SHRI BALLABHDAS UDHODHAS MOHTA,NAGPUR vs. ACIT, CIRCLE- 5, NAGPUR

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ITA 25/NAG/2015Status: DisposedITAT Nagpur17 January 2020AY 2009-106 pages
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What did the Tribunal hold?

The Tribunal held that if the Assessing Officer lacks clear satisfaction or shows ambiguity regarding the specific charge for penalty under Section 271(1)(c), the penalty proceedings become void-ab-initio. The assessee is entitled to know the exact charge to prepare their defense.

What were the facts?

The assessee challenged the penalty levied under Section 271(1)(c) of the Income Tax Act. The Assessing Officer's orders and notices showed ambiguity regarding the specific charge (concealment of income or furnishing inaccurate particulars) for levying the penalty.

What were the issues?

Whether the penalty levied under Section 271(1)(c) is void due to ambiguity in the Assessing Officer's satisfaction and the charge for levying the penalty.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

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Income Tax Appellate Tribunal, BENCH, NAGPUR

Before: SHRI D. KARUNAKARA RAO, AM & SHRI PARTHA SARATHI CHAUDHURY, JM

For Appellant: Shri Mahavir Atal
For Respondent: Smt. Agnesh P. Thomas
Hearing: 17.01.2020Pronounced: 17.01.2020

आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM :

1.

This appeal preferred by the assessee emanates from the order of the Ld. CIT(Appeals)-II, Nagpur dated 25.09.2014 for the assessment year 2009- 10 as per the grounds of appeal on record.

2.

The assessee has preferred grounds of appeal on merits in appeal memo as well as admission of additional legal grounds of appeal relying on the decision of the Hon'ble Supreme Court in the case of NTPC Ltd. Vs. CIT, 229 ITR 383 (SC). In these additional grounds, the assessee has challenged the validity of penalty levied u/s.271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) stating that no proper satisfaction was arrived at by the Assessing Officer before levying penalty u/s.271(1)(c) of the Act and that there was apparent ambiguity in the mind of Assessing Officer while levying penalty u/s.271(1)(c) of the Act regarding the charge on which he wants to levy penalty. Thus, penalty levied being void-ab-initio should be deleted.

3. We have perused the additional grounds raised by the assessee before us and following the decision of the Hon’ble Supreme Court in the case of NTPC Ltd. Vs. CIT (supra.), we admit these additional grounds and we proceed to adjudicate these legal grounds first.

4.

In the assessment order dated 27.12.2011, at Para 7, the Assessing Officer states that “In view of the above mentioned facts, separate proceedings u/s.271(1)(c) are initiated for furnishing inaccurate particulars of income/concealment of income.”

5.

In the penalty order dated 19.03.2014, the Assessing Officer states that “ I am satisfied that the assessee has concealed his income by filing inaccurate particulars by failing to prove the expenses claimed to have been incurred, therefore, penalty u/s.271(1)(c) of the I.T. Act is leviable on the assessee.”

That further in the show cause notice dated 27.12.2011, before imposing penalty u/s.271(1)(c) of the Act, the Assessing Officer states “during the course of proceeding u/s.143(3) of the Income Tax Act, 1961 for the assessment year 2009-10, there has been concealment of income on your part as discussed in the assessment order or furnished inaccurate particulars of such income.”

6.

In this sort of exercise by the Assessing Officer, there is no clear satisfaction arrived at regarding the charge under which the Assessing Officer intends to impose penalty on the assessee u/s.271(1)(c) of the Act. There has been plethora of decisions wherein it has been held that if there is ambiguity in the mind of Assessing Officer regarding exact charge on which penalty has to be imposed or if he has not specifically mentioned as to for which limb u/s.271(1)(c) of the Act penalty is levied, in such scenario, the entire proceedings imposing penalty u/s.271(1)(c) of the Act becomes void-ab-initio as per law and penalty levied has to be deleted.

That taking guidance from the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Samson Perinchery reported as 392 ITR 4 (Bom.) wherein the Hon'ble Bombay High Court has considered the decision of Hon'ble Karnataka High Court in the case of CIT Vs. Manjunath Cotton and Ginning Factory reported as 359 ITR 565 ( Kar.), the legal proposition that comes out and which is binding in nature is that the Assessing Officer should be clear as to which of the two limbs under which penalty is imposable, has been contravened or indicate that both have been contravened while initiating penalty proceedings. It cannot be that the initiation would be only on one limb i.e. for furnishing inaccurate particulars of income while imposition of penalty on the other limb i.e. concealment of income.

7.

The sanctity in terms of natural justice with regard to this proposition is that the assessee under the scheme of welfare legislation which is embedded in the Income Tax Act, 1961 should get an opportunity to prepare himself for the defense as regards to the exact charge on which penalty is imposed upon him u/s. 271(1)(c) of the Act. In the instant case, the charge is vague and therefore, levy of penalty is not warranted.

Taking totality of facts and legal scenario into consideration and on examination of documents on record on the very fact that penalty levied is ambiguous and the charge is not specific, we set aside the order of the Ld. CIT(Appeals) and direct the Assessing Officer to delete the penalty from the hands of the assessee.

8.

Since the assessee gets relief on the legal ground, all other grounds on merits becomes academic in nature.

9.

In the result, appeal of the assessee is allowed.

Order pronounced on 17th day of January, 2020.

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