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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: SH. N.S.SAINI & SH. N.K.CHOUDHRY
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. N.S.SAINI, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA Nos.61 & 62(Asr)/2018 Assessment Year:2009-10 & 2011-12
Guru Gobind Singh Vs. Income Tax Officer Educational Society, (Exemptions), Village and Post Office, Ward, Jalandhar. Bhaloor Moga. [PAN: AABTG 2865L] (Appellant) (Respondent)
Appellant by: Sh. P.N. Arora (Ld. Adv.) Respondent by: Sh. M.P. Singh (Ld. CIT-DR) Date of hearing: 19.02.2019 Date of pronouncement: 20.02.2019
ORDER PER N.K.CHOUDHRY, JM: These appeals have been preferred by the Assessee/Appellant against the orders impugned herein dated 15.12.2017 passed by the Ld. CIT(A)-4, Ludhiana u/s 250(6) of the Income Tax Act, 1961 (hereinafter called as ‘the Act’).
Legal issue in both the appeals is identical and similar, therefore for the Sake of brevity, facts of ITA no. ITA Nos.61 (Asr)/2018 have been taken into consideration and result of the same should apply mutatis-mutandis to ITA Nos. 62(Asr)/2018.
The assessee has raised the following grounds of appeal.
“1. That the penalty order thereby levying penalty at Rs.12,00,248/- u/s 271 (1)(c) of the IT Act, 1961, passed by the Assessing Officer as well as the
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order of Learned CIT(A) thereby confirming the same are both against the facts of the case and are untenable in
That the AO has not allowed any reasonable opportunity of being heard before levying the penalty of Rs.12,00,248/- u/s 271(1 )(c) of the IT Act, 1961. Similarly, the worthy C1T(A) has grossly erred in confirming the action of the AO in levying penalty of Rs.12,00,248/- and that too without assuming jurisdiction as per law. As such the penalty order is bad in law and is liable to be cancelled.
That the Ld CIT(A) has erred in not cancelling the penalty order passed by the AO which is beyond his jurisdiction and the impugned order has been confirmed without considering the submissions of the assessee and without placing any adverse material on record against the assessee. The written submissions submitted before the CIT(A) are made part & parcel of grounds of appeal.
That the worthy CIT(A) has erred in confirming the penalty order without appreciating the fact that, the notice u/s 274 r.w.s. 271(1 )(c) did not specify the default or limb under which the penalty notice has been issued and it was observed in the show cause notice as under:-
"Have concealed the particulars of your income and have furnished inaccurate particulars of such income. ”
The Ld. CIT(A) though this point was specifically raised in the written submissions as well as at the time of arguing the appeal before the CIT(A), the CIT(A) has not adjudicated on this issue. Thus both the initiation of penalty as well as levy of penalty are bad in the eyes of law and the CIT(A) has grossly erred in confirming the same without appreciating the facts of the case and as such the order is bad in law and the same is liable to be cancelled.
That the CIT(A) did not appreciate that while completing the assessment vide order dated the Ld AO has observed in the assessment order as under:- “ Penalty proceedings for furnishing inaccurate particulars of income initiated u/s 271(l)(c) of the Act, 1961. ” Whereas the AO while levying the penalty has observed as under:-
“I am of the opinion that the assessee society has concealed particulars of income and furnished inaccurate particulars of the income to the tune of Rs. 3884300/-. Therefore I hold that it is a fit case for imposition of penalty u/s 271(1) (c) and imposed penalty of Rs. 12,00,248/- @ 100% of the tax sought to be made. ” Thus it is a clear case where there was no application of mind at the time of levy of penalty and no reasonable opportunity of being heard was allowed. Similarly the C1T(A) has grossly erred in confirming the order of the AO without application of mind.
That the Ld CIT(A) failed to appreciate that even on merits no penalty is at all called for and this case does not fall within the mischief of section
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271(1 )(c) of the IT Act, 1961. As such the penalty order is bad in law and the same is liable to be cancelled.”
The assessee challenged the penalty order on various grounds. In the instant case, the AO initiated penalty under section 271(1)(c) of the Act for ‘concealing the particulars of Income and thereafter issued the notice u/s 274 without specifying the limb of the penalty imposable and finally imposed the penalty for both of the limbs i.e. concealment of particulars of income and furnishing of inaccurate particulars of the income, therefore we find it appropriate to decide the legal issue involved in the instant case, instead of going into merits and analyzing the facts and decisions relied upon by the parties.
Hon'ble Apex Court in case of M/s. SSA's Emerald Meadows, (2016) 73 taxmann.com 248(SC) dismissed the Special Leave Petition filed by the Revenue against the judgment rendered by Hon'ble High Court of Karnataka whereby identical issue was decided in favour of the assessee. Operative part of the judgment in case of M/s. SSA's Emerald Meadows (supra) decided by Hon'ble High Court of Karnataka is reproduced below:- "2. This appeal has been filed raising the following substantial questions of law:
(1) Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case?
(2 Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in. holding that the penalty notice
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under Section 274 r.w.s. 271(1)(c) is had in law and. invalid inspite the amendment of Section 271(1 B) with retrospective effect and by virtue of the amendment, the assessing officer has initiated the penalty by properly recording the satisfaction for the same? (3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in deciding the appeals against the Revenue on the basis of notice issued, under Section 274 without taking into consideration the assessment order when the assessing officer has specified that the assessee has concealed particulars of income?
The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (for short 'the Act') to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income .The Tribunal, while allowing the appeal of the assessee, has relied upon the decision of the Division Bench of this Court rendered In the case of COMMISSIONER or INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565.
In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court, the appeal is accordingly dismissed."
The penalty provisions of section 271(1)(c) of the Act are attracted where the assessee has concealed the particulars of income or furnished inaccurate particulars of such income. It is also a well-accepted proposition that the aforesaid two limbs of section 271(1)(c) of the Act carry different
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meanings. Therefore, it was imperative for the Assessing Officer to strike - off the irrelevant limb so as to make the assessee aware as to what is the charge made against him so that he can respond accordingly. The Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Kar) observed that the levy of penalty has to be clear as to the limb under which it is being levied. As per Hon'ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon'ble High Court held that the standard proforma of notice under section 274 of the Act without striking of the irrelevant clauses would lead to an inference of non-application of mind by the Assessing Officer. The Hon'ble Supreme Court in the case of Dilip N. Shroff vs. JCIT, 291 ITR 519(SC) has also noticed that where the Assessing Officer issues notice under section 274 of the Act in the standard proforma and the inappropriate words are not deleted, the same would postulate that the Assessing Officer was not sure as to whether he was to proceed on the basis that the assessee had concealed the particulars of his income or furnished inaccurate particulars of income. According to the Hon'ble Supreme Court, in such a situation, levy of penalty suffers from non-application of mind.
In the instant case, at the time of penalty also, the assessing officer was not decisive and had imposed the penalty under both of the limbs. In the similar facts and circumstances as involved in these appeals, the co-ordinate bench at Amritsar in (third Member's cases) ‘HPCL Mittal Energy Ltd Vs Addl CIT’ & ‘HPCL Mittal Pipeline Ltd., Vs Addl CIT’ ( ITA Nos. 554 & 555/Asr/2014 and 510 & 556/Asr.2014 Assessment Years 2008-09 & 2009-10, order dated 7.5.2018), while analyzing various decisions rendered by Hon'ble Karnataka High Court in ‘Manjunatha Cotton and Ginning Factory’ 359 ITR 565 (Kar), Karnataka, ‘CIT Vs Manu Engineering Works (1980) 122 ITR 306 (Guj), and ‘Padma Ram Bharali Vs CIT’, ordered for deletion of the penalty and the
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consequential effect to the third Member decision was given by the Co- ordinate Bench in the same ITA Nos. vide order dated 7.5.2018 . Relevant part of the decision of the tribunal in Third Member's cases(supra) reproduced herein below for the sake of brevity and ready reference :-
“In view of the foregoing discussion, I am satisfied that the penalty was wrongly imposed and confirmed in all the four appeals under consideration. I agree with the Ld. JM in striking down all the penalty orders. The question posed is, therefore, answered in affirmative to the effect that where the satisfaction of the AO while initiating penalty proceedings u/s 271(1)(c) I.T. Act, 1961 is with regard to the alleged concealment of income by the assessee, whereas the imposition of penalty is for ‘concealment/ furnishing inaccurate particulars of income’, the levy of penalty is not sustainable.”
In the background of the aforesaid legal position and having regard to the manner in which the Assessing Officer has issued notice under section 274 r.w.s. 271(1)(c) of the Act dated 28-03-2016, without striking off the irrelevant words, without specifying the exact limb while imposing penalty, apparently goes to prove that the Assessing Officer initiated the penalty proceedings by issuing the notice u/s 274/271(1)(c) of the Act without specifying whether the assessee has concealed ''particulars of income" or assessee has furnished "inaccurate particulars of income", so as to provide adequate opportunity to the assessee to explain the show cause notice. Rather notice in this case has been issued in a stereotyped manner without applying mind which is bad in law, hence can not be considered a valid notice sufficient to impose penalty u/s 271(1)(c) of the Act. Even the mind of the AO, while initiating the penalty proceedings, issuing notice u/s 274 of the Act and imposing the penalty itself, was not clear as to under which limb, the
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assessee had to reply and to defend its case, therefore we are of the view that under these circumstances, the penalty is not leviable as held by the various Courts including the tribunal in the case of HPCL Mittal Energy Ltd Vs Addl CIT’ & ‘HPCL Mittal Pipeline Ltd., Vs Addl CIT’ (supra) and the Apex Court in the case of M/s. SSA's Emerald Meadows (supra) and hence we have no hesitation to delete the penalty levied by the AO, consequently the order under challenged is set aside.
In the result, the appeal i.e. IAT no. 61(Asr)/2018 filed by the assessee stands allowed.
In view of the judgment passed in ITA no. 61(Asr)/2018, the second appeal i.e. ITA Nos. 62(Asr)/2018 also stands allowed.
Order pronounced in the open Court on 20 .02.2019.
Sd/- Sd/- (N.S.SAINI) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:20.02.2019 /PK/ Ps. Copy of the order forwarded to: (1) Appellant (2) The ITO, Ward 2(1), Bathinda (3) The CIT(A), Bathinda (4) The CIT concerned (5) The SR DR, I.T.A.T., Amritsar True copy By order
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