TMI Blog2022 (1) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty notice - Decided in favour of assessee. - I.T.A. Nos. 253 to 257/Mum/2021 - - - Dated:- 18-1-2022 - Shri Shamim Yahya (AM) And Shri Amarjit Singh (JM) For the Assessee : Shri Vijay Mehta For the Department : Shri B.K.Bagchi ORDER PER SHRI SHAMIM YAHYA (AM) :- These are appeals by the assessee against respective orders of learned Commissioner of Income Tax (Appeals), wherein penalty under section 271(1)(c) of the I.T.Act has been confirmed. 2. Since the issues are common and connected and the appeals were heard together, these are consolidated for the sake of convenience. 3. Since grounds and orders of authorities below are similar, we are referring to grounds of appeal from AY 2009-10:- On the facts and circumstances of the case and in law the Ld.CIT(A) erred in confirming the penalty of ₹ 1032450 u/s. 271(1)(c) of I.T.Act, 1961. 2. the ld.CIT(A) erred in not appreciating the fact that the notice issued does not make any specific charge on which penalty proceedings have been initiated and further the penalty being levied on estimate basis the same needs to be cancelled. 4. Brief facts of the case are that in this case AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licting views the latter decision being unaware of the former one. Finally, that precedential conflict stood resolved through a Full Bench decision in Maviluyi Service. Co-operative Bank Ltd. v. Commissioner of Income Tax, Caticut [2019 (2) KHC 287]. This Full Bench decision was taken to Supreme Court. That is how, on 12 January 2021, a three-Judge Bench of the Supreme Court has decided Mavilayi. 165. Mavilayi has noted that the Full Bench of Kerala High Court has reached its conclusion based on the Supreme Court's judgment Citizen Cooperative Society Ltd. v, Asst. CIT, Hyderabad [(2017) 9 SCC 364]. Indeed, Mavilayi acknowledges that the Kerala High Court's Full Bench did follow Citizen Cooperative. But it holds that in Citizen Cooperative Society Ltd., the counsel for the assessee advanced no argument that the assessing officer and other authorities under the IT Act could not go behind the registration of the I co-operative society in order to discover as to whether it was conducting 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer is satisfied that the case of the assessee involves concealment of particulars of income or furnishing of inaccurate particulars of income or both, with clarity. If the notice is issued in the printed form, then the necessary portions which are not applicable are required to be struck off, so as to indicate with clarity the nature of the satisfaction recorded. In both Samson Perinchery and New Era Sova Mine, the notices issued had not struck of the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or proper application of mind in a matter of initiation of penalty proceedings. 7. In the present case, as well if the notice dated 30/09/16 (at page 33) is perused, it is apparent that the relevant portions have not been struck off. This coupled with the fact adverted to in paragraph (5) of this order, leaves no ground for interference with the impugned order. The impugned orders are quite consistent by the law laid 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto previous proceedings for justification of its action in the later proceedings, which are, undeniably, independent. It forgets that a stitch in time saves nine. Its one cross or tick mark clears the cloud, enables the assessee to mount an effective defence, and, in the end, its diligence avoids a load of litigation. Is not prejudice writ large on the face of the mechanical methods the Revenue adopts in sending a statutory notice to the assessee under section 271 (1) (c) read with section 274 of the Act? Pragmatically speaking, Kaushalya casts an extra burden on the assessee and assumes expertise on his part. It wants the assessee to make up for the Revenue's lapses. Ex Post and Ex Ante Approaches of Adjudication: 174. In ex-post adjudication, the Court looks back at a disaster or other event after it has occurred and decides what to do about it or how to remedy it. In an ex-ante adjudication, the Court looks forward, after an event or incident, and asks what effects the decision about this 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 say ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent the concealed income. 177. That is, even if the assessment order does not contain a specific finding that the assessee has concealed income or he is deemed to have concealed income because of the existence of facts which are set out in Explanation 7, if a mere direction to initiate penalty proceedings under clause (c) of subsection (1) is found in the said order, by legal fiction, it shall be deemed to constitute satisfaction of the Assessing Officer for initiation of penalty proceedings under the said clause (c). In other words, the Assessing Officer's satisfaction as to be spelt out in the assessment order is only prima facie. Even if the assessment order gives no reason, a mere direction for penalty proceedings triggers the legal fiction as contained in the Explanation (1). 178. Therefore, in every instance, it is a question of inference whether the assessment order contained any grounds for initiating the penalty proceedings. Then, whenever the notice is vague or imprecise, the assessee 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an approach more in consonance with the statutory scheme. That means we must hold that Kaushalya does not lay down the correct 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 nonapplication 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 about the proposal to levy penalty in order to enable him to expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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, section 271(l)(c) is one such provision. With calamitous, albeit commercial, consequences, the provision is mandatory and brooks no trifling with or dilution. For a further precedential prop, we may refer to Rajesh Kumar v. CIT [(2007) 2 SCC 181], in which the Apex Court has quoted with approval its earlier judgment in State of Orissa v. 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 Article 14 of the Constitution. 191. As a result, we hold that Dilip N. Shroff treats omnibus show-cause notices as betraying n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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