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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED&
The instant appeal filed by the assessee is directed against the order dated 13.04.2018 passed by the Commissioner of Income Tax (Appeals) - 11, Ahmedabad arising out of the order dated 27.03.2017 passed by the DCIT, Central Circle – 1(4), Ahmedabad under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) for the Assessment Year 2011-12.
The brief facts leading to this case is this that a search u/s. 132 of the Act was conducted in the case of Sewani Group on 20.12.2011 in which the assessee was also covered. Consequently, proceeding u/s 153A was initiated by and under a notice dated 21.12.2012 whereupon on 28.03.2013, the assessee filed the return of income for A.Y. - 2 - Smt. Bhartiben Prahalad bhai Sewani vs DCIT Asst.Year – 2011-12 2011-12 u/s 153A of the Act declaring total income of Rs.71,54,330/-. Subsequently following additions were made upon finalizing the assessment u/s 153 of the Act: a. Disallowance made on account of Rs.8,85,062/- Excess loss claimed under the head of “Income from House Property” b. Addition on account of capital gain not Rs.72,897/- shown in return on income. c. Disallowance made on account of Rs.6,73,557/- excess interest
Penalty proceeding was also initiated u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income by the Assessing Officer. However, while imposing penalty by and under the order dated 27.03.2017, the Learned DCIT, Central Circle – 1(4), Ahmedabad imposed penalty amounting to Rs.4,96,650/- u/s 271(1)(c) of the Act in the following manner: “…in view of the above, on the basis of the facts and circumstances of the case, I am satisfied that the assessee has committed default u/s 271(1)(c) of the Act by way of furnishing of inaccurate particulars of income / concealment of income and fit case for laving penalty u/s 271(1)(c) of the Act…”
Thus, the Revenue has not been satisfied to the specific guilt committed by the assessee. No specific conclusion, therefore, has been made by the Assessing Officer while imposing penalty. We find that though the Learned CIT(A) in appeal has rejected such penalty to the tune of Rs.1,97,339/- thereby deleted Rs.2,99,311/- but the basic ambiguity prevailing in the order passed by the Learned AO in not mentioning the specific commission of offence has not been taken care of.
At the time of hearing of the instant appeal the Learned Advocate appearing for the assessee submitted before us that the order of penalty does not fulfill the criteria laid down under section 271(1)(c) of the Act. Specific charge, though requires to be - 3 - Smt. Bhartiben Prahalad bhai Sewani vs DCIT Asst.Year – 2011-12 mentioned in the penalty order as to whether penalty is being imposed for concealment of income or for inaccurate particulars of income as held by different High Courts has not been mentioned and thus the penalty is invalid as the case made out by the assessee. The Learned AO has neither specified the alleged guilt committed by assessee by furnishing of inaccurate particulars of income or concealment of income which is nothing but non application of mind as submitted by the Learned AR. In this aspect, Learned AR relied upon the judgment passed by the Hon’ble Jurisdictional High Court in the matter of Snita Transport Pvt. Ltd-vs-ACIT reported in 42 taxmann.com 54 where it was further held that while imposing penalty u/s 271(1)(c) of the Act the AO should apply his mind and to make it clear as to whether he has proceeded and finalized on the basis that the tax payer has concealed his income or he had furnished inaccurate particulars of income, which according to the Learned AR, has not been followed in the instant case by the Learned AO while imposing penalty against the assessee at the final stage.
The Learned AR also relied upon the judgment passed by the Gujarat High Court in the case of CIT-vs-Jyoti Ltd. reported in [2013] 34 taxmann.com 65 (Gujarat) and also relied upon the order passed by the Hon’ble Tribunal, Ahmedabad Benches in the case of Dharmesh Dhulabhai Prajapati-vs-ITO in for A.Y. 2011-12 and also the case of Smt. Ushaben Atulbhai Shah in ITA No.197/Ahd/2017 for A.Y 2012-13. The order passed by the Hon’ble Tribunal in ITA No.99/Ahd/2017 for A.Y. 2008-09 has also been relied upon by the Learned AR. On the contrary the Learned DR relied upon the order passed by the authorities below.
We have heard the respective parties, we have also perused the relevant materials available on record. We find that the order imposing penalty has not specified the guilt committed by the assessee. In similar circumstances the Hon’ble Court passed an order in favour of the assessee. The relevant portion whereof is as follows:
- 4 - Smt. Bhartiben Prahalad bhai Sewani vs DCIT Asst.Year – 2011-12
“4. With assistance of the ld.representatives, we have gone through the record carefully. In the case of Snita Transport P.Ltd. (supra), Hon’ble jurisdictional High Court has observed that while issuing notice under section 271(1)(c) r.w.s. 274 provide an opportunity to explain as to why penalty be not imposed. If an Assessing Officer used expression “or” in between the concealment of income/furnishing inaccurate particulars, then that show cause notice be not fatal to the proceedings, but while visiting the assessee with penalty the ld.AO ought to have - 3 - recorded a specific finding, for which breach, he has visited the assessee with penalty i.e. whether he has visited the assessee with penalty for concealment of income or furnishing inaccurate particulars of income. In the penalty order he cannot use both the expression. The discussion made by the Hon’ble Court in para-9 is worth to note. It reads as under:
“9. Regarding the contention that the Assessing Officer was ambivalent regarding under which head the penalty was being imposed namely for concealing the particulars of income or furnishing inaccurate particulars, we may record that though in the assessment order the Assessing Officer did order initiation of penalty on both counts, in the ultimate order of penalty that he passed, he clearly held that levy of penalty is sustained in view of the fact that the assessee had concealed the particulars of income. Thus insofar as final order of penalty was concerned, the Assessing Officer was clear and penalty was imposed for concealing particulars of income. In light of this, we may peruse the decision of this Court in case of Manu Engineering Works (supra). In the said decision, the Division Bench came to the conclusion that language of "and/or" may be proper in issuing a notice for penalty, but it was incumbent upon the Assessing Authority to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by them. If no such clear cut finding is reached by the authority, penalty cannot be levied. It was a case in which in final conclusion the authority had recorded that "I am of the opinion that it will have to be said that the assessee had concealed its income and/or that it had furnished inaccurate particulars of such income." It was in this respect the Bench observed that "Now the language of "and/or" may be proper in issuing a notice as to penalty order or framing of charge in a criminal case or a quasi-criminal case, but it was incumbent upon the IAC to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. No such clear cut finding was reached by the IAC and, on that ground alone, the order of penalty passed by the IAC was liable to be struck down."
If the penalty order is perused in the light of the judgment of Hon’ble jurisdictional High Court, then it will reveal that the ld.AO was - 4 - not specific in his finding for which he has visited the assessee with penalty. Therefore, this order is not in line of law laid down by the Hon’ble jurisdictional High Court, and hence not sustainable. The ld.CIT(A) has erred in upholding this order of the AO. We allow this appeal of the assessee and quash the penalty order.
- 5 - Smt. Bhartiben Prahalad bhai Sewani vs DCIT Asst.Year – 2011-12
In the result, appeal of the assessee is allowed.”
In a nut shell it appears from the penalty orders that the Learned AO has not levied the penalty on the specific charge as mandated u/s 271 (1)(c) of the Act. In such facts and circumstances the Hon'ble Jurisdictional High Court in the case of Snita Transport Pvt. Ltd. Vs. Assistant Commissioner of Income Tax reported in 42 taxmann.com 54 has held that penalty cannot be imposed without mentioning the specific charge. The relevant extract of the order is reproduced below: “9. Regarding the contention that the Assessing Officer was ambivalent regarding under which head the penalty was being imposed namely for concealing the particulars of income or furnishing inaccurate particulars, we may record that though in the assessment order the Assessing Officer did order initiation of penalty on both counts, in the ultimate order of penalty that he passed, he clearly held that levy of penalty is sustained in view of the fact that the assessee had concealed the particulars of income. Thus insofar as final order of penalty was concerned, the Assessing Officer was clear and penalty was imposed for concealing particulars of income. In light of this, we may peruse the decision of this Court in case of Manu Engineering Works (supra). In the said decision, the Division Bench came to the conclusion that language of "and/or" may be proper in issuing a notice for penalty, but it was incumbent upon the Assessing Authority to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by them. If no such clear cut finding is reached by the authority, penalty cannot be levied. It was a case in which in final conclusion the authority had recorded that "I am of the opinion that it will have to be said that the assessee had concealed its income and/or that it had furnished inaccurate particulars of such income." It was in this respect the Bench observed that "Now the language of "and/or" may be proper in issuing a notice as to penalty order or framing of charge in a criminal case or a quasi-criminal case, but it was incumbent upon the IAC to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. No such clear cut finding was reached by the IAC and, on that ground alone, the order of penalty passed by the IAC was liable to be struck down."
The principles laid down by the Hon’ble Jurisdictional High Court in the above case are squarely applicable to the facts of the case in hand. At the cost of repetition we observe that the AO has not mentioned the specific charge in its penalty orders whether it was levied for concealment of income or for furnishing inaccurate particulars of income.
- 6 - Smt. Bhartiben Prahalad bhai Sewani vs DCIT Asst.Year – 2011-12 Therefore, respectfully relying upon the ratio laid down by the Jurisdictional High Court, we are of the opinion that the penalty levied by the AO and confirmed by the Learned CIT (A) is not sustainable in the eye of law. The penalty, therefore, is deleted. Hence, the ground of appeal of the assessee is allowed.