M/S. HONEYWELL AUTOMATION INDIA LIMITED,PUNE vs. DEPUTY COMMISSIONER OF INCOME TAX, PUNE

आदेश / ORDER

PER PARTHA SARATHI CHAUDHURY, JM :

This appeal preferred by the assessee emanates from the order of Ld. CIT(Appeals)-1, Pune dated 24.10.2016 for the assessment year 2006-07 as per grounds of appeal on record.

2 ITA No. 290/PUN/2017 A.Y.2006-07

referred to as ‘the Act’) without recording satisfaction on the penalty imposed

and without specifying the limb for which penalty has been imposed.

to the assessment order at Para 3.2 where the Assessing Officer writes “Issue

show cause notice u/s.271(1)(c) in respect of adjustment to the arm’s length

price”. Thereafter, in Para 4 with regard to provision not added back, the

Assessing Officer adds the amount of Rs.1,72,00,000/- since Dispute

Resolution Panel (DRP) has confirmed the said addition. Herein also, no

satisfaction of penalty proceedings was recorded by the Assessing Officer. The

Ld. AR referred to the penalty order and demonstrated that in the said

penalty order, the Assessing Officer sometimes wishes to impose penalty “for

furnishing inaccurate particulars of income” by the assessee. Sometimes he

wants to impose penalty “for concealment of income” by the assessee.

Meaning thereby, he is not sure about which specific limb of section 271(1)(c),

penalty has to be levied. The Ld. AR therefore, referred to the decision of Pune

Bench of the Tribunal in assessee’s own case in ITA Nos.405 &

407/PUN/2016 wherein exactly on the same facts and issue, relief was

provided to the assessee by placing reliance on the judgment of Hon'ble

Bombay High Court in the case of CIT Vs. Samson Perinchery reported as 392

ITR 4 (Bom).

ordinate Authorities.

have given thoughtful consideration to the documents on records. We observe

that first of all in the assessment order, no satisfaction has been recorded by

3 ITA No. 290/PUN/2017 A.Y.2006-07

the Assessing Officer regarding imposition of penalty u/s.271(1)(c) of the Act.

That in the penalty order, the Assessing Officer is not clear as to which limbs

of section 271(1)(c) of the Act penalty to be imposed . Sometimes, he is

referring “for furnishing inaccurate particulars of income” while at times, he

is imposing penalty “for concealment of income”. This exercise is not

permitted within the ambit of Income Tax Law as observed in our decision in

assessee’s own case in ITA No. 405 to 407/PUN/2016 (supra.). That on the

issue, the Pune Bench of the Tribunal has held as follows:

“31…….. It is settled law that while levying penalty for concealing of particulars of income, 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 r.w.s 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. 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. 32. Considering the facts of the present case 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 and therefore penalty order cannot be upheld. We accordingly set aside the penalty order passed by AO. Thus, the ground of assessee is allowed.”

Perinchery (supra.) has held that 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

4 ITA No. 290/PUN/2017 A.Y.2006-07

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. In this case

the Hon'ble Bombay High Court accepted the view of the Hon'ble Karnataka

High Court in the case of CIT Vs. Manjunath cotton and Ginning Factory

reported as 359 ITR 565 wherein the Hon'ble Karnataka High Court has

categorically held that the Assessing Officer while issuing notice has to come

to the conclusion that whether is it a case of concealment of income or a case

of furnishing inaccurate particulars of income. The Hon'ble Apex Court in the

case of Ashok Pai Vs. CIT reported as 292 ITR 11 has held that concealment

of income and furnishing of inaccurate particulars of income in section 271(1)

(c) of the Act carry different meanings/connotations. The Hon'ble Gujarat

High Court in the case of Manu Engineering reported as 122 ITR 306 and the

Delhi High Court in the case of Virgo Marketing P. Ltd. reported in 171

taxman 156 has held that levy of penalty has to be clear as to the limb for

which it is levied and the position being unclear penalty is not sustainable.

Therefore, when the Assessing Officer proposes to invoke the first limb being

concealment, then the notice has to be appropriately marked. Similar is the

case for furnishing inaccurate particulars of income. The standard proforma

without striking of the relevant clauses will lead to an inference as to non

application of mind.

pronouncements that before imposing penalty u/s.271(1)(c), the Assessing

Officer should satisfy himself regarding the reasons for which he is imposing

penalty and the same reasons should be reflected in the notice issued to the

assessee so that he can be ready with his defense and statement of facts. Any

ambiguity in the process is not warranted within the scope of Income Tax

5 ITA No. 290/PUN/2017 A.Y.2006-07

Law. With these observations, we direct the Assessing Officer to cancel the penalty in the case of assessee and we thereby allow the appeal.

Order pronounced on 28th day of February, 2019.

Sd/- Sd/- ANIL CHATURVEDI PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 28th February, 2019. SB

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

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeals)-1, Pune. 4. The Pr. CIT-4, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, 5. पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.

6 ITA No. 290/PUN/2017 A.Y.2006-07

Date 1 Draft dictated on 28.02.2019 Sr.PS/PS 2 Draft placed before author 28.02.2019 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order