AMAN CHHOTE VYAPARI SAHAKARI PATSANSTHA MARYADIT,,ICHALKRANJI vs. आयकर अधिकारी, वार्ड - 4,, ICHALKARANJI

The issues raised in the grounds are identical and it relates to the levy of penalty u/s 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟). The CIT(A) passed a composite order for all the assessment years. We shall take up the appeal of the assessee for the A.Y. 2000-01 first for reference to the facts and issues. Grounds raised by the assessee for this assessment year are extracted here as under : 1) On the facts and circumstances of the case and in law the CIT(A) erred in confirming the penalty levied u/s 271 (1)(c) by the AO though the notice initiating the penal proceedings being invalid inasmuch as the specific ground on which the penalty is initiated has not bean specified in such notice u/s 274 rws 271. 2) On the facts and circumstances of the case and in law the CIT(A) erred in confirming the penalty levied u/s 271 (1)(c) by the AO though she has not recorded her satisfaction as to which specific default in respect which the penalty is levied by her, there by rendering her order of levying the penalty to be invalid being bad in law. 3) On the facts and circumstances of the case and in law the CIT(A) erred in confirming the penalty levied u/s 271(1)(c) by the AO in respect of addition sustained by the ITAT on account of deposits of one 'Aman Bachat Mandal' particularly when the protective addition of the same had also been made in the hands of the said Aman Bachat Mandal. 4) On the facts and circumstances of the case and in law the CIT(A) erred in confirming the penalty levied u/s 271(1)(c) by the AO in respect of addition sustained by the ITAT on account of deposits of one 'Aman Bachat Mandal', the same being its business income on which it is eligible for deduction u/s 80P(20(a)(i).

Briefly stated relevant facts are that the assessee is a Co-operative Society. Search and seizure action under section 132(1) of the Act was conducted in the case of assessee on 18.05.2005. Accordingly, in response to notice u/s 153A(a) of the Act, the assessee filed return of income declaring total income of Rs.32,630/- on 24.10.2005. Finally, assessment u/s 143(3) r.w.s. 153A(b) of the Act was completed on 31.12.2007 by making various additions and determining assessed income of Rs.3,24,52,625/-. The Assessing Officer further initiated the penalty proceedings by mentioning that Issue notice u/s 271(1)(c) of the Act. (para 43 of the assessment order).

The CIT(A) confirmed the penalty as levied by the Assessing Officer. The contents of paras 5.6, 5.7 and 5.8 of the appellate order are relevant in this regard.

Aggrieved with the said decision of the CIT(A), the assessee is in appeal before the Tribunal with the above extracted grounds.

We perused the orders of the authorities below and find that this is a case where the Assessing Officer failed to record proper satisfaction while initiating and levying the penalty u/s 271(1)(c) of the Act. On perusal of paras 36, 36.a and 41 of the assessment order, we find the following are the reasons for initiation of penalty proceedings :- “36…. Since the assessee had furnished inaccurate particulars of its income, penalty proceedings under section 271(1)(c) are hereby initiated. 36.a ….Penalty proceedings under section 271(1)(c) are initiated for furnishing inaccurate particulars of income. 41….. Penalty proceedings under section 271(1)(c) are initiated for furnishing inaccurate particulars of income…..”

Further, we also perused the penalty order passed by the Assessing Officer on 28.03.2014. On perusal of paras 8 and 9 of the penalty order, we find the following is the reasons for levy of penalty u/s 271(1)(c) of the Act :-

The above extracts reveal that the Assessing Officer suffers from ambiguity in his mind while recording the satisfaction at the time of initiation of penalty proceedings u/s 271(1)(c) of the Act.

Highlighting the legal requirement of making a specific reference to the specific limb of clause (c) of section 271(1) of the Act and following the various binding judgments in the case CIT Vs. Shri Samson Perinchery (2017) 392 ITR 4 (Bom.) as well as the judgment of Hon‟ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton and Ginning Factory 359 ITR 565, we find the order of the CIT(A) should have to be set-aside on the legal issue. Hence, the penalty levied by the Assessing Officer is unsustainable in law and the same is wrongly upheld by the CIT(A).

The ld. DR for the Revenue heavily relied on the orders of the authorities below.

Considering the above, we are of the opinion that the legal requirement of making a clear cut reference to the applicable limb of clause (c) of section 271(1) of the Act, is not met by the Assessing Officer while initiating and levying the penalty u/s 271(1)(c) of the Act. Thus, the satisfaction of the Assessing Officer suffers from ambiguity in his mind.

Therefore, considering the above referred binding judgments, we are of the view that such penalty is unsustainable in law legally. It is a settled legal proposition that the Assessing Officer is under obligation to specify the appropriate limb of clause (c) of section 271(1) of the Act at the time of initiation as well as at the time of levy of penalty. In view of the above deliberation on this issue, without going into the merits of the case, we set- aside the order of the CIT(A) and direct the Assessing Officer to delete the entire penalty imposed by him. Accordingly, the grounds raised by the assessee are allowed on legal issue.

The facts and issues in other appeals in & 144/PUN/2018 are similar to the facts and issues in ITA No.142/PUN/2018. Accordingly, our decision in ITA No.142/PUN/2018 shall apply mutatis mutandis to appeals in ITA Nos.143 & 144/PUN/2018.

Considering the relief granted on legal arguments to the assessee, we find that the adjudication of the grounds on merit becomes academic.

In the result, all the three appeals of assessee are allowed on legal grounds.