Ventura Textiles Ltd. v. CIT [Income Tax Appeal
No. 958 of 2017, dt. 12-6-2020] : 2020 TaxPub(DT) 2582 (Bom-HC)
Concealment Penalty under section 271(1)(c) -- assessment
order mentioning reason for penalty but notice under section 271(1)(c) not
clearly mentioning it -- quashing of penalty levy thereof on grounds of
incorrect notice issuance.
Facts
Assessee was slapped with a penalty under section 271(1)(c)
for claiming an expenditure which was disallowed by lower tax authorities.
Penalty notice did not mention whether it was a case of concealment or
furnishing inaccurate particulars of income. The assessment order of same date
as penalty notice did state that penalty notice was being issued and levied
separately for furnishing inaccurate particulars of income alleging assessee
had claimed a disallowable expenditure. This penalty stood upheld at lower
levels and thus reached the Mumbai HC.
Held by the HC in favour of the assessee by quashing the
penalty - applying CIT v. Reliance Petroproducts Pvt. Ltd., (2010) 322 ITR
158 (SC) : 2010 TaxPub(DT) 1683 (SC) which had held that mere
claim of a disallowable expenditure does not warrant penalty under section
271(1)(c).
The topic is no longer res integra, i.e., not
mentioning for which purpose penalty notice is being issued under section
271(1)(c) deserves outright quashing of the penalty notice as held in CIT v.
SSA's Emerald Meadows, (2016) 73 Taxmann.com 248 (SC) : 2016 TaxPub(DT)
4242 (SC), CIT v. SSA's Emerald Meadows, (2016) 73 Taxmann.com 241
(Karnataka-HC) : 2018 TaxPub(DT) 0953 (Karn-HC) and CIT v. Manjunath
Cotton and Ginning Factory, (2014) 359 ITR 565 (Karn-HC) : 2014
TaxPub(DT) 0202 (Karn-HC).
But fine print worth noting in this decision is --
Because the assessment order also dated as same of the
penalty notice did mention levy of penalty for furnishing inaccurate
particulars of income is being done separately; though the same not being
further clearly put on the section 271(1)(c) notice it was only seen as a
technical breach curable as Assessee did know as to what for penalty was being
levied as per the clear assessment order. The HC did go over elaborately
decisions on this topic before commenting this finer aspect and it was the case
of Reliance Petroproducts SC decision which came to their saving grace
that too not on the aspect of irregularity of the section 271(1)(c).
"26. Reverting back to the facts of the present case,
if the assessment order and the show cause notice, both issued on the same date
i.e., on 28-2-2006, are read in conjunction, a view can reasonably be taken
that notwithstanding the defective notice, assessee was fully aware of the
reason as to why the assessing officer sought to impose penalty. It was quite
clear that for breach of the second limb of section 271 (1)(c) of the Act i.e.,
for furnishing inaccurate particulars of income that the penalty proceedings
were initiated. The purpose of a notice is to make the noticee aware of the
ground(s) of notice. In the present case, it would be too technical and
pedantic to take the view that because in the printed notice the inapplicable
portion was not struck off, the order of penalty should be set aside even
though in the assessment order it was clearly mentioned that penalty
proceedings under section 271(1)(c) of the Act had been initiated separately
for furnishing inaccurate particulars of income. Therefore, this contention
urged by the appellant/assessee does not appeal to us and on this ground we are
not inclined to interfere with the imposition of penalty".
Editorial Note: How
this decision will be used by the department in coming days to their favour in
this domain will be worth watching. A res integra issue dealt
differently makes it a flash worthy decision.