PRAMOD KOTI,,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 3,, PUNE

This appeal by the assessee against the order dated 29-05-2017 passed by the Commissioner of Income Tax (Appeals)-3, Pune [„CIT(A)‟] for assessment year 2013-14 wherein he confirmed the penalty imposed by the AO u/s. 271(1)(c) of the Act.

Shri V. Jayaraman, the ld. AR submitted that the assessee is an individual engaged in running a Restaurant and Bar under the name and style of „Hotel Sarovar‟. The Assessing Officer while recording satisfaction for initiating penalty has invoked both the limbs of section 271(1)(c) i.e. “concealment of income” and “furnishing inaccurate particulars of income”, but however, the Assessing Officer levied penalty for “concealed particulars of his income”. The Assessing Officer at the time of recording satisfaction was not clear about precise charge to be invoked for initiating penalty proceedings. The ld. AR submitted that in the light of decision of Hon‟ble Bombay High Court in the case of Commissioner of Income Tax Vs. Samson Perinchery reported as 392 ITR 4 and the decision of Hon‟ble Karnataka High Court in the case of Commissioner of Income Tax Vs. Manjunatha Cotton & Ginning Factory reported as 359 ITR 565, penalty proceedings are liable to be quashed.

Shri Pankaj Garg, the ld. DR submitted that the Assessing Officer while passing order u/s. 271(1)(c) has mentioned specific charge i.e. concealed particulars of his income and the same charge has also been mentioned while recording satisfaction during assessment proceedings. Thus, there was consistency in the mind of Assessing Officer with regard to charge for levy of penalty.

Thereafter, while concluding the assessment order the Assessing Officer has again made reference to initiation of penalty proceedings u/s. 271(1)(c) of the Act reads as under : “08. Hence, in view of the facts and legal position discussed above, I am satisfied that the assessee had concealed particulars of his income to the extent of Rs.1,50,00,000/- and thus, it is a fit case for levy of penalty u/s. 271(1)(c). Therefore, penalty of Rs.46,35,000/- being 100% of the tax sought to be evaded is hereby levied u/s. 271(1)(c) of the I.T. Act, 1961.”

A bare perusal of satisfaction recorded by the Assessing Officer during assessment proceedings shows that the Assessing Officer was not clear; Whether the penalty proceedings u/s. 271(1)(c) are to be initiated on the charge of concealment of income or furnishing of inaccurate particulars of income. In para 4 of the assessment order the Assessing Officer has mentioned both the charges.

The Hon‟ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Samson Perinchery (supra) has held that where satisfaction has been recorded on one ground and penalty is levied on another, such penalty order bad in law. The relevant extract of the order of Hon‟ble High Court reads as under : “6. The above submission on the part of the Revenue is in the face of the decision of the Supreme Court in Ashok Pai v/s. CIT 292 ITR 11 [relied upon in Manjunath Cotton & Ginning Factory (supra)] – wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act, carry different meanings/ connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/ permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must,

Thus, not mentioning of specific charge would lead to ambiguity in recording of satisfaction for initiating penalty proceedings. This would render penalty order bad in law and as such the same is liable to be quashed. We hold and direct accordingly.

In the result, appeal of assessee is allowed.

The Pr. Commissioner of Income Tax-2, Pune ववभागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, “बी” बेंच, 5. ऩुणे / DR, ITAT, “B” Bench, Pune. गार्ड फ़ाइऱ / Guard File. 6. //सत्यावऩत प्रतत// True copy // आदेशानुसार / BY ORDER,