SHRI HARISH CHAND NARANG,BHARATPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE, BHARATPUR

“1 On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in confirming levied by Ld. AO by ignoring the fact that penalty proceedings were initiated for furnishing inaccurate particulars of income whereas penalty was levied for concealment of income as well as for furnishing inaccurate 2 ITA 675/JP/2017_ Harish Chand Narang Vs ACIT particulars of income, which is not in accordance with law. It is therefore prayed that penalty levied u/s 271(1)(c) is not accordance with law and deserves to be deleted.

On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in confirming penalty of around 80,936/- levied u/s 271(1)(c) of the income Tax Act, 1961on the additions of Rs.2,61,930/- made by Ld. AO, alleging the same as Shortage of Stock arbitrarily solely relying upon conclusions drawn in assessment proceedings though penalty proceedings are separate and distinct proceedings, thus the penalty so confirmed deserves to be deleted.

The appellant craves the right to add, delete or amend any of the grounds of appeal

It was argued by the ld. AR of the assessee that the penalty proceedings in the case of assessee were specifically initiated for furnishing inaccurate particulars of income as has been evident from the perusal of the assessment order at page 15 para 1. However, while imposing the penalty, ld. AO has recorded the conclusion that assessee has concealed the income in addition to furnishing of inaccurate particulars of income.

The ld AR has further submitted that while initiating penalty u/s 271(1)(c) of the Act the AO has recorded satisfaction and directed initiation of penalty for 'furnishing of inaccurate particulars of income', which is evident from the assessment order, whereas in the penalty order the same has been levied alleging 'concealment of income and also furnishing of inaccurate particulars of income. According to provisions of sec. 271 (1)(c), the AO has to show that the assessee has either concealed his income or has furnished inaccurate particulars of income. Concealment of income is quite different from furnishing inaccurate particulars of income and the satisfaction recorded during

Reliance was placed on the decision of the Hon'ble ITAT Amritsar bench, in the case of HPCL Mittal Energy Ltd. Vs. ACIT in & 555/ Asr/2014 dated 03.05.2018. wherein it has been held that where satisfaction of the AO while initiating penalty proceedings u/s 271(1)(c) of the I T Act is with regard to alleged 'concealment of income' by the assessee, whereas imposition of penalty is for 'Concealment/ furnishing inaccurate particulars of income', the levy of penalty is not sustainable.

On the other hand, the ld DR has submitted that no objection was raised by the assessee either before the A.O. or before the ld. CIT(A) with regard to recording of satisfaction for initiating the penalty. He has further submitted that quantum addition was made with reference to the survey carried out at the assessee’s business premises wherein physical stock was taken and it was found that the assessee has sold the goods without entering in the regular books of 5 ITA 675/JP/2017_ Harish Chand Narang Vs ACIT account, accordingly, profit on such unaccounted sale was brought to tax which amounts to concealment of income. Accordingly, the A.O. was justified in levying the penalty U/s 271(1)(c) of the Act.

We have considered the rival contentions and carefully gone through the orders of the authorities below. We had considered the written submissions filed by the assessee wherein various judicial pronouncements were relied upon. We had deliberated all these judicial pronouncements with reference to the factual matrix of the case. With regard to illegality of the penalty, the ld AR has relied on the decision of Amritsar Bench of the ITAT in the case of HPCL Mittal Energy Ltd. Vs ACIT (supra). As per the ld AR while initiating the penalty proceedings with regard to alleged “concealment of income” and imposing penalty for the other charge i.e. furnishing of inaccurate particulars/concealment, the levy of penalty is not sustainable. We had carefully gone through the order of the Amritsar Bench of the ITAT in the case of HPCL Mittal Energy Ltd. Vs ACIT (supra) wherein the Tribunal have observed that after insertion of sub-section (1B) to Sec. 271 w.e.f. 01/4/1989, the A.O. need not specifically record in the quantum order as to whether each item of addition/disallowance is a case of concealment of particulars of 6 ITA 675/JP/2017_ Harish Chand Narang Vs ACIT income or furnishing of inaccurate particulars of income. The Tribunal have further observed that deeming ‘satisfaction’ under clause (c) in terms of sub-section (1B) means deeming ‘proper satisfaction’ and ‘proper satisfaction means getting satisfied as to whether it is a case of concealment of particulars of income or furnishing of inaccurate particulars of such income.

With regard to levy of charge at the stage of initiation of penalty by issue of notice U/s 274 vis a vis charge levied in the penalty order U/s 271(1)(c) of the Act, the precise observation of the Tribunal was as per para 15 which reads as under:

The sum and substance of above decision is that the nature of specification of charge by the A.O. at the stage of initiation of penalty proceedings at the time of issue of notice U/s 274 read with Section 271(1)(c) of the Act and at the time of passing the penalty order U/s 8 ITA 675/JP/2017_ Harish Chand Narang Vs ACIT 271(1)(c) should not be at variance. If there is any variance between the charge levied at the time of initiation of penalty proceedings and the charge levied at the time of imposition of penalty, the penalty order will be vitiated and penalty cannot be sustained. However, if the charge are same then no fault can be found with regard to defect in notice so as to hold that the penalty is not leviable.

Now we consider the facts of the instant case with reference to the judicial pronouncements discussed hereinabove, we found that for initiating the penalty the A.O. has issued notice U/s 274 of the Act on 27/12/2010 for “concealment and furnishing of inaccurate particulars of his income”. Thereafter considering the assessee’s contention, the A.O. has passed order on 18/03/2015 wherein the penalty was levied after having the following observation:

With regard to merit of penalty so imposed U/s 271(1)(c) of the Act, we found that there was survey at the business premises of the assessee wherein it was found that the assessee has made unaccounted sales, therefore, stock was found short on physical verification. To the extent of profit on such short stock, addition was made. This addition was confirmed by the ld. CIT(A) and thereafter by the ITAT. Thus, there is no dispute with regard to the concealment of income and furnishing of inaccurate particulars of income, in so far as the addition has been upheld up to the last extent. It has not been shown by the ld AR as to whether the order of the Tribunal was challenged before the Hon’ble High Court and the Hon’ble High Court has accepted substantial questions of law so as to suggest that it is debatable issue. Accordingly, we do not find any infirmity in the penalty so imposed.

In the result, appeal of the assessee is dismissed. Order pronounced in the open court on 11th June, 2019.