a large part of other expenses, AO cannot hold interest claim " only as bogus and levy penalty on such claim". (4) "Ishque in Paris" film project was shown as work-in-progress. In the Balance Sheet for A.Y. 2012-13, amount of Rs. 5,72,22,172/-, which included financial cost consisting of bank charges and bank interest of Rs. 46,56,704/- is shown. Central Bank of India loan of Rs. 7,50,00,000/- is also declared with these details. Similarly, for A.Y. 2013-14, "Ishque in Paris" project work-in-progress is declared as asset amounting to Rs. 20,83,87,137/- and the details of income and expenses and the details of project cost/income and details of bank charges and the bank interest of Rs. 1,72,70,635/- are disclosed. [Though apparently return for A.Y. 2013-14 was not filed in time u/s. 139(1)]. (5) Further, without giving a finding that these expenses are bogus, when the work-in-progress for the film project has been duly reflected in the returns for A.Y. 2014-15, there cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentative Ms. Shreekala Pardeshi could not dispute the proposition that the jurisdiction issue is in favour of the assessee by the aforesaid decision of Hon'ble Bombay High Court. 11. Upon careful consideration we find that it will gainful to refer to the notices under section 271(1)(c) of the Act given to the assessee as submitted by the assessee in the paper book before us:- "To, Smt. Preity Durganannd Zinta Whereas in the course of proceedings before me for the A.Y, 2014-15, it appears that you: * have without reasonable cause failed to furnish me return of income which you were required to furnish by a notice given under section 22(l)/22(2)/34 of the Indian Income-tax Act, 1922 or which you were required to furnish under section 139(1)/153A or by a notice given under section 139(2)/148 of the Income-tax Act, 1961, or have without reasonable cause failed to furnish it within the time allowed and the manner required by the said section 139(1) of by such notice, * have without reasonable cause failed to comply with a notice under 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. * concealed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business in accordance with its j bye-laws". That sets Citizen Cooperative apart, according to Mavilayi. 166. In this context, Mavilayi holds that only the ratio decidendi of a judgment binds as a precedent. To elaborate on this proposition, Mavilayi refers to State of Orissa v. Sudhanshu Sekhar Misra [(1968) 2 SCR 154], which holds that a decision is only an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein, nor what logically follows from the various observations made in it. Then, it quotes Dalbir Singh v. State of Punjab[1919) 3 SCR 1059]. Though it was from the dissenting judgment, Mavilayi points out, it remained uncontradicted by the majority: According to the well-settled theory of precedents every decision contains three basic ingredients: (i) findings of material facts, direct and inferential. An inferential finding of facts is the inference which the Judge draws from the direct or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the combined effect of (i) and (ii) above." For the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid down in the case of Samson Perinchery and New Era Sova Mine and therefore, warrant no interference." 170. Samson Perinchery, too, has held that the notice issued under section 274 of the Act should strike off irrelevant clauses. And New Era Sova Mine has endorsed the Tribunal's view that "the penalty notices in these cases were not issued for any specific charge, that is to say, for concealment of particulars of income or furnishing of inaccurate particulars". In fact, Samson Perincherry relies on Karnataka High Court's SSA's Emerald Meadows, which, as we have already seen, has followed Manjunatha. So, in a sense, it is a conflict between Kaushalya and Manjunatha if we take comity, rather than stare decisis, as the reckoning factor. 171. That said, as Mavilayi found distinguishing features in Citizen Cooperative; here, too, the fact situation as obtained in Kaushalya has been seen in none of these decisions: Goa Dourado Promotions, Goa Coastal Resorts and Recreation, Samson Perinchery, New Era Sova Mine-not even in Manjunatha pointed, in both sets of cases, the proposition is this: To an assessee facing penalty proceedings, the Revenue must supply complete, un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his case will have in the future - on parties who are entering similar situations and have not yet decided what to do, and whose choices may be influenced by the consequences the law says will follow from them. The first perspective also might be called static since it accepts the parties' positions as given and fixed; the second perspective is dynamic since it assumes their behaviour may change in response to what others do, including judges, (for a detailed discussion, see Ward Farnsworth's Legal Analyst: A Toolkit for Thinking about the Law). 175. Kaushalya has adopted an ex-post approach to the issue resolution; Goa Dourado Promotions, an ex-ante approach. Kaushafya saves one single case from further litigation. It asks the assessee to look back and gather answers from whatever source he may find, say, the assessment order. On the other hand, Goa Dourado Promotions saves every other case from litigation. It compels the Revenue to be clear and certain. To be more specific, we may note that if we adopt Kaushalya's approach to the issue, it requires the assessee to look for the precise charge in the penalty proceedings not only from the statutory note but from every ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee assails it as bad; the Revenue defends it by saying that the assessment order contains the precise charge. Thus, it becomes a matter of adjudication, opening litigious floodgates. The solution is a tick mark in the printed notice the Revenue is used to serving on the assessees. 179. Besides, the prima facie opinion in the assessment order need not always translate into actual penalty proceedings. These proceedings, in fact, commence with the statutory notice under section 271(l)(c) read with section 274. Again, whether this prima facie opinion is sufficient to inform the assessee about the precise charge for the penalty is a matter of inference and, thus, a matter of litigation and adjudication. The solution, again, is a tick mark; it avoids litigation arising out of uncertainty. 180. One course of action before us is curing a defect in the notice by referring to the assessment order, which may or may not contain reasons for the penalty proceedings. The other course of action is the prevention of defect in the notice-and that prevention takes just a tick mark. Prudence demands prevention is better than cure. Answers: Question No. 1: If the assessment order clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... halya closes the discussion by observing that the notice issuing "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". 185 No doubt, there can exist a case where vagueness and ambiguity in the notice can demonstrate non-application of mind by the authority and/or ultimate prejudice to the right of opportunity of hearing contemplated under sect7orT274. So asserts Kaushalya. In fact, for one assessment year, it set aside the penalty proceedings on the grounds of non-application of mind and prejudice. 186. That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or justification, avoids prejudice to the assessee. That is where, we reckon, the reasoning suffers. Kaushalya's insistence that the previous proceedings supply justification and cure the defect in penalty proceedings has not met our acceptance. Question No. 3: What is the effect of the Supreme Court's decision in Dilip N. Shroff on the issue of non-application of mind when the irrelevant portions of the printed notices are not struck off? 187 In Dilip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les of natural justice, it may also be held ultra vires Article 14 of the Constitution. 191. As a result, we hold that Dilip N. Shroff treats omnibus show-cause notices as betraying non-application of mind and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that generic notice." 13. Examining the present case on the anvil of aforesaid case law, we find that the notice in this also is an omnibus show-cause notice as it does not strike off/delete the inappropriate/irrelevant/not applicable portion. Such a generic notice betrays a non-application of mind. Hence, the penalty levied pursuant to such a notice is not legally sustainable in law. Hence following the aforesaid precedent from the Full Bench of the Hon'ble Jurisdictional High Court we hold that the Assessing Officer was bereft of valid jurisdiction as the notice issued to assessee is unsustainable in law. Hence, the penalty levied under section 271(1)(c) of the Act is liable to be deleted. We direct as such. Since we have held that the penalty order is liable to be quashed for lack of a valid notice, the adjudication on merit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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