AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 417
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctional High Court & Hon'ble Supreme Court (which we will discuss infra while adjudicating the issue) & pleaded that the penalty be cancelled for defect of show-cause notice. 3. However, learned DR submitted written submission which is as under: "2. Briefly stated, facts of the case are that the assessee is a company having its registered office at Japan. The assessee was appointed by the Government of West Bengal under an agreement executed by the company with the Transport Department, Govt. of West Bengal for the purpose of construction of the flyovers in Kolkata with the funds provided by the Overseas Economic Corporation Fund of Japan. The assessee received fees from the Government of West Bengal, through its agent, Hooghly River Bridge Commissioners. In the account, the assessee disclosed its income, and debited other regular business expenses, but in assessment, the income of the Company was treated as Royalty income and thereby Section 44D was invoked. Section 44D was a presumptive section for assessment of entities having income in the nature of Royalties, Fees for Technical Services etc at a lower rate of taxation. 3. The Assessing Officer also initiated penalty proce....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... quantum assessment before the Hon'ble ITAT. In fact the appellant has not responded to notice u/s 250 in the last two years even while they were served successfully on the representative assessee. Therefore, in my considered view, the assessment proceedings have reached finality, and there is no merit in the contention of the appellant that the Ld.AO will again have to reconsider what he had done in the assessment proceedings for the A.Y.2001-02 which have attained finality. Hon'ble Courts have held that once the assessment order becomes final, it was binding on both parties, and neither party could seek to reopen matters in a penalty proceedings * Bharat Rice Mill vs CIT(All) 278 ITR 599 * CIT vs Ram Nivas Agarwal (All) 126 ITR 432 4. Therefore. after examining the factual matrix., I am of the considered view that the Ld.AO in the reassessment proceedings, detected the incorrect claims as made by appellant and that it was ineligible claim any deductions of any expenditure as the profits were to be determined u/s 44AD of the Income Tax Act. To that extent, there was a clear element of inaccurate claims by the assessee, which were detected by the Ld.AO in the set asid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) may kindly be sustained and the appeal be dismissed." 4. Heard both the parties and perused the records, especially the show-cause notice dt. 06.03.2016 issued by AO before levying Penalty u/s 271 (1)(c) of the Act. In order to buttress his contentions that the show-cause notice dt.06.03.2016 issued prior to levy of penalty u/s 271(1)(c) of the Act was defective, the ld. Counsel for the assessee drew our attention to the decision of the Hon'ble Karnataka High Court in the case of CIT vs. SSA's Emerald Meadows in ITA No.380 of 2015 dated 23.11.2015 wherein the Hon'ble Karnataka High Court following its own decision in the case of CIT vs Manjunatha Cotton and Ginning factory (2013) 359 ITR 565 took a view that imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. The ld. Counsel further brought to our notice that as against the decision of the Hon'ble Karnataka High Court the revenue preferred an appeal in SLP in CC No.11485 of 2016 and the Hon'b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iance was placed on two decisions of the Hon'ble Bombay High Court viz., (i) CIT Vs. Kaushalya 216 ITR 660(Bom) and (ii) M/S.Maharaj Garage & Co. Vs. CIT dated 22.8.2017. This decision was referred to in the written note given by the learned DR. This is an unreported decision and a copy of the same was not furnished. However a gist of the ratio laid down in the decision has been given in the written note filed before us. 9. In the case of CIT Vs. Kaushalya (supra), the Hon'ble Bombay High Court held that section 274 or any other provision in the Act or the Rules, does not either mandate the giving of notice or its issuance in a particular form. Penalty proceedings are quasi-criminal in nature. Section 274 contains the principle of natural justice of the assessee being heard before levying penalty. Rules of natural justice cannot be imprisoned in any straight-jacket formula. For sustaining a complaint of failure of the Principles 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. The issuance of notice is an administrative device for informing the assessee about the prop....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Assessing Officer had made additions under Section 69 of the Act being undisclosed investment. In the appeal, the said finding was set-aside. But addition was sustained on a new ground, that is under valuation of closing stock. Since the Assessing Authority had initiated penalty proceedings based on the additions made under Section 69 of the Act, which was struck down by the Appellate Authority, the initiated penal proceedings, no longer exists. If the Appellate Authority had initiated penal proceedings on the basis of the addition sustained under a new ground it has a legal sanctum. This was not so in this case and therefore, on both the grounds the impugned order passed by the Appellate Authority as well as the Assessing Authority was set-aside by its order dated 9th April, 2009. Aggrieved by the said order, the revenue filed appeal before High Court. The Hon'ble High Court framed the following question of law in the said appeal viz., 1. Whether the notice issued under Section 271(1)(c) in the printed form without specifically mentioning whether the proceedings are initiated on the ground of concealment of income or on account of furnishing of inaccurate particulars is valid a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the line of reasoning of the Hon'ble Bombay High Court and the Hon'ble Patna High Court is that issuance of notice is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done. Mere mistake in the language used or mere non-striking of the inaccurate portion cannot by itself invalidate the notice. The Tribunal Benches at Mumbai and Patna being subordinate to the Hon'ble Bombay High Court and Patna High Court are bound to follow the aforesaid view. The Tribunal Benchs at Bangalore have to follow the decision of the Hon'ble Karnataka High Court. As far as benches of Tribunal in other jurisdictions are concerned, there are two views on the issue, one in favour of the Assessee rendered by the Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning (supra) and other of the Hon'ble Bombay High Court in the case of Smt.Kaushalya. It is settled legal position that where two views are available on an issue, the view favourable to the Assessee has to be followed. We therefore prefer to follow the view expressed by the Hon'ble Karnataka High Court in the case of Manjunatha Cotton ....