KALWAN MERCHANTS CO-OP BANK LTD,,NASHIK vs. ASSISTANT COMMISSIONER OF INCOME TAX,, NASHIK

आदेश / ORDER

PER ANIL CHATURVEDI, AM :

Assessee is a Co-operative Bank who filed its return of income for A.Y. 2010-11 on 04.10.2010 declaring total income at Rs.1,06,24,630/-. The case was selected for scrutiny and thereafter

assessment was framed u/s 143(3) of the Act vide order

dt.07.03.2013 and the total income was determined at

Rs.1,36,74,270/- inter-alia by making additions of Rs.8,57,368/- on

account of excess claim of deduction u/s 36(i)(viia) and

Rs.4,42,168/- on account of interest on building fund, reserve fund

and deposits etc. On the aforesaid additions, AO vide order dt.

22.01.2016 passed u/s 271(1)(c) of the Act levied penalty of

Rs.4,01,556/- u/s 271(1)(c) of the Act. Aggrieved by the order of AO,

assessee carried the matter before Ld.CIT(A), who vide order

dt.16.03.2017 (in appeal No.Nsk/CIT(A)-1/1691/2015-16) dismissed

the appeal of the assessee. Aggrieved by the order of Ld.CIT(A),

assessee is now in appeal before us and has raised the various

grounds. The grounds being argumentative in nature are not re-

produced but the sole controversy of the assessee is with respect to

levy of penalty u/s 271(1)(c) of the Act.

passing the assessment order and while recording satisfaction, AO

was not clear as to whether the assessee had furnished inaccurate

particulars of income or concealment of income, more so as he has

recorded satisfaction for concealment of income as well as for

furnishing of inaccurate particulars of income and in support of his

contention, he pointed to Para 5.4 of the assessment order.

Thereafter, he submitted that in the penalty order also, AO has not

specified whether the penalty is for concealment of income or for

furnishing of inaccurate particulars of income and had levied penalty

on both the limbs. He therefore, relying on the decision of Hon’ble

Bombay High Court in the case of CIT Vs. Samson Perinchery

reported in (2017) 392 ITR 4 (Bom) submitted that in the absence of

proper show cause notice to assessee, penalty u/s 271(1)(c) cannot be

levied and therefore urged that penalty levied by AO be deleted.

Ld.D.R. on the other hand, supported the order of lower authorities.

on record. The issue in the present case is with respect to levy of

penalty u/s 271(1)(c) of the Act. Before us, Ld.A.R. submitted that

while framing the assessment u/s 143(3) of the Act, AO had made

additions of Rs.8,57,368/- on account of excess claim of deduction

u/s 36(i)(viia) of the Act and Rs.4,42,168/- on account of interest on

building fund, reserve fund and deposits etc. The perusal of

assessment order passed u/s 143(3) of the Act reveals that in the

assessment order AO had not recorded clear satisfaction as to

whether assessee had furnished inaccurate particulars of income or

has concealed particulars of income, more so he has recorded

satisfaction for concealment of income as well as for furnishing of

inaccurate particulars of income. Thereafter, in the penalty order

passed u/s 271(1)(c) of the Act, AO had levied penalty for concealment

of income as well as for furnishing inaccurate particulars of income.

It is a settled law that while levying penalty, the AO has to record

clear satisfaction and thereafter come to a finding in respect of one of

the limbs, which is specified under section 271(1)(c) of the Act. The

first step is to record satisfaction while completing the assessment as

to whether the assessee had furnished inaccurate particulars of

income or concealed his income. Thereafter, notice u/s 274 read with

Section 271(1)(c) of the Act is to be issued to the assessee. The

Assessing Officer thereafter has to levy penalty under Section

271(1)(c) of the Act for non-satisfaction of either of the limbs. While

completing the assessment, the Assessing Officer has to come to a

finding as to whether the assessee has concealed his income or

furnished inaccurate particulars of income. The Hon’ble Bombay High

Court in CIT Vs. Shri Samson Perinchery (supra) held that where

initiation of penalty is one limb and the levy of penalty is on other

limb, then in the absence of proper show cause notice to the assessee,

there is no merit in levy of penalty.

decision of Hon’ble Bombay High Court in the case of Samson

Perinchery (supra), we are of the view that in the present case, the

basic condition for levy of penalty has not been fulfilled and that the

penalty order suffers from non-exercising of jurisdiction power and

therefore penalty order cannot be upheld. We accordingly set aside

the penalty order passed by AO. Thus, the ground of assessee is

allowed.

Order pronounced on 12th day of September, 2019.

Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 12th September, 2019. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to :

आदेशानुसार/ BY ORDER

// True Copy // व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.