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YKM Holdings Pvt. Ltd. Signature Tower-A, 14th Floor, South City Gurgaon vs. ITO Ward-18(4) New Delhi
October, 12th 2018
                                         1                       ITA No. 2174/Del/2016



                    IN THE INCOME TAX APPELLATE TRIBUNAL
                         DELHI BENCH: `D' NEW DELHI

                 BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER
                                       AND
                   MS SUCHITRA KAMBLE, JUDICIAL MEMBER

                      I.T.A .No. 2174/DEL/2016 (A.Y 2009-10)

      YKM Holdings Pvt. Ltd.                   Vs   ITO
      Signature Tower-A,                            Ward-18(4)
      14th Floor, South City                        New Delhi
      Gurgaon       AAACY0460B
      (APPELLANT)                                   (RESPONDENT)

                   Appellant by      Sh. A. T. Panda, Adv
                   Respondent by     Smt. Naina Soin Kapil, SR.
                                     DR

                     Date of Hearing            10.10.2018
                     Date of Pronouncement       12.10.2018

                                      ORDER

PER SUCHITRA KAMBLE, JM

      The present appeal has been filed by the assessee against the order
dated 25/02/2016 passed by CIT(A)-9, New Delhi for Assessment Year 2009-
10.

2.    The grounds of appeal are as under:-

      "1.     That on the facts and circumstances of the case and in law, the
      Commissioner of Income tax (Appeals)-9 [briefly "the CIT(A)] has erred in
      upholding levy of penalty of Rs.4,29,361/- under section 271(l)(c) of the
      Income tax Act, 1961.

      2.    That on the facts and circumstances of the case and in law, the CIT(A)
      has erred in not appreciating that during the relevant year, the Appellant
                                        2                      ITA No. 2174/Del/2016


      was NBFC duly recognized by RBI and was engaged in the business of
      money lending and that the ICD to Modi Connect Pvt. Ltd. was in the
      ordinary course of business.

      3.    That on the facts and circumstances of the case and in law, the
      CIT(A) has erred in not appreciating that the bad debts having been taken
      as income of the previous year is not applicable to debt advance in the
      course of money lending business.

      4.          That on the facts and circumstances of the case and in law,
      the CIT(A) erred in not appreciating that neither any income was concealed
      nor particulars of income were incorrectly furnished. It was also not
      appreciated that no satisfaction was recorded by the Assessing Officer."

3.    Assessment in this case was completed u/s 143(3) on 28/11/2011 by
making an addition of Rs.12,63,200/- on account of bad debts as conditions
laid down in section 36(2) and section 36(i)(vii) were not fulfilled in this case.
The Assessing Officer imposed penalty of Rs.4,29,361/- u/s 271(1)(c)             for
concealment of particulars of income and filing inaccurate particulars of
income.






4.    Being aggrieved by the penalty order, the assessee filed appeal before the
CIT (A). The CIT (A) dismissed the appeal of the assessee.

5.    The Ld. AR submitted that notice u/s 274 r.w.s. 271 was issued on
28.11.2011 and the inappropriate words in the said notice have not been
struck off. Therefore it is not understood as to under which limb of provisions
of Section 271(1)(c) of the Act, the Assessing Officer has levied penalty. Sicne
the said show cause notice issued u/s 274 did not specify the charge against
the assessee as to whether it was for concealing the particulars of income or for
furnishing inaccurate particulars of income. Therefore, the penalty order
passed under Section 271(1)(c) of the Act in pursuance to the said notice
deserves to be set aside. The Ld. AR further submitted that the assessee has
                                         3                     ITA No. 2174/Del/2016


rightly written off the dues from one Modi Connect and the same was reflected
in Schedule 13 of Balance Sheet. Thus, the assessee has properly claimed bad
debt in the assessment record.        But the view of the Assessing Officer was
different and the same does not amount to filing of inaccurate particulars or
concealment of income.     The Ld. AR relied upon the decision of the Hon'ble
Apex Court in case of CIT Vs. SSA's Emerald Meadows (2016) 73 Taxman.com
248 as well as various decisions of the Tribunal.

6.    The Ld. DR on the other hand strongly supported the order of the CIT(A).
Referring to the decision of the Hon'ble Madras High Court in case of
Sundaram Finance Ltd. vs. CIT 403 ITR 407 wherein it is held that where
notice did not show nature of default, it was a question of fact. The assessee
had understood the purport and import of notice and hence no prejudice was
caused to the assessee. The Hon'ble High Court in the above decision has
considered the decision of the Hon'ble Karnataka High Court in the case of CIT
vs. Manjunatha Cotton & Ginning Factory reported in 359 ITR 565. Referring
to the decision of the Hon'ble Bombay High Court in the case of CIT vs. Smt.
Kaushalya reported in 216 ITR 660 the Ld. DR submitted that the Hon'ble High
Court in the said decision has held that mere mistake in language used or
mere non-striking off of inaccurate portion cannot by itself invalidate the notice
u/s 274 of the Act. It was accordingly held that the penalty orders passed by
the ITO for assessment years 1968-69 to 1969-70 were perfectly valid and
there was no justification for quashing the same on ground of absence of
jurisdiction.   The Ld. DR also relied on various other decisions to the
proposition that mere non-striking off of inappropriate words does not
invalidate the penalty proceedings.



7.    The Ld. AR in rejoinder submitted that if two views are possible on an
issue, the view which is favourable to the assessee has to be followed. For the
above preposition, he relied on the decision of the Hon'ble Supreme Court in
                                           4                            ITA No. 2174/Del/2016


the case of Vegetable Products Limited reported in 88 ITR 192. Referring to
following decisions, he submitted that Section 292BB would not come to the
rescue of the revenue when the notice was not in substance and in conformity
with or according to the intent of the I.T. Act :-

        i.     Shri Sachin Arora, ITA No.118/Agra/2015 dated 19.12.2017.

        ii.    Dr. Sarita Milind Davare, 184 TTJ 9.

        iii.   Shri   K.   Prakash   Shetty,    ITA   No.265     to   267/2014          dated
05.06.2014.

        The Ld. AR accordingly submitted that the order of the CIT(A) be set-
aside and the penalty levied u/s 271(1)(c) be deleted.

8.      We have heard both the parties and perused the material available on
record. We have also considered the various decisions cited before us. We find
the only issue to be decided in the grounds of appeal is regarding the
sustainable of penalty levied u/s 271(1)(c) when the inappropriate words in the
notice issued u/s 274 r.w.s. 271 of the Act have not been struck off. A perusal
of the notice issued u/s 274 r.w.s. 271 dated 28.11.2011 shows that the
inappropriate words in the said notice have not been struck off and it is a
printed notice. Even the last line of the said notice only speaks of Section 271
and does not even mention of section 271(1)(c) of the I.T. Act.                 We find an
identical issue had come up before the Co-ordinate Bench of the Tribunal in
the    case    of   Sahiwal   Investment    &   Trading    Co.    vs.     ITO    vide    ITA
No.4913/Del/2015 for assessment year 2006-07 order dated 18.07.2018 to
which both of us parties.       We find the Tribunal in the said decision while
allowing the additional ground filed by the assessee has decided the issue in
favour of the assessee by observing as under :-

     "12.      Additional Ground No. (ii) is relating to absence of specific charge
     pointing out in the notice. It is pertinent to note here that the penalty order is
     based on furnishing of inaccurate particulars but the notice is not specifying
                                         5                        ITA No. 2174/Del/2016


   exactly on which limb the penalty u/s 271(1)(c) has been initiated. From the
   notice dated 30.06.2013 produced by the Ld. AR during the hearing, it can be
   seen that the Assessing Officer was not sure under which limb of provisions
   of Section 271 of the Income Tax Act, 1961, the assessee is liable for
   penalty. The issue is squarely covered by the decision of the Hon'ble Supreme
   Court in case of M/s SSA' Emerald Meadows. The extract of the decision of
   the Hon'ble Karnataka High Court in M/s. SSA' Emerald Meadows are as
   under which was confirmed by the Hon'ble Apex Court:

   "3. The Tribunal has allowed the appeal filed by the assessee holding the
   notice issued by the Assessing Officer under Section 274 read with Section
   271(1)(c) of the Income Tax Act, 1961 (for short 'the Act') to be bad in law as it
   did not specify which limb of Section 271(1)(c) of the Act, the penalty
   proceedings had been initiated i.e., whether for concealment of particulars of
   income or furnishing of inaccurate particulars of income. The Tribunal, while
   allowing the appeal of the assessee, has relied on the ITA No.
   4913/Del/2015 decision of the Division Bench of this Court rendered in the
   case of COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND
   GINNING FACTORY (2013) 359 ITR 565.

   4. In our view, since the matter is covered by judgment of the Division Bench
   of this Court, we are of the opinion, no substantial question of law arises in
   this appeal for determination by this Court. The appeal is accordingly
   dismissed."






   Thus, Additional Ground No. (ii) of the assessee's appeal is allowed. Since the
   inception of the notice issued u/s 271(1)(c) has become null and void, there is
   no need to comment on merit of the case. The Penalty u/s 271(1)(c) of the Act
   is quashed."

      Since in the instant case also the inappropriate words in the penalty
notice has not been struck off and the notice does not specify as to under
which limb of the provisions, the penalty u/s 271(1)(c) has been initiated,
therefore, we are of the considered opinion that the penalty levied u/s 271(1)(c)
is not sustainable and has to be deleted. Although the Ld. DR has relied on
various decisions to the proposition that mere non-striking off of the
inappropriate words will not invalidate the penalty proceedings, however, all
these decisions are of non-jurisdictional High Court decisions. The decision of
the Delhi Bench of the Tribunal relied on by the Ld. DR is prior to the decision
                                         6                       ITA No. 2174/Del/2016


of the Hon'ble Karnataka High Court in the case of SSA'S Emerald Meadows
(supra) where the SLP filed by the Revenue has been dismissed. Since there is
no decision of the Jurisdictional High Court on this issue, therefore, we find
merit in the argument of the Ld. AR that if two views are available on a
particular issue, the view which is favourable to the assessee has to be followed
in the light of the decision of the Hon'ble Supreme Court in the case of
Vegetable Products Limited (supra). We, therefore, set-aside the order of the
CIT(A) and direct the Assessing Officer to cancel the penalty so levied.

9.     In the result, the appeal filed by the assessee is allowed.

     Order pronounced in the Open Court on        12th OCTOBER, 2018.

        Sd/-                                                    Sd/-
(R. K. PANDA)                                             (SUCHITRA KAMBLE)
ACCOUNTANT MEMBER                                         JUDICIAL MEMBER

Dated:         12/10/2018
R. Naheed *

Copy forwarded to:

1.                           Appellant
2.                           Respondent
3.                           CIT
4.                           CIT(Appeals)
5.                           DR: ITAT




                                                    ASSISTANT REGISTRAR

                                                        ITAT NEW DELHI
                            7                          ITA No. 2174/Del/2016




Date of dictation                                    10 .10.2018

Date on which the typed draft is placed before the   11 .10.2018
dictating Member

Date on which the typed draft is placed before the
Other Member

Date on which the approved draft comes to the Sr.
PS/PS

Date on which the fair order is placed before the
Dictating Member for pronouncement

Date on which the fair order comes back to the Sr.   12.10.2018
PS/PS

Date on which the final order is uploaded on the     12 .10.2018
website of ITAT

Date on which the file goes to the Bench Clerk       12 .10.2018

Date on which the file goes to the Head Clerk

The date on which the file goes to the Assistant
Registrar for signature on the order

Date of dispatch of the Order

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