Not striking off concealment penalty notice-SC dismisses assessee’s SLP

Not striking off penalty notice SC dismisses assessee’s SLP against High Court order holding that it had caused no prejudice to the assessee

ABCAUS Case Law Citation:
ABCAUS 2597 (2018) (10) SC

Important Case Laws Cited/relied upon:
Commissioner of Income Tax Vs. Jindal Equipments Leasing and Consultancy Services Ltd. (2010) 325 ITR 0087
Commissioner of Income Tax & Another Vs. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 0565
Commissioner of Income Tax and another Vs. M/s.SSA’s Emerald Meadows 2017-TIOL-14-SC-IT
Muninaga Reddy Vs. Assistant Commissioner of Income Tax (2017) 396 ITR 0398 (Karn)
Lakshmi Vilas Bank Ltd., Vs. Commissioner of Income Tax (2006) 284 ITR 93

The appellant assessee had filed the appeal against the order of the Tribunal in holding that the appellant had claimed depreciation by furnishing inaccurate and false particulars and therefore liable to penalty under Section 271 (1)(c) of the Income Tax Act, 1961 (the Act).

During the hearing before the Hon’ble High Court, the appellant filed a memo seeking permission to raise additional substantial question of law with regard to the defect in the notice issued u/s 274 of the Act as it did not specify the default which assessee was required to explain.

The penalty had been imposed by the Assessing Officer (AO) for disallowance of depreciation. Before the Appellate Authority, the appellant had admitted that they had claimed depreciation on an asset which was not in existence and therefore.

The appellant contended that the additional substantial question of law with respect to the defect in the notice which was not raised earlier, being a pure question of law, be allowed.

The appellant placed reliance on the decision of the High Court of Karnataka to support the contention that the notice issued under Section 274 of the Act should specifically set the grounds mentioned in Section 271(1)(c) of the Act i.e., whether it is for concealment of income or furnishing of inaccurate particulars of income and mere sending of printed form where all grounds mentioned in Section 271 are mentioned would not satisfy the requirement of law.

It was submitted that the decision in the case of Manjunatha Cotton Mills had been confirmed by the Hon’ble Supreme Court.

The Hon’ble High Court observed that the Appellate Authority, who confirmed the order passed by the Assessing Authority, held that there was no asset in existence and the assessee themselves accepted the fact and reversed the claim for depreciation and therefore, the assessee had concealed particulars of its income and furnished inaccurate particulars.

It was further noted that the correctness of this order was tested before the Tribunal. The Tribunal by referring to the decision of the Supreme Court, confirmed the order of levying penalty.

The Hon’ble High noted that the authorities below concurrently rejected the explanation offered by the assessee. The Hon’ble High Court expressed agreement with the factual findings rendered by the authorities

With regard to the additional substantial question raised, the Hon’ble High Court pointed out that such a contention was never raised by the assessee at any point of time. The argument of the petitioner was that this being a question of law can be allowed to be raised at this stage. However the decision relied upon by the assessee had no applicability to the facts of the case.

The assessee had contend that the notices issued under Section 274 r/w. Section 271 of the Act were vitiated since it did not specifically state the grounds mentioned in Section 271(1)(c) of the Act. However, the Hon’ble High Court on a perusal of the notices found that the relevant columns had been marked, more particularly, when the case against the assessee was that they have concealed particulars of income and furnished inaccurate particulars of income. Therefore, the contention raised by the assessee was liable to be rejected on facts.

The Hon’ble High Court opined that apart, this issue can never be a question of law in the assessee’s case, as it was purely a question of fact. Apart from that, the assessee had at no earlier point of time raised the plea that on account of a defect in the notice, they were put to prejudice.

The Hon’ble High Court stated that all violations will not result in nullifying the orders passed by statutory authorities. If the case of the assessee is that they have been put to prejudice and principles of natural justice were violated on account of not being able to submit an effective reply, it would be a different matter. This was never the plea of the assessee either before the Assessing Officer or before the first Appellate Authority or before the Tribunal or before the High Court when the Appeals were filed and it was only after 10 years, when the appeals were listed for final hearing, this issue is sought to be raised.

Thus the Hon’ble High Court stated that on facts, it could be safely concluded that even assuming that there was defect in the notice, it had caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued under Section 274 r/w. Section 271 of the Act. Therefore, principles of natural justice cannot be read in abstract and the assessee, being a limited company, having wide network in various financial services, should definitely be precluded from raising such a plea at this belated stage.

Thus, the additional substantial question of law was rejected by the High Court on the ground that on facts the said question did not arise.

The assessee filed a SLP in the Supreme Court against the judgment of the High Court which was dismissed.

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