BISWAJIT NAYAK,ROURKELA, ODISHA vs. ACIT, ROURKELA CIRCLE, ROURKELA

आदेश / O R D E R Per Bench : This is an appeal filed by the assessee against the order of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, dated 28.09.2022, in DIN & Order No.ITBA/NFAC/S/250/2022- 23/1046057335(1) for the assessment year 2015-2016, confirming the penalty levied u/s.271(1)(c) of the Act of Rs.14,21,784/-. 2. The appeal is delayed by 414 days. In this regard, the assessee has filed a condonation petition along with affidavit stating therein reasonable cause for condonation of delay. Ld. Sr DR did not raise any serious objection. Looking to the facts of the case and the prayer of the assessee, we condone the delay of 414 days in filing the present appeal and the appeal of the assessee is disposed of on merits.

2 ITA No.19/CTK/2024 3. Before us, the assessee has taken three grounds of appeal, which are related to the confirmation of the imposition of penalty of Rs.14,21,784/- u/s.271(1)(c) of the Act. Since all the ground pertain to levy of penalty u/s.271(1)(c) of the Act, the same are clubbed together for the sake of convenience. 4. Brief facts of the case are that the assessment order in this case was passed u/s.143(3) of the Act dated 29.12.2017, wherein the total additions of Rs.1,73,50,918/- were made on following issues :- i) introduction of capital of Rs.39,05,101/-; ii) cash deposit in bank account of Rs.1,28,90,120/- and iii) disallowance of interest on certain depreciation of Rs.5,55,697/- 5. In the first appeal, the ld. CIT(A) has deleted the addition made on account of bank deposits and reduced the adhoc disallowance to 50%, however, confirmed the addition on account of introduction of capital. Further the AO imposed the penalty u/s.271(1)(c) of the Act at Rs.14,21,784/- vide orders dated 12.01.2022 by holding that the assessee has furnished inaccurate particulars of income to the extent of Rs.41,82,949/- i.e. the addition upheld in appellate proceedings. Against this order, the assessee filed the appeal before the ld. CIT(A), who sustained the penalty, thus, the assessee preferred appeal before the ITAT. 6. Before us, the ld. AR of the assessee submitted that in the assessment order additions were made on three grounds and if the assessment order is seen, it appears that penalty u/s.271(1)(c) of the Act was initiated for furnishing inaccurate particulars in respect of addition

3 ITA No.19/CTK/2024 made on account of deposit in bank account and no penalty was initiated on the other two issues. Since the additions on account of cash deposit in the bank account stood deleted by the ld. CIT(A), there remained no issue on which penalty u/s.271(1)(c) of the Act could be levied and therefore, no penalty is leviable in the hands of the assessee in the present case. 7. Ld. AR further submitted that the AO has issued a show cause notice u/s.274 r.w.s.271(1)(c) of the Act dated 25.01.2021, wherein the assessee was show caused to explain as to why not the penalty be levied for “concealed the particulars of income”. He, thus, submitted that before initiation of the penalty proceedings, in the assessment order satisfaction was recorded for furnishing inaccurate particulars of income whereas the show cause notice is issued for concealment of particulars of income. The extract of show cause notice dated 25.01.2021 is reproduced as follows :-

4 ITA No.19/CTK/2024 8. He further requested that the penalty levied is on different charge whereas in the notice assessee was show caused on different limb, therefore, no penalty is leviable in this case. For this, he placed reliance on the judgment of Hon’ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory, reported in [2013] 35 taxmann.com 250 (Karnataka). 9. Per Contra, the ld. Sr. DR has relied upon the order of the lower authorities and submitted that the satisfaction was recorded for furnishing inaccurate particulars of income and finally penalty was also levied for furnishing of inaccurate particulars of income, therefore, the AO has rightly levied the penalty. With regard to the defect in the notice, he placed reliance on the decision of Hon’ble Madras High Court in the case of Sundaram Finance, reported in 403 ITR 407 (Madras HC) and supported the order of the lower authorities and requested for confirmation of the penalty so levied. 10. We have heard rival submissions. It is seen that the AO at the time of recording the satisfaction in the assessment order has initiated the penalty proceedings u/s.271(1)(c) of the Act for furnishing inaccurate particulars of income with respect to the addition made under the title “cash deposit in personal bank account” vide para 4.0 of the assessment order. It is further seen that he has discussed the addition made in regard to the “introduction of capital” in para 3.0 and “disallowance of interest on car loan and depreciation” in para 5.0 where no satisfaction was recorded with regard to the initiation of penalty proceedings u/s.271(1)(c) of the Act.

5 ITA No.19/CTK/2024 Thus, it clearly evident from the assessment order that the AO was very much clear in his mind that the penalty proceedings u/s.271(1)(c) of the Act were initiated only for furnishing inaccurate particulars of income for the additions made towards cash deposit in the bank account which has already been deleted by the ld. CIT(A). Thus, the very satisfaction of initiation of penalty proceeding u/s.271(1)(c) of the Act on account of inaccurate particulars of income has no legs to stand. Once the addition on which the penalty proceedings were initiated, is deleted, no penalty could be levied. Accordingly, we are in agreement with the contention of the ld. AR that the penalty levied u/s.271(1)(c) of the Act and confirmed by the lower authorities on other issues on which no satisfaction was recorded in the assessment order, is invalid and without jurisdiction, therefore, the penalty is not leviable. 11. It is further seen that the notice dated 25.01.2021 was in respect to the initiation of proceedings u/s.271(1)(c) of the Act for concealment of the particulars of income and the penalty was levied for furnishing inaccurate particulars of income. The Hon’ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factor (supra) has held that notice for initiating the penalty should clearly spelt out the limb on which the penalty is going to be levied and further held that taking up penalty proceedings on one limb and findings of proceedings giving on another limb is bad in law. The Hon’ble Supreme Court in the case of M/s. SSA's Emerald Meadows, (2016) 73 taxmann.com 248(SC) dismissed the Special Leave Petition filed by the Revenue against the judgment

6 ITA No.19/CTK/2024 rendered by Hon'ble High Court of Karnataka whereby identical issue was decided in favour of the assessee. Operative part of the judgment in case of M/s. SSA's Emerald Meadows (supra) decided by Hon'ble High Court of Karnataka is reproduced below :- "2. This appeal has been filed raising the following substantial questions of law: (1) Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case? (2 Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in. holding that the penalty notice under Section 274 r.w.s. 271(1)(c) is had in law and. invalid in spite the amendment of Section 271(1 B) with retrospective effect and by virtue of the amendment, the assessing officer has initiated the penalty by properly recording the satisfaction for the same? (3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in deciding the appeals against the Revenue on the basis of notice issued, under Section 274 without taking into consideration the assessment order when the assessing officer has specified that the assessee has concealed particulars of income? 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 01 the derision of the Division Bench of this Court rendered In the case of COMMISSIONER or 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."

7 ITA No.19/CTK/2024 12. The reliance placed by the Hon’ble Sr. DR in the case of Sundaram Finance (supra) are on different facts as in that case the penalty was levied for claim of depreciation on the assets which were never existed and thus, the Hon’ble High Court was of the view that the assessee has not only furnished the inaccurate particulars but also concealed the income. The facts of this case are not applicable to the facts of the present case. In view of these facts and also by following the judgment of the Hon’ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory (supra), we are of the considered opinion that the penalty is not leviable in the present case since the show cause notice refers one limb of the provisions of Section 271(1)(c) of the Act, whereas the penalty has been levied on other limb. Besides the penalty u/s.271(1)(c) of the Act was levied on the additions sustained on which no satisfaction was recorded. 13. In view of these facts and by respectfully following the decision of Hon’ble Supreme Court in the case of M/s. SSA's Emerald Meadows (supra), we delete the penalty levied by the AO and confirmed by the ld. CIT(A) u/s.271(1)(c) of the Act. 14. In the result, appeal of the assessee is allowed. Order dictated and pronounced in the open court on 15/05/2024. Sd/- Sd/- (GEORGE MATHAN) (MANISH AGARWAL) ऱेखा सदस्य/ ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनाांक Dated 15/05/2024 Prakash Kumar Mishra, Sr.P.S.

8 ITA No.19/CTK/2024 आदेश की प्रनतलऱपऩ अग्रेपषत/Copy of the Order forwarded to : अऩीऱाथी / The Appellant- 1. Biswajit Nayak, Qtr.No.B-174, Sector-1, Rourkela-769008 प्रत्यथी / The Respondent- 2. ACIT, Rourkela Circle, Rourkela आयकर आयुक्त(अऩीऱ) / The CIT(A), 3. आयकर आयुक्त / CIT 4. ववभागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, 5. ITAT, Cuttack 6. गार्ड पाईऱ / Guard file. सत्यावऩत प्रतत //True Copy// आदेशानुसार/ BY ORDER, (Assistant Registrar) आयकर अऩीऱीय अधधकरण, कटक/ITAT, Cuttack