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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
आयकर अपीलीय अिधकरण, पुणे �यायपीठ “ए” पुणे म� IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE सु�ी सुषमा चावला, �याियक सद�य एवं �ी डी. क�णाकरा राव, लेखा सद�य के सम� BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO, AM आयकर अपील सं. / ITA No.09/PUN/2017 िनधा�रण वष� / Assessment Year : 2010-11 M/s. Varsha Forgings Ltd., 294, Sindh Co-op. Hsg. Society Ltd., Ganeshkhind Road, Aundh, Pune-411007. अपीलाथ�/Appellant PAN : AAACV9485B …. Vs. ACIT, Circle-1(2), …. ��यथ� / Respondent Pune. Assessee by : None Revenue by : Shri Sanjeev Ghai सुनवाई क� तारीख / घोषणा क� तारीख / Date of Hearing : 04.04.2019 Date of Pronouncement: 30.04.2019 आदेश / ORDER PER D. KARUNAKARA RAO, AM : This appeal is filed by the assessee against the order of CIT(A)-5, Pune dated 08.09.2016 for the Assessment Year 2010-11. 2. The grounds raised by the assessee are as under :- “The following grounds are taken without prejudice to each other - On facts and in law, 1) The learned CIT(A) erred in confirming the penalty order. 2) The learned CIT(A) failed to appreciate the fact that, a. The appellant had filed the revised return of Income. b. The appellant offered to tax the alleged purchases by filing the revised return as the party from whom the purchases were made was absconding and not traceable. c. The appellant did produce all relevant documentary evidences supporting purchases, receipt of goods, payments, address of the party, PAN etc. d. The purchases were very negligible and form 0.004 % of total purchases made during the year. e. The quantum involved being very meagre the appellant filed revised return by offering additional income.
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f. Income Tax Departments in other cases of such alleged purchases accepted the income offered by the assessee and not levied the penalty under section 271(1)(c) of the Income Tax Act, 1961. g. Income Tax Department’s stand in assessing such alleged purchases is not consistent. 3) The learned CIT(A) erred in not staying the appeal proceeding in response to the appellant’s application to stay the appeal proceedings, so that appellant can make a declaration under section 203 of The Finance Act 2016, in respect of The Direct Tax Dispute Resolution Scheme, 2016. 4) The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.” 3. There was none to represent the assessee before us. Therefore, we proceed to decide the appeal on the basis of material available on record and after hearing the ld. DR for the Revenue. 4. Briefly stated the relevant facts include that the assessee is a company and is engaged in the business of manufacturing, forging and machining Motor Parts. The assessee filed the return of income declaring total income of Rs.2,63,11,600/-. Notice u/s 148 of the Act was issued on 22.03.2013 to the assessee. In response to the said notice, the assessee filed the written reply to the Assessing Officer and also filed the revised return of income. However, the Assessing Officer accepted the revised return of income but he did not satisfy with the explanation given by the assessee before him. The contents of paras 2.2 and 2.3 of the assessment order are relevant in this regard. The Assessing Officer further initiated the penalty proceedings u/s 271(1)(c) of the Act. (para 2.4 of the assessment order). 5. In the penalty order, the Assessing Officer clearly stated that the levy of penalty for the default of concealment of income (para 6 of the penalty order).
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The CIT(A) confirmed the penalty as levied by the Assessing Officer. The contents of para 4.3 onwards of the appellate order are relevant in this regard. 7. Aggrieved with the said decision of the CIT(A), the assessee is in appeal before the Tribunal with the above extracted ground. 8. We perused the orders of the authorities below and find that this is a case where the Assessing Officer failed to record proper satisfaction while initiating and levying the penalty u/s 271(1)(c) of the Act. On perusal of para 2.4 of the assessment order, we find the following is the reasons for initiation of penalty proceedings :- “2.4 ……… Penalty proceedings u/s. 271(1)(c) has, therefore, been initiated separately.” 9. Further, we also perused the penalty order passed by the Assessing Officer on 23.09.2014. On perusal of para 6 of the penalty order, we find the following is the reasons for levy of penalty u/s 271(1)(c) of the Act :- “6. I, hereby hold that the assessee has concealed particulars of income and hence liable for levying penalty u/s. 271(1)(c) of the I.T. Act, 1961. The penalty of Rs.4,16,804/- is levied for the A.Y. 2010-11.” 10. The above extracts reveal that the Assessing Officer suffers from ambiguity in his mind while recording the satisfaction at the time of initiation of penalty proceedings u/s 271(1)(c) of the Act.
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Highlighting the legal requirement of making a specific reference to the specific limb of clause (c) of section 271(1) of the Act and following the various binding judgments in the case CIT Vs. Shri Samson Perinchery (2017) 392 ITR 4 (Bom.) as well as the judgment of Hon’ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton and Ginning Factory 359 ITR 565, we find the order of the CIT(A) should have to be set-aside on the legal issue. Hence, the penalty levied by the Assessing Officer is unsustainable in law and the same is wrongly upheld by the CIT(A).
The ld. DR for the Revenue heavily relied on the orders of the authorities below. 13. Considering the above, we are of the opinion that the legal requirement of making a clear cut reference to the applicable limb of clause (c) of section 271(1) of the Act, is not met by the Assessing Officer while initiating and levying the penalty u/s 271(1)(c) of the Act. Thus, the satisfaction of the Assessing Officer suffers from ambiguity in his mind. 14. Therefore, considering the above referred binding judgments, we are of the view that such penalty is unsustainable in law legally. It is a settled legal proposition that the Assessing Officer is under obligation to specify the appropriate limb of clause (c) of section 271(1) of the Act at the time of initiation as well as at the time of levy of penalty. In view of the above deliberation on this issue, without going into the merits of the case, we set- aside the order of the CIT(A) and direct the Assessing Officer to delete the
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entire penalty imposed by him. Accordingly, the grounds raised by the assessee are allowed on legal issue. 15. In the result, the appeal of the assessee is allowed. Order pronounced on this 30th day of April, 2019. Sd/- Sd/- (SUSHMA CHOWLA) (D. KARUNAKARA RAO) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 30th April, 2019. Sujeet आदेश क� �ितिलिप अ�ेिषत/Copy of the Order is forwarded to : अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. 3. The CIT(A)-5, Pune; 4. The CCIT, Pune; िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “ए” / DR ‘A’, 5. ITAT, Pune; गाड� फाईल / Guard file. 6. आदेशानुसार/ BY ORDER, स�यािपत �ित //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune