UKAY METAL INDUSTRIES PVT.LTD,NASHIK vs. ASSISTANT COMMISSIONER OF INCOME-TAX,

आदेश / ORDER

PER ANIL CHATURVEDI, AM :

This appeal filed by the assessee is emanating out of the order 1. of Commissioner of Income Tax (A) – 1, Nashik dated 20.09.2016 for the assessment year 2012-13.

Assessee is a Company stated to be engaged in the manufacturing of Front Grill, Instrument Panel, Spair, Wheel Cover, Seat Foam etc. Assessee filed its return of income on 30.09.2012 for

A.Y. 2012-13 declaring total income at Rs.2,63,47,430/-. The case

was selected for scrutiny and thereafter assessment was framed u/s

143(3) of the Act vide order dt.23.02.2015 and the total income was

assessed at Rs.2,82,85,502/- inter-alia by making various

disallowances including disallowance of Rs.17,79,699/- which was

not capitalized to plant and machinery by the assessee. On such

disallowance of Rs.17,79,699/- AO vide order dt.27.08.2015 passed

u/s 271(1)(c) of the Act levied penalty of Rs.5,77,430/-. Aggrieved

with the penalty order of AO, assessee carried the matter before

Ld.CIT(A), who vide order dt.20.09.2016 (in appeal No.Nsk/CIT(A)-

1/445/2015-16) dismissed the appeal of assessee. Aggrieved by the

order of Ld.CIT(A), assessee is now in appeal before us and has raised

the following effective ground :

“ On the facts and in the circumstances of the case and in law, the lower authorities have erred in levying the penalty of Rs.5,77,480/- u/s 271 (1)(c) of the Act by disregarding appellant's contention that the claim made under repairs and maintenance of machinery was capitalized by Learned Assessing Officer is merely change in accounting treatment and similarly by ignoring the ratio laid down by Hon'ble Supreme Court in the case of Reliance Petro Product 322 ITR 158(SC), the appellant prays for deletion of penalty.”

assessee is with respect to levy of penalty u/s 271(1)(c) of the Act.

u/s 143(3) of the Act, AO had made addition of Rs.17,79,699/- on

account of expenses which are not capitalized by the assessee to the

plant and machinery. He submitted that in the assessment order no

satisfaction has been recorded by the AO as to whether the penalty

has been levied on account of furnishing of inaccurate particulars of

income or it was a case of concealment of income. He submitted that

in the penalty order passed u/s 271(1)(c) of the Act dated 27.08.2015

AO levied penalty of Rs.5,77,430/- for “furnishing of inaccurate

particulars of income” as well as for “concealment of income” i.e., for

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 when passing

assessment order no satisfaction for levy of penalty was recorded but

in the penalty order when penalty was levied for concealment of

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

then in the absence of proper show cause notice to assessee and in

the absence of recording of proper satisfaction, penalty u/s 271(1)(c)

cannot be levied. He therefore submitted 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. In the present case, penalty of

Rs.5,77,430/- has been levied on addition of Rs.17,79,799/- on

account of expenses which were not capitalized by the assessee to the

Plant and Machinery. The perusal of assessment order reveals that

no satisfaction has been recorded by the AO as to whether the penalty

has been levied on account of furnishing of inaccurate particulars of

income or it was a case of concealment of income. Thereafter, in the

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

for “furnishing of inaccurate particulars of income” as well as for

“concealment of income” i.e., for both the limbs. It is a settled law

that while levying penalty for concealment, the AO has to record

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 concealed its income or furnished

inaccurate particulars of 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 its income or

furnished inaccurate particulars of income. The Hon’ble Bombay

High Court in CIT Vs. Shri Samson Perinchery reported in (2017) 392

ITR 4 (Bom) 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.

has not recorded any satisfaction in the assessment order but had

levied penalty for “furnishing of inaccurate particulars of income” as

well as for “concealment of income” i.e., for both the limbs.

Considering the aforesaid facts in the light of the 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 of AO 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 26th day of June, 2019.

Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 26th June, 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.