EXPRESS CLINICS PRIVATE LIMITED,,PUNE vs. INCOME-TAX OFFICER,, PUNE

The assessee has filed additional ground of appeal challenging levy of penalty u/s. 271(1)(c) on the legal issue of ambiguity in mentioning the charge at the time of initiating penalty proceedings.

Shri Kishor Phadke appearing on behalf of the assessee submitted that the assessee provides specialty and super specialty clinic services. In assessment proceedings for assessment year 2012-13 certain additions were made by the Assessing Officer. The Assessing Officer initiated penalty proceedings u/s. 271(1)(c) qua disallowance of expenditure amounting to Rs.63,25,314/-. The Assessing Officer while recording satisfaction for initiating penalty has invoked both the limbs of section 271(1)(c) i.e. “concealment of income” and “furnishing inaccurate particulars of income”. Thereafter, while passing the penalty order u/s. 271(1)(c) dated 23-09-2015 the Assessing Officer levied penalty for “furnishing inaccurate particulars of income”. The Assessing Officer at the time of recording satisfaction was not clear in his mind about precise charge to be invoked for initiating penalty proceedings. The ld. AR submitted that in the light of decision of Hon’ble Bombay High Court in the case of Commissioner of Income Tax Vs. Samson Perinchery reported as 392 ITR 4 and the decision of Hon’ble Karnataka High Court in the case of Commissioner of Income Tax Vs. Manjunatha Cotton & Ginning Factory reported as 359 ITR 565, penalty proceedings are liable to be quashed.

On the other hand Shri Vishwas Mundhe representing the Department vehemently defended the assessment order. The ld. DR submitted that the Assessing Officer while passing order u/s. 271(1)(c) has mentioned specific charge i.e. furnishing inaccurate particulars of income and the same charge has also been mentioned while recording satisfaction

Both side heard. Orders of the authorities below perused. The assessee in appeal has assailed levy of penalty on legal issue of defect in recording satisfaction for initiating penalty proceedings. A perusal of assessment order dated 31-03-2015 passed u/s. 143(3) of the Act reveal that the Assessing Officer has initiated penalty proceedings u/s. 271(1)(c) in respect of addition of Rs.63,25,214/- on account of disallowance of expenditure. While recording satisfaction for initiating penalty, the Assessing Officer has observed : “14. Accordingly, a net addition of Rs.63,25,314/- has been made to the total income declared by the assessee as mentioned earlier. Since the assessee has concealed these particulars of its income by furnishing inaccurate particulars thereof. I am satisfied that it has committed default within the meaning of section 271(1)(c) of the I.T. Act, 1961. Penalty proceedings u/s. 271(1)(c) has, therefore, been initiated separately.”

Thereafter, while concluding the assessment order the Assessing Officer has again made reference to initiation of penalty proceedings for issuance of notice u/s. 274 r.w.s. 271(1)(c) of the Act reads as under : “Issued notice u/s. 274 r.w.s. 271(1)(c) of the I.T. Act, 1961 for concealment of income as discussed in the body of order.”

A bare perusal of satisfaction recorded by the Assessing Officer during assessment proceedings shows that the Assessing Officer was not clear in his mind; Whether the penalty proceedings u/s. 271(1)(c) are to be initiated on the charge of concealment of income or furnishing of inaccurate particulars of income. In para 14 of the assessment order the Assessing Officer has mentioned both the charges and in concluding

Thereafter, the Assessing Officer vide order dated 23-09-2015 levied penalty u/s. 271(1)(c) for furnishing inaccurate particulars of income. The ambiguity in the mind of Assessing Officer is apparent writ large at the time of recording satisfaction as well as at the time of levy of penalty. There is no coherence of the charge for levy of penalty at the time of recording satisfaction and at the time of levy of penalty.

The Hon’ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Samson Perinchery (supra) has held that where satisfaction has been recorded on one ground and penalty is levied on another, such penalty order bad in law. The relevant extract of the order of Hon’ble High Court reads as under : “6. The above submission on the part of the Revenue is in the face of the decision of the Supreme Court in Ashok Pai v/s. CIT 292 ITR 11 [relied upon in Manjunath Cotton & Ginning Factory (supra)] – wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act, carry different meanings/ connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/ permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice.”

Thus, not mentioning of specific charge would lead to ambiguity in recording of satisfaction for initiating penalty proceedings. This would render penalty order bad in law and as such the same is liable to be

In the result, appeal of assessee is allowed.