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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED&
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & Ms. MADHUMITA ROY, JUDICIAL MEMBER ITA No. 98/RJT/2018 (Assessment Year : 2012-13) M/s. Maruti Sales Corporation Vs. ITO Nevil 2, Gundawadi, Ward-2(1)(3), Rajkot Rajkot [PAN No. AAU FM2 490 G] (Appellant) .. (Respondent)
Appellant by : Shri Kalpesh Doshi, A.R. Respondent by : Shri Suhas Mistry, Sr. D.R.
Date of Hearing 18.10.2019 Date of Pronouncement 27.11.2019 O R D E R PER Ms. MADHUMITA ROY – JUDICIAL MEMBER: The instant appeal filed by the Assessee is directed against the order dated 21.12.2017 passed by the Commissioner of Income Tax (Appeals) - 2, Rajkot arising out of the order dated 24.09.2015 passed by the ITO Ward-2(1)(3), Rajkot under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) for the Assessment Year (A.Y.) 2012-13.
The case of the assessee was reopened on 07.10.2013 by issuing notice under section 148 of the Act after recording reason which ultimately finalized under section 143(3) r.w.s. 147 of the Act by determining total income at Rs.
- 2 - ITA No.98/RJT/2018 M/s. Maruti Sales Corporation vs. ITO Asst.Year – 2012-13 4,36,848/- at 8% of the gross receipt of Rs. 54,60,596/- in terms of the provision of Sec. 44AD of the Act on 20.03.2015. Consequently, penalty proceeding was initiated under section 271(1)(c) of the Act and the show-cause notice dated 27.08.2015 was issued by the ITO ward-2(1)(3), Rajkot for concealment of particulars of income or furnishing of inaccurate particulars of income by the assessee. Such penalty proceeding was finalized by the concerned officer by levying penalty of Rs. 1,34,987/- for concealment of particulars of income or furnishing of inaccurate particulars of income by the assessee on 24.09.2015 which was, in turn, confirmed by the first appellate authority. Hence, the instant appeal before us.
At the time of hearing of the instant appeal the Ld. Counsel appearing for the assessee submitted before us that the penalty proceeding does not fulfill the criteria laid down u/s 271(1)(c) of the Act. Specific charge, though requires to be mentioned in the show-cause notice as to whether the guilty for concealment of income or for inaccurate particulars of income has been committed by the assessee as held by different High Courts has not been specifically alleged. Furthermore, the Learned AO while imposing penalty mentioned both the limbs being furnishing of inaccurate particulars of income and concealment of income, which is vague and ambiguous too and hence the penalty is invalid and liable to be quashed as argued by the Ld. AR. He further argued that 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. 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
- 3 - ITA No.98/RJT/2018 M/s. Maruti Sales Corporation vs. ITO Asst.Year – 2012-13 reported in 42 taxmann.com 54 where it was held that while imposing penalty u/s 271(1)(c) of the Act the AO should apply his mind and it should be definite 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 in default the penalty be quashed.
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 ITA No.1570/Ahd/2017 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 Learned CIT(A) while confirming the order levying penalty alleged on account of both counts again failed to apply his mind towards the legal bar imposed by different courts as submitted by the Learned AR. He, therefore, prays for quashing of the order of penalty before us. On the contrary the Learned DR relied upon the orders 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 admittedly has not specified the guilt committed by the assessee for such penalty as already discussed by us while dealing with facts of the case hereinabove.
The particular lacuna found in the proceeding more particularly in the order imposing penalty are as follows:
- 4 - ITA No.98/RJT/2018 M/s. Maruti Sales Corporation vs. ITO Asst.Year – 2012-13
The show-cause notice dated 27.08.2015 was issued appearing at Page 4 of the Paper Book filed before us does not specify the allege guilt committed by the assessee rather it speaks as follows:- “2. Whereas during the course of assessment proceedings for A.Y. 2012-13 a notice u/s. 271(1)(c) r.w.s. 274 of the I.T. Act, had been issued on 20.03.2015 and served upon your for concealed the particulars of your income or furnished inaccurate particulars of such income.”
Further that in the order imposing penalty the Ld. ITO in its penaltimate paragraph while dealing with the guilt committed by the assessee clubbed both the limbs being furnishing of inaccurate particulars of income and concealment of income too, the relevant portion whereof is as follows:- “It is undisputed fact that the default was detected during the course of scrutiny Assessment. If the case was ot selected for scrutiny than the offence/default would have not been detected. The assessee has committed default within the meaning of penalty u/s. 271(1)(c) of the Income-tax Act, has concealed the particulars of his income or furnished inaccurate particulars of such income. Hence, I am satisfied that the assessee has committed default within the meaning of section 271(1)(c) of the Income-tax Act and accordingly, penalty is levied on the part of the income. I levy penalty of Rs. 1,34,987/- being 100% of tax sought to be evaded as against the maximum 300% leviable of Rs. 4,04,961/-.” 6. Further this particular aspect of the matter is neither been considered even at the appellate stage by the Ld. CIT(A). Thus, this is an admitted position that the authorities below has failed to come to a definite finding regarding the charge/guilt committed by the assessee as mandated under section 271(1)(c) of the Act while either issuing of show-cause under section 271(1)(c) r.w.s. 274 of the Act or at the final stage of issuing penalty both of which suffer from ambiguity in the light of the judgment passed in the matter of Snita Transport Pvt. Ltd.-vs-ACIT reported in
- 5 - ITA No.98/RJT/2018 M/s. Maruti Sales Corporation vs. ITO Asst.Year – 2012-13 42 taxmann.com 54 whereby and whereunder the principle of specifying the guilt committed by the assessee in the show-cause under section 271(1)(c) as well as in the penalty order by the AO has been directed to be applied. 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 principle laid down by the Hon’ble Jurisdictional High Court in the above case is 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 as to whether it was levied for concealment of income or for furnishing inaccurate particulars of income. No such definite finding is reflecting from the orders impugned before us. Therefore, in our considered view, the
- 6 - ITA No.98/RJT/2018 M/s. Maruti Sales Corporation vs. ITO Asst.Year – 2012-13 penalty levied by the AO and confirmed by the Learned CIT (A) is not sustainable in the eye of law. The penalty is, thus, deleted. Hence, the ground of appeal of the assessee is allowed.
As we have deleted the penalty imposed by the Learned AO & confirmed by the Learned CIT(A) on the technical ground, i.e. no specific charge has been allowed as discussed above, we are inclined to refrain ourselves from adjudicating the grounds of appeal of assessee raised on merits.
In the result, assessee’s appeal is allowed. This Order pronounced in Open Court on 27/11/2019
Sd/- Sd/- (Ms. MADHUMITA ROY) (WASEEM AHMED) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 27/11/2019 TANMAY आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A) – 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण,राजोकट/DR,ITAT, Rajkot 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, राजोकट / ITAT, Rajkot