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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI ANIL CHATURVEDI, AM & SHRI PARTHA SARATHI CHAUDHURY, JM
आदेश/ORDER
PER ANIL CHATURVEDI, AM:
This appeal filed by the assessee is emanating out of the order of Commissioner of Income Tax (A) – 2, Pune, dt.30.06.2016 for the assessment year 2011-12.
The relevant facts as culled out from the material on record are as under :-
Assessee is a firm engaged in the business of civil construction.
Assessee filed its return of income for A.Y. 2011-12 on 30.09.2011 declaring total income at Rs.22,46,184/-. In this case assessment was re-opened u/s 147 of the Act. Subsequently, the case was taken up for scrutiny and thereafter assessment was framed u/s 143(3) r.w.s. 147 of the Act vide order dated 10.12.2014 and the total income was determined at Rs.40,94,012/- inter-alia by making addition of Rs.18,47,828/- on account of bogus purchases. On the aforesaid addition of bogus purchases, AO vide order dt.28.07.2015 levied penalty of Rs.5,71,000/- u/s 271(1)(c) of the Act. Aggrieved by the penalty order of AO, assessee carried the matter before Ld.CIT(A), who vide order dt.30.06.2016 (in appeal No.PN/CIT(A)-2/ACIT Cir/AN/2014- 15) dismissed the appeal of the assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before us and has raised the following grounds :
“1. The learned CIT(A) erred in confirming the levy of penalty u/s 271(1)(c) of Rs.5,71,000/-. 2. The assessee submits that the levy of penalty is bad in law since the specific charge on the basis of which the penalty proceedings u/s 271 (1)(c) have been initiated against the assessee has neither been specified in the notice u/s 274 nor in the asst. order and hence the penalty of Rs.5,71,000/- levied in the case of the assessee may please be deleted.
Without prejudice to the above ground, it is submitted as under :
3. The learned CIT(A) erred in holding that the assessee had furnished inaccurate particulars by debiting purchases of, Rs.18,47,828/- made from one alleged hawala party, M/s. Ceeport Iron & Steel Ltd. and thereby levying penalty u/s 271(1)(c) on the, ground that the entire amount of said purchases were offered to tax by the assessee in the course of asst. proceedings.
4. The learned CIT(A) failed to appreciate that the purchases made from the said party I were duly supported by invoices, delivery challans, weigh bridge receipts and bank payments and before, the A.O., it was time and again reiterated that the impugned purchases were genuine, however, the entire amount of purchases was suo-moto offered to tax solely in order to avoid litigation under the implied condition that no penalty u/s 271(1)(c) shall be levied and hence, levy of penalty was not justified merely because the assessee had agreed for the addition.
5. The leaned CIT(A) erred in not appreciating that in spite o specific request, the statement of the alleged hawala supplier was not furnished to the assessee and the opportunity to cross examination of the said party was also not granted by the A.O. and hence, the disallowance could not have been made solely on the basis of the said statement and therefore, merely because the said amount was suo-moto offered to tax by the assessee, there was no reason to levy penalty u/s 271(1)(c) of the same.
6. The learned CIT(A) ought to have appreciated that the claim of the assessee was duly substantiated by documentary evidences which were not controverted by the AO and in the absence of opportunity of cross- examination of the alleged hawala supplier, the claim made by the assessee was not found to be false and therefore, the explanation 1 to section 271(1)(c) was not attracted in the instant case and hence, the levy of penalty was not justified.
7. The learned CIT(A) further erred in not appreciating that on similar facts, Hon’ble ITAT Mumbai has held that no disallowance of purchases can be made and thus, the issue involved is certainly a debatable one and therefore, merely because the assessee had suo-moto offered the said amount to tax, there was no reason to levy penalty u/s 271(1)(c) of the Act.”
Before us, at the outset, Ld.A.R. submitted that though assessee has raised several grounds, but the sole controversy which requires adjudication is with respect to levy of penalty u/s 271(1)(c) of the Act.
Before us, Ld.A.R submitted that while passing the assessment order, AO with respect to addition on account of bogus purchases has recorded that assessee had “furnished inaccurate particulars of income” to the extent of Rs.18,47,828/-. But while passing the penalty order u/s 271(1)(c) of the Act, AO at Para 6 of Page 3 held that assessee has “concealed the particulars of income and made itself liable for penalty”.
The AO again at Para 10 of Page 7 held that assessee has furnished inaccurate particulars of income” and thus AO had levied penalty for concealment of income as well as for furnishing inaccurate particulars of income. He therefore relying on the decision of Hon’ble Bombay High Court in the case of CIT Vs. Samson Perinchery reported in (2017) 392 ITR 4 (Bom) submitted that in the absence of proper show cause notice to assessee, penalty u/s 271(1)(c) cannot be levied and therefore urged that penalty levied by AO be deleted. Ld.D.R. on the other hand, supported the order of lower authorities.
We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to levy of penalty u/s 271(1)(c) of the Act. In the present case, penalty of Rs.5,71,000/- u/s 271(1)(c) of the Act has been levied on amount of Rs.18,47,828/- being the addition on account of bogus purchases. The perusal of assessment order passed u/s 143(3) r.w.s. 147 of the Act reveals that in the assessment order AO had recorded satisfaction for “furnishing of inaccurate particulars of income”. Thereafter, in the penalty order passed u/s 271(1)(c) of the Act, AO at Para 6 of Page 3 held that assessee has “concealed the particulars of income and made itself liable for penalty” and again at Para 10 of Page 7 held that assessee has furnished inaccurate particulars of income” and thus AO had levied penalty for concealment of income as well as for furnishing inaccurate particulars of income. It is a settled law that while levying penalty, the AO has to record clear satisfaction and thereafter come to a finding in respect of one of the limbs, which is specified under section 271(1)(c) of the Act. The first step is to record satisfaction while completing the assessment as to whether the assessee had furnished inaccurate particulars of income or concealed his income. Thereafter, notice u/s 274 read with Section 271(1)(c) of the Act is to be issued to the assessee. The Assessing Officer thereafter has to levy penalty under Section 271(1)(c) of the Act for non-satisfaction of either of the limbs. While completing the assessment, the Assessing Officer has to come to a finding as to whether the assessee has concealed its income or furnished inaccurate particulars of income. The Hon’ble Bombay High Court in CIT Vs. Shri Samson Perinchery (supra) held that where initiation of penalty is one limb and the levy of penalty is on other limb, then in the absence of proper show cause notice to the assessee, there is no merit in levy of penalty.
Considering the facts of the present case in the light of the decision of Hon’ble Bombay High Court in the case of Samson Perinchery (supra), we are of the view that in the present case, the basic condition for levy of penalty has not been fulfilled and that the penalty order suffers from non-exercising of jurisdiction power and therefore penalty order cannot be upheld. We accordingly set aside the penalty order passed by AO.
Thus, the ground of assessee is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced on 20th day of August, 2020.