Infinity Industries P.Ltd, Mumbai vs Assessee

आयकर अपील य अ धकरण, मंब ु ई IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES 'I' MUMBAI सव ी आय.पी. बंसल, या यक सद य एवं डी. क णाकर राव,ु लेखा सद य

BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND

SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.89/MUM/2014 TO 94/MUM/2014 नधा रण वष /Assessment Year 2004-05 TO 2009-10 M/s.Infinity Industries Pvt. बनाम/ The DCIT, Cen. Cir. 12, Ltd. Mumbai.

s t Vs. Room No.1, 1 Floor, Central Building, 23, Chowpatty Sea Face, Girgaum, Mumbai 400006

थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAACI8002P (अपीलाथ /Appellant) .. ( यथ / Respondent)

Appellant by Ms. Bhumika Vora Respondent by Shri Sachhidanand Dubey सनु वाई क" तार$ख / Da te o f Hearing : 09/06/2015 घोषणा क" तार$ख /Date of Pronouncement : 09/06/2015 आदे श / O R D E R

PER BENCH:

These appeals are filed by the assessee and they are directed against order passed by Ld. CIT(A)-37, Mumbai dated 01/11/2013 for assessment years 2004-05 to 2009-10. Grounds of appeal in all the appeals are identical and read as under:

"1. On the facts and circumstances of the Appellant's case and in law Learned CIT(A) erred in confirming the levied by the AO by provision of section 271(1)(b) of the Income Tax Act, 1961.

2. In any case the Ld. CIT(A) failed to appreciate that the impugned order was passed by the Ld. AO without complying with the provision of Sec. 274 of the Income Tax Act 1961.

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3. The appellant craves leaves to add, to amend, alter modify and/ or withdraw any or all the above grounds of appeal, each of which are without prejudice to one another.

2. It may be mentioned here that on 09/06/2015 other group matter on similar facts and circumstances in the case of Mr. Lakhamshi J. Gala were heard and it was common contentions of both the parties that the view taken in the said case would be equally applicable to the present case. It is in this manner these appeals were heard.

3. We have decided the appeals in the case of Mr. Lakhamshi J. Gala vs. DCIT,Cen. Cir.12 in ITA Nos.109/MUM/2014 to 115/MUM/2014, Assessment Years 2004-05 TO 2010-11 vide our order of even date. The said order for the sake of completeness is reproduced below:

These appeals are filed by the assessee and they are directed against order passed by Ld. CIT(A)-37, Mumbai dated 01/11/2013 for assessment years 2004-05 to 2010-11. Grounds of appeal in all the appeals are identical and read as under:

"1. On the facts and circumstances of the Appellant's case and in law Learned CIT(A) erred in confirming the levied by the AO by provision of section 271(1)(b) of the Income Tax Act, 1961.

2. In any case the Ld. CIT(A) failed to appreciate that the impugned order was passed by the Ld. AO without complying with the provision of Sec. 274 of the Income Tax Act 1961.

3. The appellant craves leaves to add, to amend, alter modify and/ or withdraw any or all the above grounds of appeal, each of which are without prejudice to one another.

2. In all these cases penalty of Rs.10,000/- is imposed under section 271(1)(b) of the Income Tax Act, 1961(the Act). In all these cases facts are identical and these appeals were disposed of by Ld. CIT(A) by a consolidated order.

3. The penalty order in each of the case is same and for the sake of clarity the order is reproduced below:

"Penalty Order u/s. 271(1)(b) r.w.s. 274 of the I.T.Act, 1961.

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In the case notice u/s. 142(1) of the I.T. Act, 1961 was issued to you on 05/02/2013 and was duly served, requiring you to attend personally and give evidence on 12/02/2013 at 11.30 AM. But there was neither compliance, nor anybody filed complete details nor sought any adjournment to the said notice.

In view of above, the penalty u/s. 271(1)(b) r.w.s. 274 of IT Act 1961 is hereby initiated.

Penalty u/s.271(1)(b) levied of Rs.10,000/- Issue demand notice accordingly."

3.1 Thus it can be seen from the above order that firstly, on the basis of notice issued under section 142(1) of the Act impugned penalty has been imposed and secondly, the failure of the assessee was to attend the date given in the notice under section 142(1) on 12/2/2013.

3.2 The assessee objected the levy of penalty in the appeal filed before Ld. CIT(A) on the ground that i) no notice under section 142(1) was received and ii) on the ground that no show cause notice was issued before levy of penalty under section 271(1)(b) of the Act. The submissions made by the assessee before Ld. CIT(A) were forwarded to the concerned AO. In reply the AO submitted that notice under section 142(1) dated 5/2/2013 was served on the assessee and copy of acknowledge obtained by the Postal Authorities was also submitted. It was further submitted that in the notice issued under section 142(1) dated 5/2/2013, it was clearly mentioned that non-compliance will be penalized by levy of penalty under section 271(1)(b) of the Act. Thus, it was claimed by the AO that notice u/s. 142(1) was duly served and assessee was put to notice that penalty will be levied for non-compliance. On these facts, Ld. CIT(A) has concluded that assessee did not comply with several notices issued by the AO and only at the very end the AO levied penalty under section 271(1)(b) and assessment was finally completed under section 144 of the Act. Ld. CIT(A) further observed that assessee did not give evidence of compliance with several notices issued under section 142(1) of the Act and did not explain non- compliance. Therefore, Ld. CIT(A) has confirmed the levy of penalty, which is agitated in the present appeals.

4. After narrating the facts, it was submitted by Ld. AR that Ld. CIT(A) has wrongly taken cognizance of other dates on which assessee failed to attend the proceedings, whereas the impugned penalty has been imposed by the AO only for the default of the assessee for non-appearance on 12/2/2013. It was submitted that admittedly for levy of penalty under section 271(1)(b) no separate notice was issued but only on the basis of observation of the AO in the notice issued under section 142(1) the impugned penalty has been imposed and confirmed. It was submitted that on similar facts in group case i.e. in the case of M/s. Speciality Paper Ltd., Ld. CIT(A) has deleted the penalty and reference in this regard was made to order passed by Ld. CIT(A) dated 27/6/2014 for assessment year 2004- 05 to 2009-10, copy was also placed on our record and was also given to Ld. DR. In the said case similar report was obtained and after finding that no show cause 4 ITA No.89/MUM/2014 TO 94/MUM/2014 /Assessment Year 2004-05 TO 2009-10

notice was issued for levy of penalty, it was held that by Ld. CIT(A) that it was in violation of cardinal principle of natural justice. It was further held by Ld. CIT(A) that those observations regarding section 271(1)(b) were in the notice issued under section 142(1) of the Act dated 28/1/2013 and not for the non- compliance of notice dated 5/2/2013. Thus, it was submitted by Ld. AR that Ld. CIT(A) has committed an error in sustaining the penalty and in absence of show cause notice for levy of penalty, the penalty should have been deleted.

5. On the other hand, relying upon the order passed by Ld. CIT(A) it was submitted by Ld. DR that assessee was clearly informed that non-compliance of notice under section 142(1) of the Act would result into the levy of penalty under section 271(1)(b) of the Act and this was sufficient compliance with the provisions of section 274(1) of the Act and, therefore, Ld. CIT(A) was right in sustaining the penalty and his order should be upheld.

6. We have heard both the parties and their contentions have carefully been considered. It may be mentioned here that we have carefully gone through the assessment orders for all the years to ascertain the default of the assessee for which the impugned penalty has been imposed. The default of the assessee as mentioned in the impugned penalty order is regarding notice issued under section 142(1) on 5/2/2013, which require the assessee to attend the assessment proceedings personally and give evidence on 12/2/2013 at 11.30 AM. It is for non-compliance of such notice impugned penalty has been imposed. The penalty order has already been reproduced in the above part of this order. The assessment orders in respect of A.Y 2004-05 to 2009-10 are identically worded so as it relates to mentioning the reason for proceeding to make best judgment assessment under section 144 r.w.s. 153A of the Act. For the sake of convenience the observations of the AO in the assessment order for A.Y 2004-05 to that extent are reproduced below:

"The search & Seizure action u/s 132 of the Income Tax Act, 1961 was carried out in the case of Reliable Paper (India) Private Limited and its Group Concerns, Mumbai between 23.02.2010 and 20.04.2010, wherein incriminating documents. relating to the assessee was found and simultaneously action u/s. 132 of the Income Tax Act, 1961 was carried out on the premises of the assessee at Room no.1, 1st Floor; 23 Central Building, Chowpatty Sea Face, Mumbai- 400007.

2. Subsequently notice u/s. 153A of I.T. Act, 1961 dated 07.03.2011 was issued and duly served on the assessee. In response to the notice, the assessee filed his return of income for A.Y. 2004-05 on 23.03.2011 declaring a total income of Rs. 27,82,940/-.

3. Thereafter, notice u/s 143(2) was issued on 11.04.2011 and duly served on the assessee. The date for hearing was fixed on 25.04.2011, but on the designated date no one from the assessee. On 26.04.2011 Assessee submitted letter of adjournment and the case is adjourned till further date.

4. Further, notice u/s. 142(1) dated 25.04.2011 along with questionnaire was issued and duly served on the assessee calling for various details. The date for making submissions and for hearing the case was fixed on 12.05.2011.

5 ITA No.89/MUM/2014 TO 94/MUM/2014 /Assessment Year 2004-05 TO 2009-10

However, on the designated date no one attended. On 19.05.2011 Assessee has submitted letter adjournment and the case is adjourned to 30.05.2011.

5. Subsequently, the assessee made his first partial submission on 15.06.2011 and second partial submission was made on 21.10.2011.

6. Further notice u/s. 142(1) dated 15.10.2012 was issued asking the assessee to submit complete details as requested in the questionnaire issued earlier. The date for compliance of this notice was fixed on 29.10.2012, but on the designated date no one attended, nor had any adjournment letter been filed.

7. In view of consistent non-compliance on the part of the assessee more reminder notice u/s. 142(1) dated 29.10.2012 was issued and duly served on the assessee. In this notice the assessee was asked to show cause that if the assessee fails to attend the hearing with all details then why the assessment should not be completed u/s.144 of the income Tax Act, 1961. Further it was mentioned that, if is the last opportunity of being heard, and further the assessment will be completed ex-parte without further notice. The date for hearing was fixed on 06.11.2012, but on the designated date no one attended.

8. In view of consistent non-compliance on the part of the assessee one more reminder notice u/s.142(1) dated 7/12/2012 was issued and duly served on the assessee. In this notice the assessee was asked to show cause that if the assessee fails to attend the hearing with all details then why the assessment should not be completed u/s.144 of the Income Tax Act, 1961. Further it was mentioned that, it is the last opportunity of being heard, and further the assessment will be completed ex-parte without further notice. The date for hearing was fixed on 14.12.2012, but on the designated date no one attended.

9. Furthermore, notice u/s 142(1) dated 31.12.012 was issued wherein a final opportunity of being heard was given to the assessee. The date for hearing was fixed on 07.01.2013, but on the desired date no one attended, In response to the above mentioned notices, the assessee has submitted some details on 08.01.2013.

10. Penalty u/s 271(1)(b) r.w.s. 274 of LT. Act, !l.961 has been initiated vide penalty order dated 14.2.2013.

11. Since the details submitted by the assessee were not complete, notice u/s 142(1) dated 21.01.2013 along with questionnaire was issued and duly served on the assessee calling for various details. The date for compliance of this notice was fixed on 28.01.2013. But no one attended on the desired date.

12. It is very evident from the facts as mentioned in the aforesaid ·ft paragraphs that there is continuous non-compliance of various notices on· the part of the assessee and hence the assessment is being completed on the basis of the materials, documents and information as available on record with this office ex- parte u/s. 144 of the I.T. Act, 1961 after providing the sufficient opportunity of being heard and by following all principles of natural justice".

6.1 It can be seen from the above observations of AO that it does not refer even to the noticed issued under section 142(1) dated 5/2/2013, which required the assessee to attend the assessment proceedings and to submit the evidence 6 ITA No.89/MUM/2014 TO 94/MUM/2014 /Assessment Year 2004-05 TO 2009-10

on 12/2/2013. Thus, the failure of the assessee to attend the proceedings on 12/2/2013 has not been even made ground for framing ex-parte assessment under section 144 of the Act. In respect of assessment year 2010-11 also no reference has been made to the impugned notice dated 5/2/2013 which required the assessee to attend the proceedings on 12/2/2013. For the sake of brevity the relevant portion of the assessment order for A.Y. 2010-11 is not reproduced.

6.2 Thus, it can be seen that the impugned failure of the assessee dose not result into best judgment assessment and the said notice has not been even referred in the assessment orders passed by AO in respect of all the assessment years.

6.3 In the light of above mentioned facts, we have to consider that whether levy of impugned penalty is justified or not. Admittedly, penalty has been imposed only on the basis of some observations of AO in the notice issued under section 142(1) on the basis of which it is claimed that assessee was put to the notice that in case of failure of the assessee, penalty under section 271(1)(b) would be levied. Whether such observations of AO in the notice issued under section 142(1) would be sufficient compliance with the provisions of section 274(1), which describe the procedure for imposing the penalty under Chapter XXI. It is described in section 274(1) that "no order imposing penalty under this chapter shall be made unless the assessee has been heard, or has been given reasonable opportunity of being heard". The notice issued under section 142(1) required the assessee to submit evidence to support his case but that does not mean that assessee has been put to notice for levy of penalty u/s.271(1)(b). For levy of penalty a separate notice is required to be given describing failure of the assessee for a particular date to comply with the notice.

Notice under section 142(1) was for 12/2/2013 and upon non-compliance of that notice, the AO was required to issue further notice to the assessee, if he wanted to levy penalty under section 271(1)(b) to fulfill the compliance of section 274(1). The requirement of section 274 is that order imposing penalty cannot be passed unless the assessee has been heard or has been given a reasonable opportunity of being heard. For imposition of penalty no opportunity has been given to the assessee. The assessee must be put to notice to show cause as to why he/she was unable to fulfill the requirements of the notice. Such opportunity is missing in the present case. Therefore, even not going into the question that whether there is a reference in the assessment order of the failure of the assessee to attend the proceedings on 12/2/2013, it is a clear case where it can be held that levy of impugned penalty is contrary to the statutory provisions of section 274(1). Section 274(1) has been interpreted by the Courts that it provides principles of natural justice that even where a provision for penalty is not attended with a specific provision for giving a hearing, the assessee should be given such opportunity to show, if he can, that default or delay in complying with the substantive provisions of law was not without reasonable cause and reference in this regard can be made to the following decisions:

CAg IIT v. Smt. P.Parukutti Amma, 105 ITR 79 (Ker); Tarulata Shyam vs. AGIT, 99 ITR 532 (Gauhati); CIT vs. Narang & Co., 98 ITR 462 (Del).

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6.4 Hon'ble Madras High Court in the case of CIT vs. D.Ratnam (1995) Tax LR 504, 506 has held that under section 274(1) it is mandatory for the authorities concerned to serve a show cause notice on the assessee requiring him to offer his explanation, consider the explanation, if any, submitted by the assessee and thereafter hold him guilty of concealment etc.

6.5 In the present case assessee has never been put to the notice to explain as to why penalty should not be imposed under section 271(1)(b) as there was only an indication in the notice issued under section 142(1) that the failure of the assessee to attend the proceedings on 12/2/2013 would entail the assessee for levy of penalty under section 271(1)(b) of the Act. But that cannot be said to be fulfillment of the requirement of section 274(1) as the same require that assessee should be given reasonable opportunity of being heard and fulfillment of such requirement is absent in the present case.

6.5 In view of above discussion, we hold that Ld. CIT(A) has committed an error in upholding the impugned penalty in respect of all these years. We delete the impugned penalty in all the years and appeals filed by the assessee are allowed.

7. In the result, all the appeals are allowed.

4. In the light of above discussions, since it was admitted by both the parties that the decision in the case of Mr. Lakhamshi J. Gala is equally applicable to facts of the present appeals, we delete the impugned penalty in all these years and appeals filed by the assessee are allowed.

5. In the result, the appeals filed by the assessee are allowed.

Order pronounced in the open court on 09/06/2015 आदे श क" घोषणा खुले यायालय म* +दनांकः 09/06/2015 को क" गई ।

Sd/- Sd/- (डी. क णाकर रावु / D.KARUNAKARA RAO) (आय.पी. बंसल / I.P. BANSAL) लेखा सद य / ACCOUNTANT MEMBER या यक सद य / JUDICIAL MEMBER मंब ु ई Mumbai; +दनांक Dated 09/06/2015 8 ITA No.89/MUM/2014 TO 94/MUM/2014 /Assessment Year 2004-05 TO 2009-10

आदे श क त ल प अ!े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. आयकर आयु/त(अपील) / The CIT(A)- 4. आयकर आयु/त / CIT

5. 0वभागीय त न2ध, आयकर अपील$य अ2धकरण, मुंबई / DR, ITAT, Mumbai

6. गाड फाईल / Guard file.

आदे शानुसार/ BY ORDER, स या0पत त //True Copy//

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai व. न.स./Vm, Sr. PS