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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD
आदेश/O R D E R
PER PRADIP KUMAR KEDIA - AM: The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals), Gandhinagar (‘CIT(A)’ in short), dated 12.09.2016 arising in the penalty order dated 20.03.2015 passed by the Assessing Officer (AO) under S. 271(1)(c) of the Income Tax Act, 1961 (the Act) concerning AY 2010-11.
ITA No.3021/Ahd/16 [Dilipbhai A. Patel vs. ITO] A.Y. 2010-11 - 2 -
The captioned appeal of the assessee seeks to assail the imposition of penalty of Rs.77,705/- imposed by the AO under s.271(1)(c) of the Act and confirmed by the CIT(A).
When the matter was called for hearing, the learned AR for the assessee at the outset referred to the assessment order and submitted that the satisfaction was formed by the AO for concealment of particulars of income while passing the assessment order under s.143(3) of the Act. However, while imposing the penalty under s. 271(1)(c) of the Act, the AO has charged the assessee with default in the form of furnishing inaccurate particulars of income to the extent of Rs.4,77,102/-. The learned AR thus contended that in the absence of the continuity in the formation of satisfaction, the penalty under s. 271(1)(c) of the Act is not sustainable. For this proposition, the learned AR referred to the decision of the co-ordinate bench of Tribunal in Hatish Prabhudas Chaudhary vs. ITO ITA No. 3557/Ahd/2016 order dated 19.06.2018.
The learned DR, on the other hand, relied upon the appellate order of the CIT(A).
We have heard the rival submissions on the legal issue raised on behalf of the assessee. In the absence of proper satisfaction about the nature of default committed by the assessee, the penalty is not sustainable in law. We find that the aforesaid legal issue has been dealt with by the co-ordinate bench in following terms:
“9. We have carefully considered rival submissions and perused the assessment order, penalty order and the first appellate order in penalty proceedings. The material referred in the course of hearing was also perused. As noted above, the controversy revolves around the maintainability of penalty on income by way of short term capital gain not included in the return of income but offered for taxation in the course of scrutiny proceedings. In this regard, it is noted that the assessee has
ITA No.3021/Ahd/16 [Dilipbhai A. Patel vs. ITO] A.Y. 2010-11 - 3 -
readily offered the income on sale in the course of assessment proceedings and paid taxes thereon. No doubt, it is the bounden duty of an assessee to offer the income chargeable to tax in the return of income itself. The assessee has filed revised computation after the issuance of scrutiny notice seeking pertinent details including bank statement which could have easily unearthed the capital gains not offered thus far. However, this by itself will not, in our view, propel a reasonable person to draw an inflexible inference that omission was deliberate. The totality of circumstances is required to be gauged. The intention requires to be seen from the conduct of the assessee. The assessee herein is a technical person and may not necessarily know the complicated tax laws. A perusal of land sale agreement suggests that the land was in the nature of agricultural land the gain on sale of which, under the popular belief, is not taxable. However, on objective consideration, it was found that such agricultural land was also required to undergo agricultural operations, which was missing in the present case. In these circumstances, the assessee acting on legal advice, readily came forward and offered the capital gains without resorting to litigation. On weighing the circumstances, we are of the view that the onus of bonafide therefore, in our view, is broadly discharged. The strict provisions of Section 271(1)(c) of the Act should not apply in these facts. Couple with this, we simultaneously notice that the action of the AO is quite vague. The ‘satisfaction’ in the course of the assessment was formed for alleged ‘furnishing of inaccurate particulars of income’. The penalty notice does not specify the nature of default and thus suffers from vice of ambiguity. The AO, however, in departure with the satisfaction formed in the assessment proceedings, went on to impose penalty on a different ground i.e. concealment of particulars of income. Ostensibly, the original basis of initiation of penalty has been altered in a significant way by the AO himself by imposing the penalty. The basis for formation of satisfaction, thus, was altered and rendered nonexistent. Hence, in the absence of continuity in the satisfaction of the AO at the quantum stage vis-à-vis penalty stage, the penalty order passed by the AO is liable to be struck down on this ground also. For such a view, we may usefully refer to the decision of the Hon’ble Gujarat High Court in the case of New Sorathia Engineering Co. (supra) as well as another decision of the Hon’ble Gujarat High Court in the case of CIT vs. Manu Engineering Works (1980) 122 ITR 306 (Guj). Thus, in totality, penal action under s.271(1)(c) of the Act is not sustainable in law.”
In parity with the view taken as quoted above, we find force in the plea of the assessee that where the penalty has been imposed on a ground different from the ground for which the penalty was originally initiated, the imposition of penalty is vitiated in law. It is apparent that the satisfaction of the AO in the penalty proceedings is not consistent with that of the satisfaction formed in the course of quantum assessment. Therefore, in parity with the view taken by the co-ordinate bench, the penalty imposed is liable to be struck down on
ITA No.3021/Ahd/16 [Dilipbhai A. Patel vs. ITO] A.Y. 2010-11 - 4 -
this score alone. Accordingly, we set aside the first appellate order passed by the CIT(A) in this regard and direct the AO to delete the penalty.
In the result, appeal of the assessee is allowed.
This Order pronounced in Open Court on 25/04/2019
Sd/- Sd/- (MAHAVIR PRASAD) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: Dated 25/04/2019 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।