SHRI PREM KUMAR SANGHI,JAIPUR vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2, JAIPUR

2 ITA 291/JP/2018_ Prem Kumar Sanghi vs DCIT 2. That without prejudice to the ground No. 1 above on the facts and in the circumstances of the case, the ld. CIT(A) is wrong, unjust and has erred in law in confirming penalty to the extent of Rs. 1,15,875/- imposed by the ld. Assessing Officer U/s 271(1)(c) of the I.T. Act, 1961. 3. That the appellant craves the permission to add to or amend to any of the above grounds of appeal or to withdraw any of them.”

Further in the penalty notice u/s 274 read with section 271 of the Act dated 01.08.2014 the A.O. mentioned that: - Penalty proceedings under above mentioned section of the IT Act were initiated during the course of assessment proceedings in your case for the above-mentioned assessment year and statutory notice has already been issued and served upon you. Now these proceedings are to be finalized and for that purpose you are again given an opportunity to explain your case and to show cause as to why penalty under above mentioned section of the Income Tax Act may not be levied upon you. Another printed notice dated 22-03-2016 was issued u/s 274 read with section 271 of the Act mentioning the same lines of earlier notice i.e. Penalty proceedings under above mentioned section of the IT Act were initiated during the course of assessment proceedings in your case for the above-mentioned assessment year and statutory notice has already been issued and served upon you. Now these proceedings are to be finalized and for that purpose you are again given an opportunity to explain your case and to show cause as to why penalty under above mentioned section of the Income Tax Act may not be levied upon you.

It was contended by the ld AR that any notice issued under section 274, read with Section 271 (1) (c) of the Income Tax Act, 1961, should

As per the ld AR, it is apparent from assessment order and/or penalty notice(s) that the A.O. neither in assessment order nor in penalty notice issued by him has clearly mentioned the limb, on which basis the impugned penalty has been imposed. As verifiable from the record that the AO has simply issued a pre-printed notice without striking off the unnecessary portions of the notice. If the A.O. was of the view that the assessee has concealed the income or furnishing inaccurate particulars of income then he should have deleted or not mentioned the other limb for imposition of penalty i.e. concealing the particulars of income. The above act of the A.O. clearly shows that the entire exercise of initiation of penalty proceedings has been done without application of mind.

As per the ld AR, since there is variation in the charge levied in the show cause notice vis a vis penalty order, the penalty so levied is not sustainable in view of the decision of the Hon’ble Karnataka High court in 6 ITA 291/JP/2018_ Prem Kumar Sanghi vs DCIT the case of CIT Vs. M/s SSA’s Emerald Meadows 2015 (11) TMI 1620 wherein at para 3, the Hon’ble High Court has observed as under: Para “3. If 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 on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX – VS – MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565. In our view, since the matter is covered by judgement of the Division Bench of this Court, we are of the opinion, no substantial question of law arised in this appeal for determination by this Court. The appeal is accordingly dismissed.” The SLP filed by the I.T. department against the above order, before the Hon'ble Supreme Court has been dismissed by the Hon’ble Supreme Court. Therefore, Hon'ble Supreme Court has approved the findings made by Hon'ble Karnataka High Court in the case of CIT Vs. SSA’s Emerald Meadows (supra) and CIT Vs Manjunatha Cotton & Ginnign Factory & others [2013] 359 ITR 565. Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565 (Karnataka) after referring to the decision of Hon'ble Supreme Court in the case of T. Ashok Pai (Supra) held as under: -

Reliance was also placed on the decision of Hon’ble Jurisdictional High Court in the case of Shevata Construction Co. Pvt. Ltd. in and also on the decision of the Hon’ble Gujarat High Court in the case of M/s Jyoti Ltd. (2013) taxmann.com 65 and New Sorathia Engg. Co. (2006) 282 ITR 642 (Guj).

As per the ld. AR, recently again the Karnataka High Court in case of Muninga Reddy Vs. ACIT (2017) 396 ITR 398 and the Telengana & Andhra Pradesh High Court in PCIT Vs. Baisetty Revethi (2017) 398 ITR 88 held the same view. In the above said judgments the Hon’ble courts decided the law position on issue that the concealment of income and furnishing inaccurate particulars of income, two are different defaults and 8 ITA 291/JP/2018_ Prem Kumar Sanghi vs DCIT they cannot be intermixed. Therefore, the order of Ld. CIT (A) holding that it cannot be concluded that penalty notice did not specify the limb for initiation of penalty proceedings i.e. for concealment of income or for furnishing inaccurate particulars of income that itself cannot be reason for invalidating penalty proceedings is wrong and order of CIT (A) deserves to be set aside on this issue and penalty levied by AO deserves to be cancelled.

Reliance was also placed on the decision of the Third Member of the ITAT Amritsar Bench in the case of HPCL Mittal Energy Ltd. Vs Addl.CIT in support of the proposition that in case of variation in the charge for levy of penalty in the notice issued U/s 274 and the actual charge in the penalty order passed U/s 271(1)(c) of the Act, the penalty cannot be sustained. With regard to merit of penalty so imposed with respect to addition of Rs. 3,75,000/-, it was argued that entire income from housing project was exempt U/s 80IB(10), therefore, no penalty is imposable for enhancement of such quantum of profit of housing project.

On the other hand, the ld DR has contended that the addition with respect to receipt of on money of Rs. 3.75 lacs made U/s 68 of the Act has been confirmed by the ld. CIT(A), on which the A.O. has correctly

We have considered the rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by the ld. AR and ld. DR during the course of hearing before us in the context of factual matrix of the case. From the record we found that in the quantum order, the A.O. did not initiate penalty in respect of addition of Rs. 3.75 lacs however, penalty was initiated for disallowance of the deduction claimed U/s 80IB(10) of the Act. The addition made by the A.O. by disallowing the deduction claimed U/s 80IB(10) of the Act, was allowed by the ld. CIT(A) and further confirmed by the ITAT as well as the Hon’ble Rajasthan High Court by dismissing the appeal filed by the department. From the record we found that the penalty order was passed by the A.O. on 31.03.2016, wherein penalty u/s 271(1)(c) is imposed on addition of income of Rs. 3,75,000/- on account of alleged cash amounting to Rs.3,75,000/- received from one Sh Bimal Kumar Jain by holding that the assessee had furnished inaccurate particulars of income and concealed his income. The relevant findings of A.O. in last para of the penalty order is as under:-

The same view has been upheld by the Hon’ble Rajasthan High Court in the case of Shevetha Construction Co. Pvt. Ltd. (supra), ITAT Jaipur Bench in the case of Narayana Heights & Towers Vs ITO in and Lal Chand Mittal Vs DCIT in ITA No. 772/JP/2016 order dated 29/12/2011.

The ITAT, Amritsar Bench (THIRD MEMBER) in the case of HPCL Mittal Energy Ltd. Vs Add. CIT, Circle-1, Bhatinda (supra) has held that “when Assessing Officer is satisfied at stage of initiation of penalty proceedings of a clear-cut charge against assessee of concealment of particulars of income, but imposes penalty by holding assessee as guilty of other charge (furnishing of inaccurate particulars of income) or an uncertain charge (concealment of particulars of income/furnishing of inaccurate particulars of income), penalty cannot be sustained”

In view of the above facts and circumstances, we do not find any merit in the penalty so imposed U/s 271(1)(c) of the Act, therefore, we direct the A.O. to delete the same.

In the result, appeal of the assessee is allowed.