Ventura Textiles Ltd. v. Commissioner of Income-tax-Mumbai City-11
[Citation -2020-LL-0612-24]

Citation 2020-LL-0612-24
Appellant Name Ventura Textiles Ltd.
Respondent Name Commissioner of Income-tax-Mumbai City-11
Court HIGH COURT OF BOMBAY
Relevant Act Income-tax
Date of Order 12/06/2020
Assessment Year 2003-04
Judgment View Judgment
Keyword Tags furnishing of inaccurate particulars of income • disallowance of bad debt • non-application of mind • imposition of penalty • concealment of income • claim of deduction • bar of limitation • order of penalty • levy of penalty • quantum of tax • satisfaction • tax payable • wrong claim
Bot Summary: On a query by the Court as to whether in a case where the Assessing Officer directs initiation of penalty proceedings in the assessment order for furnishing inaccurate particulars of income but in the show cause notice it is not indicated whether penalty is sought to be imposed for furnishing inaccurate particulars of income by not striking off the inapplicable portion in the printed notice, would it 6/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: ITXA95817. Mere disallowance of a claim made bonafidely would not amount to concealment of particulars of income or furnishing inaccurate particulars of such income to warrant imposition of penalty under Section 271(1)(c) of the Act. At the time of hearing, learned counsel for the appellant had argued that in the show-cause notice the inapplicable portion was not struck off; thus it was not indicated in the notice whether the penalty was sought to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of income, which has vitiated the impugned order of penalty. The question relating to non-striking off of the inapplicable portion in the show-cause notice which is in printed format, thereby not indicating therein as under which limb of Section 271(1)(c) of the Act penalty was proposed to be imposed i.e. whether for concealing the particulars of income or for furnishing inaccurate particulars of such income would go to the root of the lis. As already discussed above, for imposition of penalty under Section 271(1)(c) of the Act, either concealment of particulars of income or furnishing inaccurate particulars of such income are the sine qua non. We have already noticed that in the statutory show cause notice, Assessing Officer did not indicate as to whether penalty was sought to be imposed for concealment of income or for furnishing inaccurate particulars of income though in the assessment order it was mentioned that penalty proceedings were initiated for furnishing inaccurate particulars of income. On the ground that while the charge against the assessee was of furnishing inaccurate particulars of income whereas the penalty was imposed additionally for concealment of income, the order of penalty as upheld by the lower appellate authorities could be justifiably interfered with, still we would like to examine whether there was furnishing of inaccurate particulars of income by the assessee in the first place because that was the core charge against the assessee.


ITXA958_17.odt IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.958 OF 2017 Ventura Textiles Ltd. ... Appellant Vs. Commissioner of Income Tax-Mumbai City-11 ... Respondent Ms Aarti Sathe for Appellant. Mr. Akhileshwar Sharma for Respondent. CORAM : UJJAL BHUYAN & MILIND N. JADHAV, JJ. Reserved on : MARCH 11, 2020 Pronounced on : JUNE 12, 2020 P.C.: Heard Ms Aarti Sathe, learned counsel for appellant / assessee and Mr. Akhileshwar Sharma, learned standing counsel, Revenue for respondent. 2. This appeal has been preferred by assesee under Section 260-A of Income Tax Act, 1961 (briefly 'the Act' hereinafter) against order dated 11.01.2017 passed by Income Tax Appellate Tribunal, 'F' Bench, Mumbai ('Tribunal' for short) in I.T.A.No.5535/Mumbai/2014 for assessment year 2003-04 filed by assessee. 3. appeal has been preferred by assessee projecting following questions as substantial questions of law:- A. Whether on facts and in circumstances of case and in law Tribunal erred in upholding levy of penalty u/s.271(1)(c) of Act of Rs.22,08,860/- (Rupees Twenty-Two Lakhs Eight Thousand Eight Hundred and Sixty only) on account of disallowance of Rs.62,47,460/- (Rupees Sixty Two Lakhs Forty Seven Thousand Four Hundred and Sixty only) which was allowable as deduction under provisions of Section 37 of theAct? B. Whether on facts and in circumstances of case and in law Tribunal erred in not applying ratio laid down by Apex 1/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: ITXA958_17.odt Court in case of CIT Vs. Reliance Petroproducts Private Limited reported in 322 ITR 158(SC), which was squarely applicable to facts of present case? C. Whether on facts and in circumstances of case and in law Tribunal grossly erred in upholding levy of penalty under Section 271(1)(c) of Act without appreciating / considering that: (i) appellant had not been found to have concealed particulars or furnished inaccurate particulars of its claims; (ii) aforesaid claim could be allowed under Section 37 of Act as incurred wholly and exclusively for purposes of business; (iii) no income has been concealed / avoided as inter alia settlement with JCT took place in assessment year 2003- 2004, when claim was made by appellant under provisions of Section 37 of Act. D. Whether on facts and in circumstances of case Tribunal ought to have held that order passed under Section 271(1) (c) is bad in view of fact that both at time of initiation as well as at time of imposition of penalty Assessing Officer was not clear as to which limb of Section 271(1)(c) was attracted? 4. From above it is evident that core issue in this appeal is sustaining by lower appellate authorities imposition of penalty of Rs.22,08,860.00 under Section 271(1)(c) of Act by Assessing Officer on account of disallowance of Rs.62,47,460.00 claimed as deduction under Section 36(i)(vii) of Act on account of bad debt and subsequently claimed as deduction under Section 37 of Act as expenditure expended wholly and exclusively for purpose of business. 5. For appreciation of questions proposed, it would be apposite to deal with relevant facts. 6. Respondent is assessee under Act (hereinafter referred to as 'the assessee' also), having status of resident company. Assessment year under consideration is 2003-04. Assessee filed its return of income declaring total loss at 2/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: ITXA958_17.odt Rs.4,66,68,740.00. case was selected for scrutiny assessment. During assessment proceedings it was found amongst others that assessee had debited Rs.62,47,460.00 under head 'selling and distribution expenses' and claimed it as bad debt in books of account thus claiming it as deduction under Section 36(1)(vii) of Act. Subsequently it was found that aforesaid amount was paid to M/s. JCT Ltd. as compensation for supply of inferior quality of goods. Thus Assessing Officer held that amount of Rs.62,47,460.00 claimed as bad debt was not actually debt and therefore it was not allowable as deduction under Section 36(1)(vii) of Act. Assessing Officer further held that said claim was also not admissible even under Section 37(1) of Act, with observation that payment made to M/s. JCT Limited was not wholly and exclusively for business purposes but for extraneous considerations. In view thereof, assessee's claim was rejected and Rs.62,47,460.00 was added back to total income of assessee. In assessment order dated 28.02.2006 passed under Section 143(3) of Act total loss figure furnished by assessee was lessened by aforesaid amount and by two other amounts, rounding it off to Rs.3,53,48,680.00. Taking view that assessee had furnished inaccurate particulars of income, Assessing Officer ordered that penalty proceedings under Section 271(1)(c) of Act be initiated separately. 7. Following same Assessing Officer issued notice under Section 274 read with Section 271 of Act on same day i.e., on 28.02.2006 to assessee to show cause as to why order imposing penalty should not be made under Section 271 of Act. It may however be mentioned that in pertinent portion of notice Assessing Officer did not strike off inapplicable portion. pertinent portion reads as under:- Whereas in course of proceeding before me for assessment year 2003-04 it appears to me that you:- * * * * * * * * * * * * * * * * * * 3/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: ITXA958_17.odt have concealed particulars of your income or ..... furnished inaccurate particulars of such income. * * * * * * 8. It appears that assessee had challenged disallowance of bad debt along with other disallowances in assessment order by filing appeal before Commissioner of Income Tax (Appeals) who by order dated 14.11.2012 confirmed disallowance of bad debt while deleting other disallowances. 9. In penalty proceedings, Assessing Officer took view that assessee's claim was not actually bad debt but represented payment made to M/s. JCT Limited which was also not incurred wholly and exclusively for purposes of business. Had case not been selected for scrutiny, income to said extent would have escaped assessment. Thus, by order dated 14.02.2014 Assessing Officer held that by making improper and unsubstantiated claim of bad debt of Rs.62,47,460.00, assessee had wilfully reduced its incidence of taxation, thereby concealing its income as well as furnishing inacurrate particulars of income. Therefore, invoking Section 271(1)(c) of Act, Assessing Officer imposed minimum penalty being 100% of tax which amount was quantified at Rs.24,99,200.00 which included penalty on another disallowance. 10. Aggrieved by such imposition of penalty, assessee preferred appeal before Commissioner of Income Tax (Appeals)-18, Mumbai, briefly First Appellate Authority or CIT (A) hereinafter. By appellate order dated 07.08.2014, CIT (A) deleted penalty on other disallowance by holding that there was neither any concealment nor submission of inaccurate particulars by assessee. Regarding penalty levied on Rs.62,47,460.00 claimed as bad debt in assessment proceedings, CIT (A) held that assessee had made wrong claim by submitting inaccurate particulars of income by claiming bad debt which was not actually debt and also not expenditure allowable under Section 37(1) of Act. Thus it was held that assessee had wilfully submitted inaccurate 4/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: ITXA958_17.odt particulars of income which had resulted into concealment. Therefore, penalty levied by Assessing Officer on amount of Rs.62,47,460.00 was upheld. 11. Assessee carried matter in further appeal before Tribunal assailing decision of CIT (A) in upholding imposition of penalty in respect of amount of Rs.62,47,460.00. By order dated 11.01.2017, Tribunal upheld order of CIT (A) and rejected appeal of assessee. According to Tribunal, it was rightly held by CIT (A) that assessee had made wrong claim by submitting inaccurate particulars of income by claiming bad debt which was not actually debt and also not expenditure allowable under Section 37(1) of Act. Therefore, finding recorded by CIT (A) that assessee had wilfully submitted inaccurate particulars of income which had resulted into concealment was affirmed. 12. Hence this appeal by assessee. 13. Ms Sathe, learned counsel for appellant submits at outset that notice issued to petitioner under Section 274 read with Section 271 of Act proposing to impose penalty was in printed format but inapplicable portion therein was not struck off. Consequently, whether penalty was sought to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of such income was not indicated in notice. This is fundamental error which goes to root of matter and has vitiated impugned order of penalty. However she admits that this point was neither pleaded nor argued before any of lower authorities including Tribunal. This point has been raised for first time in appeal before High Court. But she contends that this being pure question of law touching upon jurisdiction, it can be raised even for first time in High Court in proceeding under Section 260-A of Act. In this connection, she has placed reliance on following decisions:- 1. CIT Vs. Jhabua Power Limited, (2013) 37 Taxmann.com 162 (SC); 5/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: ITXA958_17.odt 2. Ashish Estates & Properties (P) Ltd. Vs. CIT, (2018) 96 Taxmann.com 305 (Bombay) 13.1. Elaborating further, Ms Sathe submits that Section 271(1)(c) has two limbs i.e. concealing particulars of income or furnishing inaccurate particulars of income. Concealment of particulars of income and furnishing inaccurate particulars of such income are two different things having separate connotation. Therefore, in show cause notice issued under Section 274 read with Section 271(1)(c) of Act it must be specifically indicated on what ground penalty is sought to be imposed, whether for concealment or for furnishing inaccurate particulars. Such notice being in printed format, inapplicable portion or limb of Section 271(1)(c) of Act has to be struck off. Otherwise notice would be invalid rendering consequential orders wholly untenable being bad in law. This is position in present case, she submits. In this connection she has placed reliance on following decisions:- 1. CIT Vs. SSA's Emerald Meadows, (2016) 73 Taxmann.com 248 (SC); 2. CIT Vs. SSA's Emerald Meadows, (2016) 73 Taxmann.com 241 (Karnataka); 3. CIT Vs. Samson Pernchery, (2017) 98 CCH 39 (Bombay); 4. PCIT Vs. New Era Sova Mine, (2019) SCC OnLine Bom.1032; 5. PCIT Vs. Goa Coastal Resorts & Recreation Pvt.Ltd., (2019) 106 CCH 0183 (Bombay); 6. PCIT Vs. Shri Hafeez S. Contractor, ITA Nos.796 and 872 of 2016 decided on 11.12.2018. 13.2. On query by Court as to whether in case where Assessing Officer directs initiation of penalty proceedings in assessment order for furnishing inaccurate particulars of income but in show cause notice it is not indicated whether penalty is sought to be imposed for furnishing inaccurate particulars of income by not striking off inapplicable portion in printed notice, would it 6/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: ITXA958_17.odt still vitiate penalty proceeding and consequential order of penalty, Ms Sathe, learned counsel for appellant answers in affirmative. She contends that penalty proceeding is initiated by show cause notice. Therefore in show cause notice it must be clearly mentioned as to why penalty is sought to be imposed; charge against assessee must be already indicated. Failure to do so would reflect non-application of mind, thus vitiating penalty proceedings and consequential order of penalty. 13.3. In addition to above, learned counsel for appellant submits that assessee had made bona-fide claim of deduction and had furnished all necessary particulars. In assessment proceedings, Assessing Officer may not have agreed to such claim and may have disallowed same. Mere disallowance of claim made bonafidely would not amount to concealment of particulars of income or furnishing inaccurate particulars of such income to warrant imposition of penalty under Section 271(1)(c) of Act. To support such contention, she has placed reliance on CIT Vs. Reliance Petroproducts Pvt. Ltd., 322 ITR 158 (SC) and on few other cases. 13.4. Summing up, learned counsel for appellant submits that questions proposed are substantial questions of law which arise from impugned order of Tribunal. Those may be answered in favour of assessee and against Revenue. 14. Per contra, Mr. Sharma, learned standing counsel, Revenue supports impugned order passed by Tribunal. He submits that assessee had made improper and unsubstantiated claim of bad debt, thereby reducing total income and consequential quantum of tax which came to light only during scrutiny assessment and rightly disallowed by Assessing Officer. Had case not been selected for scrutiny, such inadmissible claim would have escaped assessment. CIT (A) rightly held that assessee had wilfully submitted inaccurate particulars 7/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: ITXA958_17.odt of income which had resulted into concealment, which was affirmed by Tribunal. Therefore, Assessing Officer was justified in imposing penalty which has been confirmed by both lower appellate authorities by applying correct principles. In such circumstances, learned standing counsel submits that there is no merit in appeal, which should accordingly be dismissed. 15. Submissions made by learned counsel for parties have been duly considered. Also perused materials on record including judgments cited at Bar. 16. Since imposition of penalty is under Section 271(1)(c) of Act, same may be adverted to at outset. As per this provision, if Assessing Officer or Commissioner (Appeals) or Principal Commissioner or Commissioner in course of any proceedings under Act is satisfied that any person had concealed particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty, in addition to tax payable by him, sum which shall not be less than but which shall not exceed three times amount of tax sought to be evaded by reason of concealment of particulars of his income or furnishing of inaccurate particulars of such income. 17. two key expressions in Section 271(1)(c) of Act are concealment of particulars of his income and furnishing inaccurate particulars of such income . These two expressions comprise of two limbs for imposition of penalty under Section 271(1)(c) of Act. Gujarat High Court in case of Manu Engineering Vs. CIT, 122 ITR 306 and Delhi High Court in Virgo Marketing P. Ltd. Vs. CIT, 171 Taxmann 156 held that levy of penalty has to be clear as to limb for which penalty is levied. If Assessing Officer proposes to invoke first limb, then notice has to be appropriately marked. Similarly, if Assessing Officer wants to invoke second limb then notice has also to 8/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: ITXA958_17.odt be appropriately marked. If there is no striking off of inapplicable portion in notice which is in printed format, it would lead to inference as to non- application of mind. In such case, penalty would not be sustainable. 18. Supreme Court in Ashok Pai Vs. CIT, 292 ITR 11 observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of Act carry different connotations. 19. Having discussed above, let us address submissions advanced by learned counsel for parties. 20. In so far first contention of learned counsel for appellant is concerned i.e., raising question of law for first time before High Court though not raised before lower authorities, our attention is drawn to decision of Supreme Court in Jhabua Power Limited (supra) relied upon by learned counsel for appellant. In that case two questions were raised by Revenue for first time before Supreme Court. two questions related to bar of limitation for imposing penalty under Section 275(1) of Act. Supreme Court took view that two questions were required to be answered first by Tribunal. Accordingly, Supreme Court set aside orders passed by High Court and Tribunal and remanded matter back to Tribunal to decide two questions in accordance with law. 20.1. In Ashish Estates & Properties (P) Ltd. (supra), this Court was confronted with question as to whether Tribunal was justified in not giving any reasons and in not deciding issue relating to disallowance under Section 14A of Act qua strategic investments made in firms and companies for executing various projects. However, this Court noticed that issue of strategic investments was not urged by assessee before Tribunal more particularly that disallowance under Section 14A of Act could not be in excess of total 9/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: ITXA958_17.odt exempt income. This Court referred to series of decisions of Supreme Court as well as of this Court wherein it has been held that question not raised before Tribunal and consequently not decided by Tribunal would not be question arising out of order of Tribunal. appeal under Section 260-A of Act can only be in respect of issues which were raised before Tribunal. Reference was made to decisions in CIT Vs. Tata Chemicals (P) Ltd., 256 ITR 395 and in CIT Vs. Smt. Lata Shantilal Shah, 323 ITR 297 where Court had taken view that question of law not raised before Tribunal would not be allowed to be urged before High Court in appeal under Section 260-A of Act. After going through entire spectrum of case laws on this point, this Court ultimately observed that notwithstanding view taken in Tata Chemicals (P) Ltd. (supra) and Smt. Lata Shantilal Shah (supra), it would not preclude High Court from entertaining appeal on issue of jurisdiction even if same was not raised before Tribunal. However, in that case, proposed question was found to be neither one of jurisdiction nor raising any substantial issue. 20.2. Therefore, from above it can be culled out that if issue is not urged before Tribunal, same cannot be raised before High Court in appeal under Section 260-A of Act. However, in Jhabua Power Limited (supra), Supreme Court had remanded questions raised before it for first time back to Tribunal for deciding questions in accordance with law. Again, in Ashish Estates & Properties (P) Ltd. (supra), this Court has taken view that appeal under Section 260-A of Act can be entertained by High Court on issue of jurisdiction even if same was not raised before Tribunal. 21. Let us now advert to fourth question i.e. Question number D framed / proposed by appellant. Through this question, appellant is contending that Tribunal ought to have held that order of penalty passed under Section 271(1) (c) of Act was bad in law in view of fact that at time of initiation of penalty proceedings as well as at time of imposition of penalty, Assessing 10/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: ITXA958_17.odt Officer was not clear as to which limb of Section 271 (1)(c) of Act was attracted. At time of hearing, learned counsel for appellant had argued that in show-cause notice inapplicable portion was not struck off; thus it was not indicated in notice whether penalty was sought to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of income, which has vitiated impugned order of penalty. However, she fairly submits that this point was not urged before lower authorities including Tribunal. We have already noted and analyzed two limbs of Section 271(1)(c) of Act and also fact that two limbs i.e. concealment of particulars of income and furnishing inaccurate particulars of income carry different connotations. We have also noticed that Assessing Officer must indicate in notice for which of two limbs he proposes to impose penalty and for this notice has to be appropriately marked. If in printed format of notice inapplicable portion is not struck off thus not indicating for which limb penalty is proposed to be imposed, it would lead to inference as to non-application of mind, thus vitiating imposition of penalty. 21.1. Therefore, question relating to non-striking off of inapplicable portion in show-cause notice which is in printed format, thereby not indicating therein as under which limb of Section 271(1)(c) of Act penalty was proposed to be imposed i.e. whether for concealing particulars of income or for furnishing inaccurate particulars of such income would go to root of lis. Therefore, it would be jurisdictional issue. Being jurisdictional issue, it can be raised before High Court for first time and adjudicated upon even if it was not raised before Tribunal. 21.2. In CIT Vs. Manjunath Cotton and Ginning Factory, 359 ITR 565, Karnataka High Court held that Assessing Officer while issuing notice has to come to conclusion as to whether it is case of concealment or furnishing of inaccurate particulars. Levy of penalty has to be clear as to limb for which it 11/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: ITXA958_17.odt was levied. standard proforma without striking off relevant causes will lead to inference as to non-application of mind. 21.3. In SSA's Emerald Meadows (supra), Karnataka High Court was again confronted with similar question. In that case, Tribunal had allowed appeal filed by assessee by holding that notice issued by Assessing Officer under Section 274 read with 271(1)(c) of Act was bad in law as it did not specify under which limb of Section 271(1)(c) of Act penalty proceeding was initiated i.e., whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. While allowing appeal, Tribunal had relied upon Manjunath Cotton & Ginning Factory (supra). In circumstances, Karnataka High Court dismissed appeal of Revenue. 21.4. Revenue preferred Special Leave Petition (SLP) before Supreme Court against decision of Karnataka High Court in SSA's Emerald Meadows (supra). In (2016) 242 Taxmann 180, Supreme Court dismissed SLP. 21.5. Though decision of Karnataka High Court in SSA's Emerald Meadows (supra) which relied upon Manjunath Cotton & Ginning Factory (supra) was not interfered with by Supreme Court by dismissing SLP, fact remains that dismissal of SLP would not lead to merger of High Court's order with order of Supreme Court. 21.6. This Court in Samson Pernchery (supra) was examining question as to justification of Tribunal in deleting penalty levied under Section 271(1)(c) of Act. In that case, Tribunal had deleted penalty imposed by Assessing Officer because initiation of penalty proceedings was for furnishing inaccurate particulars of income whereas order imposing penalty was for concealment of income. Further Tribunal noted that notice issued under Section 274 of Act was in standard proforma without having striked out irrelevant clauses therein. 12/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: ITXA958_17.odt Revenue contended that there was no difference between furnishing of inaccurate particulars of income and concealment of income. This contention of Revenue was rejected by this Court in view of Supreme Court decision in Ashok Pai (supra). Referring to decision of Karnataka High Court in Manjunath Cotton & Ginning Factory (supra), this Court held that satisfaction of Assessing Officer with regard to only one of two breaches mentioned in Section 271(1)(c) of Act for initiation of penalty proceedings will not warrant penalty being imposed for other breach. This is because assessee would respond only to ground on which notice was issued. In other words, penalty cannot be imposed on ground of which assessee had no notice. It was further observed by this Court that nothing could be shown which would warrant taking view different from view taken by Karnataka High Court in Manjunath Cotton & Ginning Factory (supra). 21.7. In Goa Coastal Resorts & Recreation Pvt. Ltd. (supra) both lower appellate authorities had categorically held that there was no record of satisfaction of Assessing Officer that there was any concealment of income or that any inaccurate particulars were furnished by assessee. In such circumstances, this Court held that two lower appellate authorities had correctly ordered dropping of penalty proceedings against assessee. It was in that context that this Court noted that in notice issued in printed format inapplicable portion was not struck off. Therefore in that case, this Court found that in addition to notice being defective, there was no finding or satisfaction recorded in relation to concealment or furnishing of inaccurate particulars. 21.8. Similar is view taken in New Era Sova Mine (supra) as well as in Shri Hafeez S. Contractor (supra). 22. Coming to facts of present case, we have already noticed that in assessment order dated 28.02.2006, Assessing Officer had ordered that since 13/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: ITXA958_17.odt assessee had furnished inaccurate particulars of income, penalty proceedings under Section 271(1)(c) were also initiated separately. Therefore, it was apparent that penalty proceedings were initiated for furnishing inaccurate particulars of income. 23. statutory show-cause notice under Section 274 read with Section 271 of Act proposing to impose penalty was issued on same day when assessment order was passed i.e., on 28.02.2006. said notice was in printed form. Though at bottom of notice it was mentioned 'delete inappropriate words and paragraphs', unfortunately, Assessing Officer omitted to strike off inapplicable portion in notice i.e., whether penalty was sought to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of such income. Such omission certainly reflects mechanical approach and non-application of mind on part of Assessing Officer. 24. However, moot question is whether assessee had notice as to why penalty was sought to be imposed on it? 25. This brings us to basic question as to what is notice or what do we mean by notice. Concise Oxford English Dictionary, Indian Edition, explains notice to mean fact of observing or paying attention to something; advanced notification or warning; displayed sheet or placard giving news or information. It means to become aware of. In other words, to put someone on notice would mean warn someone of something about or likely to occur. Black's Law Dictionary, Eighth Edition, defines expression 'notice' to mean having actual knowledge of fact; has received information about it; has reason to know it; knows about related fact. In CST Vs. Subhash & Company, (2003) 3 SCC 454, Supreme Court deliberated upon concept of notice and observed that term 'notice' has originated from Latin word notifia which means being known or knowing . Thereafter, Supreme Court referred to definition of word 'notice' 14/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: ITXA958_17.odt in various general and judicial dictionaries. Without adverting to large number of definitions, suffice it to say notice would mean information, warning or announcement of something impending; notice in its legal sense may be defined as information concerning fact communicated to party by authorized person or actually derived by him from proper source; term notice in its full legal sense embraces knowledge of circumstances that ought to induce suspicion or belief as well as direct information of that fact. 26. Reverting back to facts of present case, if assessment order and show cause notice, both issued on same date i.e., on 28.02.2006, are read in conjunction, view can reasonably be taken that notwithstanding defective notice, assessee was fully aware of reason as to why Assessing Officer sought to impose penalty. It was quite clear that for breach of second limb of Section 271 (1)(c) of Act i.e., for furnishing inaccurate particulars of income that penalty proceedings were initiated. purpose of notice is to make noticee aware of ground(s) of notice. In present case, it would be too technical and pedantic to take view that because in printed notice inapplicable portion was not struck off, order of penalty should be set aside even though in assessment order it was clearly mentioned that penalty proceedings under Section 271(1)(c) of Act had been initiated separately for furnishing inaccurate particulars of income. Therefore, this contention urged by appellant / assessee does not appeal to us and on this ground we are not inclined to interfere with imposition of penalty. 27. Having held so, let us now examine whether in return of income assessee had furnished inaccurate particulars of income. As already discussed above, for imposition of penalty under Section 271(1)(c) of Act, either concealment of particulars of income or furnishing inaccurate particulars of such income are sine qua non. In instant case, as we have seen, penalty proceedings under Section 271(1)(c) of Act were initiated on ground that 15/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: ITXA958_17.odt assessee had furnished inaccurate particulars of income. 28. In assessment proceeding, assessee filed its return of income on 28.11.2003 declaring total loss at Rs.4,66,68,740.00. Assessee disclosed that it had debited Rs.62,47,460.00 under head 'selling and distribution expenses' and claimed it as bad debt in books of account. As per explanation given by assessee it was exporting fabrics through M/s. JCT Ltd., recognized export house for which assessee had ongoing account with M/s. JCT Ltd. M/s. JCT Ltd. raised quality claims from time to time and was pressing assessee for settlement. As assessee was in need of funds, it could not settle claims. It was only during assessment year under consideration that assessee had requisite funds and paid to M/s. JCT Ltd. Rs.62,47,460.00 as full and final settlement, confirmation of which from M/s. JCT Ltd. was submitted. Assessee clarified during assessment proceedings that said amount which was written off was actually not bad debt but in nature of rebate and discounts given to M/s. JCT Ltd. on account of quality claims made by it from time to time. This explanation of assessee was not accepted by Assessing Officer by holding that subsequent payment made to M/s. JCT Ltd. would not be covered by Section 36(1)(vii) of Act since amount claimed as bad debt was actually not debt. Thereafter Assessing Officer examined as to whether such payment would be covered under Section 37(1) of Act as per which expenditure would be allowable as deduction if it pertains to that particular year and incurred wholly and exclusively for purpose of business. Assessing Officer held that assessee's claim was not admissible even under Section 37(1) of Act as circumstances indicated that payments were not made wholly and exclusively for business purpose. While disallowing claim of assessee, Assessing Officer took view that since assessee had furnished inaccurate particulars of income, penalty proceedings under Section 271(1)(c) of Act was also initiated separately. 16/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: ITXA958_17.odt 29. We have already noticed that in statutory show cause notice, Assessing Officer did not indicate as to whether penalty was sought to be imposed for concealment of income or for furnishing inaccurate particulars of income though in assessment order it was mentioned that penalty proceedings were initiated for furnishing inaccurate particulars of income. 30. Be that as it may, in order of penalty, Assessing Officer held that assessee had concealed its income as well as furnished inaccurate particulars of income. 31. Concealment of particulars of income was not charge against appellant, charge being furnishing inaccurate particulars of income. As discussed above, it is trite that penalty cannot be imposed for alleged breach of one limb of Section 271(1)(c) of Act while penalty proceedings were initiated for breach of other limb of Section 271(1)(c). This has certainly vitiated order of penalty. In appeal, CIT (A) took curious view that submission of inaccurate particulars of income resulted into concealment, thus upholding order of penalty. This obfuscated view of CIT (A) was affirmed by Tribunal. 32. On ground that while charge against assessee was of furnishing inaccurate particulars of income whereas penalty was imposed additionally for concealment of income, order of penalty as upheld by lower appellate authorities could be justifiably interfered with, still we would like to examine whether there was furnishing of inaccurate particulars of income by assessee in first place because that was core charge against assessee. 33. In Reliance Petroproducts Pvt. Ltd. (supra), Supreme Court examined meaning of words 'particulars' and 'inaccurate'. As per Law Lexicon, word 'particulars' means 'detail or details; details of claim or separate items of 17/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: ITXA958_17.odt account'. Therefore, it was held that word 'particulars' used in Section 271(1)(c) of Act would embrace meaning of details of claim made. Referring to Webster's Dictionary where word 'inaccurate' has been defined as 'not accurate, not exact or correct; not according to truth; erroneous; as inaccurate statment, copy or transcript', Supreme Court held that two words i.e., 'inaccurate' and 'particulars' read in conjunction must mean that details supplied in return are not accurate, not exact or correct, not according to truth or erroneous. It was held that mere making of claim which is not sustainable in law by itself would not amount to furnishing inaccurate particulars regarding income of assessee. Therefore, such claim made in return cannot amount to furnishing inaccurate partiulars of income. Elaborating further, Supreme Court held that if such stand of Revenue was accepted then in case of every return where claim made is not accepted by Assessing Officer for any reason, assessee will invite penalty under Section 271(1)(c) of Act which is clearly not intendment of Legislature. 34. This decision was followed by this Court in CIT Vs. M/s. Mansukh Dyeing & Printing Mills, Income Tax Appeal No.1133 of 2008, decided on 24.06.2013. In CIT Vs. DCM Ltd., 359 ITR 101, Delhi High Court applied said decision of Supreme Court and further observed that law does not debar assessee from making claim which he believes is plausible and when he knows that it is going to be examined by Assessing Officer. In such case liberal view is required to be taken as necessarily claim is bound to be carefully scrutinized both on facts and in law. Threat of penalty cannot become gag and / or haunt assessee for making claim which may be erroneous or wrong. Again, in CIT Vs. Shahabad Co-operative Sugar Mills Ltd., 322 ITR 73, Punjab & Haryana High Court held that making of wrong claim is not at par with concealment or giving of inaccurate information which may call for levy of penalty under Section 271(1)(c) of Act. 18/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: ITXA958_17.odt 35. Reverting back to present case it is quite evident that assessee had declared full facts; full factual matrix or facts were before Assessing Officer while passing asessment order. It is another matter that claim based on such facts was found to be inadmissible. This is not same thing as furnishing inaccurate particulars of income as contemplated under Section 271(1) (c) of Act. 36. Thus, on careful examination of entire matter, while we answer question number D against appellant / assessee, question numbers A, B and C are answered in favour of appellant / assessee. Therefore, on overall consideration, appeal would stand allowed and order of penalty as affirmed by two lower appellate authorities would consequently stand interfered with. 37. Accordingly, appeal is allowed. However, there shall be no order as to costs. (MILIND N. JADHAV, J.) (UJJAL BHUYAN, J.) Minal Parab 19/19 ::: Uploaded on - 12/06/2020 ::: Downloaded on - 13/06/2020 11:09:01 ::: Ventura Textiles Ltd. v. Commissioner of Income-tax-Mumbai City-11
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