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26-04-2019, Nathmal Saraf Charity, Section 271, 274, 271(1)(c), Tribunal Kolkata

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9 months 3 weeks ago #9248 by amit
Section - 271, 274, 271(1)(c), 32
Order Date - 26-04-2019
Favouring - Assessee
Court - Tribunal Kolkata
Appellant - Nathmal Saraf Charity Trust
Respondent - ITO
Citation - 419Taxpundit289
Appeal No. - ITA No.2120/Kol/2018
Asstt. Year - 2013-14


PER : Dr. Arjun Lal Saini

The captioned appeal filed by the Assessee, pertaining to assessment year 2013-14, is directed against the orders passed by the Commissioner of Income Tax (Appeal)-25, Kolkata, which in turn arises out of penalty order passed by the Assessing Officer u/s 271(1)(c ) of the Income Tax Act, 1961 (in short the ‘Act’) dated 29.09.2016.

2. The ld. AR submits that the notice dated 16/03/2016 issued by the AO u/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. The ld.AR further submits 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. He also submits that the AO imposed penalty on defective notice issued u/s. 274 of the Act on 16/03/2016 and the imposition/confirmation of penalty on defective notice is not maintainable in the eye of law.

4. On the other hand, 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 judgement of the Hon'ble Calcutta High Court in the case Dr.Syamal Baran Mondal Vs. CIT (2011) 244 CTR631 states that "section 271 nowhere mandates that recording of satisfaction about concealment of assessee's income must be in specific terms and wo ds, satisfaction of AO must reflect from the order either with expressed words reco ded by the Assessing Officer himself or by his overt act and action."

3. The Ld. ITAT Mumbai in its order the case of Trishul Enterprises Vs. DCIT (ITA Nos.384 & 385/Mum/2014 for A.Yrs.2006-07 & 2007-08), Dt.10-02-2017 dismissed the contention of the assessee regarding failure of the AO to strike off the relevant par of the notice u/s.274 for initiating proceedings u/s.271(1)(c). The ITAT relied upon the judgement of the Hon'ble Bombay High Court in the case of CIT Vs. Smt.Kaushalya (1992) wherein it was held that "mere not striking off specific limb cannot by itself invalidate notice issued u/ s.274 of the Act. The language of the section does not speak about the issuance of notice. All that is required that the assessee be given an opportunity of show cause’….. "

4. The Hon'ble Bombay High Court (Nagpur Bench) in the case of M/s.Maharaj Garage & Company Vs. CIT in its judgement Dt.22-08-2017, has also held that

"15. The requirement of Section 274 of the Income Tax Act for granting reasonable opportunity of being heard in the matter cannot be stretched to the extent of framing a specific charge or asking the assessee an explanation in respect of the quantum of penalty proposed to be imposed, as has been urged ..... " It further observed that: "16. It is not in dispute that a reasonable opportunity of being heard in the matter, as required by Section 274 of the said Act was given to the assessee before imposing the penalty by the Income Tax Officer."

5. Honble Mumbai E Bench in the case of Earthmoving Equipment Service Corporation vs DCIT 22(2), Mumbai (2017) 84 51 looked into the issue very closely and opined that after perusing the ratio of the judgement rendered in Manjunatha Coton and Ginning Factory we find that the assessees appeal was allowed by the Honble High Court after considering the multiple factors and not solely on the basis of defect in notice u/s 274. Therefore we are of the opinion that the penalty could not be deleted merely on the basis of defect pointed by the Ld AR in the notice 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 observing the facts of the case held that the tax officer had recorded satisfaction in the assessment order in relation to invoking penalty pro isions. The tax officer had applied his mind while detailing the reasons for initiation of penalty proceedings in the assessment order. Accordingly, not mentioning the reasons in the penalty notice cannot invalidate the penalty proceedings.

7. Hon'ble Mumbai ITAT in the case of Dhanraj Mills (P) Ltd vs ACIT(OSD) Central Range-s, Mumbai on 21 March 2017 has stated As there is no declaration of law which may be governed by Article 141 of the Constitution of India in the case of CITVersus SSA'S Emerald Meadows dismissed by Hon'ble Apex Court, vide SLP (CC No. 11485/2016) on 05/08/2016. The judgment of Hon'ble Jurisd ctional High Court in CIT Vs Kaushalya (supra) is still having a binding force on us. Thus, with utmost regards to the judgment of Karnataka High Court in CIT Vs Manjunatha Cotton & Ginning Factory (supra) we are bound to follow the judgment of jurisdictional High Court in CIT Vs Kaushalya (supra). Our view also find support from a decision of the Mumbai Bench of the Tribunal in the case of Dhawal K. Jain vs Income Tax Officer (ITANo.996/Mum/2014) order dated 30/09/2016. With these observations, the argument of Id. counsel of the assessee on the legal/technical ground is rejected. Thus, all these four appeals are, therefore, dismissed and the stand of the Ld. Commissioner of Income Tax (Appeal) is affirmed.

8. Hon’ble Madras High Court in the case of Sundaram Finance Ltd. vs. ACIT in [2018] 93 250 (Madras) wherein it was held as under:

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