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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI GEORGE MATHAN, JM & SHRI ANIL CHATURVEDI, AM
आदेश / ORDER PER ANIL CHATURVEDI, AM :
This appeal filed by the assessee is emanating out of the order of 1. Commissioner of Income Tax (A) – 1, Nashik dt.14.07.2017 for the assessment year 2013-14.
The relevant facts as culled out from the material on record are as under :-
Assessee is an individual and stated to be engaged in the business of Builders and Developers. Assessee electronically filed his return of income for A.Y. 2013-14 on 29.09.2013 declaring total income at Rs.1,25,03,000/-. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dt.15.02.2016 and the total income was determined at Rs.1,75,02,336/- inter-alia by making additions of Rs.49,98,490/- on account
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of routing the entries of receipts to the capital account instead through Profit and
Loss account and Rs.846/- on account of interest on TDS. On the aforesaid
additions, AO vide order dt. 30.08.2016 levied penalty of Rs.15,44,530/- u/s
271(1)(c) of the Act. Aggrieved by the order of AO, assessee carried the matter
before Ld.CIT(A), who vide order dt.14.07.2017 (in appeal No.Nsk/CIT(A)-
1/172/2016-17) 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. 15,44,530/- in respect of the addition or Rs. 49,98,490/- made by the A.O. in the asst. completed u/s 143(3) or the Act.
The learned CIT(A) failed to appreciate that the exact charge on the basis of which the penalty proceedings were initiated has neither been stated in the assessment order nor in the notice u/s 274 r.w.s. 271 (1)(c) and thus, the notice issued u/s 274 is bad in law and hence, the penalty levied in pursuance of such invalid notice is not justified and same ought to have been deleted.
The assessee further submits that the specific/ exact charge under section 271 (1)(c) has also not been specified by the AO while levying penalty in the order passed u/s 271 (1)(c) and hence, the levy of penalty is bad in law in view of various decisions of Hon'ble ITAT, Pune and hence, the penalty levied in the instant case may please be deleted.
Without prejudice to ground nos. 2& 3, it is submitted as under—
The learned CIT(A) erred in holding that the assessee had furnished inaccurate particulars of income and concealed income in respect of the addition of Rs.49,98,490/- made by the A.O. on the ground that the value of three flats [held as ,stock in trade by the assessee] transferred / introduced by the assessee individual as his capital in a partnership firm during the year was wrongly credited by the assessee to his 'capital a/c' instead of crediting it to the P&1. A/c and thereby the profit for the year was understated by Rs.49,98,490/- which attracted levy of penalty u/s 271 (1)(c) or the Act.
The learned CIT(A) erred in holding that the said income or Rs.49,98,490/- was offered by the assessee as his income only after the said income was detected by the A.O. in the course of asst. proceedings and thus, the bonafides of the assessee were not established and hence, the provisions of section 271(1)(c) were attracted in the case of the assessee.
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The Ld.CIT(A) failed to appreciate that –
a. The amount of Rs.49,98,490/- remained to be offered to tax due to an inadvertent mistake on the part of the accountant in passing an incorrect accounting entry by wrongly crediting the capital a/c [by the amount of stock in trade - flats transferred to partnership firm] instead of crediting the P&L A/c and thus, the levy of penalty was not justified on the facts of the case. b. The fact of the stock in trade - 'flats' of Rs.49,98,490/- being transferred to the partnership firm during the year was quite evident from the balance sheet of the assessee individual and the balance sheet of the said firm f led along with the returns of income of the respective entities and thus, the assessee had not concealed any particulars relating to the said income and therefore, there was no reason to levy penalty u/s 271 (1)(c) merely because the said income had inadvertently remained to be offered to tax due to a bona fide mistake on the part of his accountant.
The Ld.CIT(A) further erred in appreciating that –
a. The assessee had voluntarily noticed the above mistake before being detected by the A.O. in the course of asst. proceedings and this fact was duly clarified before the CIT(A) along with the trail of questionnaire issued by the A.O. and submissions filed by the assessee prior to voluntarily offering the above amount to tax and thus, the CIT(A) was not justified in holding that the income was offered only after detection by the A.O. without taking cognizance or controverting the details filed by the assessee and hence, the levy of penalty was not justified . b. The assessee had declared huge returned income of more than Rs.1.25 Crs. and the books of accounts were also audited by a duly qualified chartered accountant who also failed to notice the above mistake and in view of the above facts, there was no reason for the assessee to purposely conceal the above income by disclosing all the relevant facts in the balance sheet and thus, the levy of penalty was not justified on facts of the case.”
All the grounds being inter-connected are considered together.
Before us, Ld.A.R. submitted that while passing the assessment order and
while recording satisfaction, AO was not clear as to whether the assessee had
furnished inaccurate particulars of income or concealment of income, as he has
recorded satisfaction for concealment of income as well as for furnishing of
inaccurate particulars of income and in support of his contention, he pointed to
Page No.2 of the assessment order. Thereafter, he submitted that in the penalty
order also, AO has not specified whether the penalty is for concealment of income
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or for furnishing of inaccurate particulars of income and had levied penalty on
both the limbs.
Ld.A.R. further pointing to the notice dt.18.12.2016 issued u/s 274 r.w.s.
271(1)(c) submitted that AO has not strike down the relevant portion of the
printed form to indicate whether the satisfaction for penalty is for concealment of
particulars or furnishing of inaccurate particulars of income. He therefore relying
on the decision of Hon’ble Bombay High Court in the case of PCIT Vs. Goa
Coastal Resorts & Recreation Pvt. Ltd., reported in (2020) 113 Taxmann.com 574
submitted that no penalty is leviable. Ld.D.R. on the other hand, supported the
order of lower authorities.
We have heard the rival contentions and perused the material on record.
The issue in the present appeal is with respect to levy of penalty u/s 271(1)(c) of
the Act. A perusal of the assessment order shows that the A.O has initiated the
penalty proceedings for furnishing of inaccurate particulars and concealment of
income. Even in the penalty order dated 30.08.2016 AO holds that the case of
the assessee falls under the ambit of Explanation (1) to Sec.271(1)(c) of the Act,
where it is deemed about the particulars of income been concealed. Even in the
notice issued u/s 274 r.w.s. 271(1)(c), the AO has not struck the relevant portion
of the from to indicate as to whether the penalty is for concealment of income or
for furnishing inaccurate particulars of income. We thus find that no clear cut
satisfaction has been recorded by AO as to whether the assessee has concealed
the particulars of income or furnished inaccurate particulars of income. We find
similar issue arose before the Hon’ble Bombay High Court in the case of Goa
Coastal Resorts & Recreation (supra) wherein the Hon’ble High Court held that
penalty is not leviable. The relevant observation of the High Court are as under :
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“5. We have carefully examined the record as well as duly considered the rival contentions. Both the Commissioner (Appeals) as well as the ITAT have categorically held that in the present case, there is no record of satisfaction by the Assessing Officer that there was any concealment of income or that any inaccurate particulars were furnished by the assessee. This being a sine qua non for initiation of penalty proceedings, in the absence of such petition, the two authorities have quite correctly ordered the dropping of penalty proceedings against the petitioner.
Besides, we note that the Division Bench of this Court in Samson Pereinchery (supra) as well as in New Era Sova Mine (supra) has held that the notice which is issued to the assessee must indicate whether the Assessing Officer is satisfied that the case of the assessee involves concealment of particulars of income or furnishing of inaccurate particulars of income or both, with clarity. If the notice is issued in the printed form, then, the necessary portions which are not applicable are required to be struck off, so as to indicate with clarity the nature of the satisfaction recorded. In both Samson Perinchery and New Era Sova Mine (supra), the notices issued had not struck of the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or proper application of mind in matter of initiation of penalty proceedings.
In the present case, as well if the notice dated 30/09116 (at page 33) is perused, it is apparent that the relevant portions have not been struck off. This coupled with the fact adverted to in paragraph (5) of this order, leaves no ground for interference with the impugned order. The impugned order are quite consistent by the law laid down in the case of Samson Perinchery and New Era Sova Mine(supra) and therefore, warrant no interference.
The contention based upon MAK Data (P) Ltd. (supra) also does not appeal to us in the peculiar facts of the present case. The notice in the present case is itself is defective and further, there is no finding or satisfaction recorded in relation to concealment or furnishing of inaccurate particulars. 9. For the aforesaid reasons, we hold that no substantial questions of law arises in this appeal. Consequently, this appeal is dismissed.”
We are of the view that the ratio of the decision in the case of Goa Coastal Resorts
& Recreation Pvt. Ltd. (supra) is applicable to the facts of the present case. We
therefore respectfully following the aforesaid decision of Hon’ble Bombay High
Court in the case of Goa Coastal Resorts & Recreation Pvt. Ltd., (supra) hold that
AO was not justified in levying penalty u/s 271(1)(c) of the Act and therefore
direct its deletion.
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In the result, the appeal of the assessee is allowed.
Order pronounced on 21st day of February, 2020.
Sd/- Sd/- (GEORGE MATHAN) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER
पुणे Pune; �दनांक Dated : 21st February, 2020. Yamini
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A)-1, Nashik. 4. Pr. CIT-1, Nashik. 5 �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” / DR, ITAT, “बी” Pune; 6. गाड� फाईल / Guard file.
आदेशानुसार/ BY ORDER
// True Copy //
व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.