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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED&
PER Ms. MADHUMITA ROY – JUDICIAL MEMBER:
The bunch of appeals filed by different Assessees are directed against the order dated 24.06.2014 passed by the Commissioner of Income Tax (Appeals) - I, Rajkot arising out of the order passed by the ITO, Ward-1(4) under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) for the Assessment Year (A.Y.) 2007-08 consequential to a search action carried out under section 132 of the Act dated 22.12.2006. Since, all the cases are relating to the identical issue arising out of the common search proceeding conducted on 22.12.2006 under section 132 of the Act the appeals are heard analogously and are being disposed of by a common order.
ITA No. 443/Rjt/2014 for A.Y. 2007-08 is taken as the lead case. The assessment under section 143(3) of the Act in regard to the assessee was finalized upon assessment of the long-term capital gain in regard to the sale of land at Rs. 1,43,63,312/- as against Rs. 52,07,005/- as worked out by the assessee in the return of income. Penalty proceeding under section 271(1)(c) was also initiated by the Ld. AO. Such penalty proceeding was ultimately finalized by the concerned officer upon levying penalty of Rs. 15,11,885/- under section 271(1)(c) of the Act for concealment of income and furnishing of inaccurate particulars of income which was, in turn, confirmed by the Ld. CIT(A). 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 ITA Nos.443,444,445 & 446/RJT/2014 Asst.Year – 2007-08 down u/s 271(1)(c) of the Act. Specific charge though requires to be mentioned in the show-cause notice as to whether for concealment of income or for inaccurate particulars of income 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 urged by the Ld. AR. The Learned AO since neither specified the alleged guilt committed by the assessee by furnishing of inaccurate particulars of income or concealment of income the same is nothing but non application of mind as submitted by the Learned AR. In support of his argument, Learned AR relied upon the judgment passed by the Hon’ble Juri ictional High Court in the matter of Snita Transport Pvt. Ltd-vs-ACIT reported in 42 taxmann.com 54. 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 bars 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 vehemently argued that this technical ground of maintainability of the penalty proceeding has not been taken either before the Ld. CIT(A) or before us by way of specific ground and hence the same cannot be considered by us at this stage. Finally, Ld. DR relied upon the orders passed by the authorities below. ITA Nos.443,444,445 & 446/RJT/2014 Asst.Year – 2007-08
We have heard the respective parties, we have also perused the relevant materials available on record.
The crux of the matter is this that the penalty proceeding was initiated against the assessee on both the limbs being for concealment of income and for furnishing of inaccurate particulars of income which was culminated into an order imposing penalty that too on both the limbs by the authorities below which is contrary to the provision of Sec. 271(1)(c) of the Act and hence the entire penalty proceeding is liable to be quashed.
This ground of maintainability of the penalty proceeding though has not been taken up before Ld. CIT(A) or before us by the assessee, since this is a point of law and further it touches the very integral part of the issue involved in the matter, the same can be entertained by us in terms of various judgment pronounced by different court of law including the Apex Court and in that view of the matter we find no merit in the argument advanced by the Ld. DR for rejection of the said ground argued by the Ld. AR.
Admittedly the penalty proceeding was initiated by the Ld. AO under section 271(1)(c) of the Act for furnishing of inaccurate particulars and concealment of income which has also been recorded by the Ld. ITO at Page 3 of the penalty order dated 19.03.2014. Further that the Ld. ITO imposed the penalty of Rs. 15,11,885/- upon being satisfied on both the limbs of guilt committed by the assessee being concealment of income and furnishing of inaccurate particulars of income under section 271(1)(c) of the Act. But Sec. 271(1)(c) puts the bar in initiating as well as levying penalty on both the limbs by the revenue and restricted initiation and imposition of penalty on the specific guilt committed by the assessee, either for concealment on income or for furnishing of inaccurate particulars of income. ITA Nos.443,444,445 & 446/RJT/2014 Asst.Year – 2007-08
This is an admitted position that the authorities below has failed to specify the charges as mandated under section 271(1)(c) of the Act at the time of 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 and thus the same suffers from ambiguity in regard to the alleged guilt committed by the assessee in the light of the judgment passed in the matter of Snita Transport Pvt. Ltd.-vs-ACIT, reported in 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 hereinbelow:
“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 Juri ictional High Court in the above case are squarely applicable to the facts of the case in hand. At the cost of repetition we ITA Nos.443,444,445 & 446/RJT/2014 Asst.Year – 2007-08 observe that the AO has not mentioned the specific charge/guilt in its penalty orders whether it was levied for concealment of income or for furnishing inaccurate particulars of income. Therefore, in our considered view, 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.
As we have deleted the penalty imposed by the Learned AO & confirmed by the Learned CIT(A) on this technical ground, i.e. no specific charge has been invoked as discussed above, we are inclined to refrain ourselves from adjudicating the grounds of appeal of assessee raised on merits.
ITA Nos. 444 to 446/RJT/2014(A.Y. 2007-08):-
The ground of appeal on maintainability of penalty proceeding as argued by the Ld. AR are identical to that of the issues already been dealt with by us in ITA No. 443/Rjt/2014 for A.Y. 2007-08 and in the absence of any changed circumstances the same shall apply mutatis mutandis. Hence, these grounds of appeal preferred by the assessee are allowed.
In the result, all the appeals filed by the separate assessee are allowed. This Order pronounced in Open Court on 19/11/2019 (Ms. MADHUMITA ROY) JUDICIAL MEMBER Ahmedabad; Dated 19/11/2019 TANMAY, Sr. PS ITA Nos.443,444,445 & 446/RJT/2014 Asst.Year – 2007-08
आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant
""यथ" / The Respondent. 3. संबं"धत आयकर आयु"त / Concerned CIT 4. आयकर आयु"त(अपील) / The CIT(A) –
"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 //// उप/सहायक पंजीकार (Dy./Asstt.