SHAILA PRALHAD CHOUDHARY,NASHIK vs. INCOME TAX OFFICER,

आदेश आदेश / ORDER आदेश आदेश

PER VIKAS AWASTHY, JM :

These two appeals by the assessee are directed against the order of Commissioner of Income Tax (Appeals)-12, Pune dated 09-09-2016 common for the assessment years 2009-10 & 2010-11, confirming levy of penalty u/s.271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’)

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legal ground of ambiguity in mentioning of charge u/s.27(1)(c) of the

Act while recording satisfaction for levy of penalty. The ld. AR

referred to the assessment order dated 08-01-2014 for the A.Y. 2009-

10 and pointed that penalty was initiated by the AO in respect of two

additions, i.e. (1) additional income offered in return of income in

response to notice u/s.153A Rs.3,110/-; and (2) unexplained capital

Rs.2,00,000/-. The ld. AR pointed that the AO while recording

satisfaction for initiation of penalty proceedings in respect of additional

capital introduced has not specified the charge u/s.271(1)(c) for which

penalty is to be levied. As regards addition of Rs.3,110/-, the AO while

recording satisfaction mentioned that penalty is being levied for

concealment. However, while passing the order levying penalty dated

23-05-2014, the AO in para 8 of order mentioned that assessee has

“furnished inaccurate particulars of income and thereby concealed her

income” to the extent of Rs.2,03,110/- which includes both the

additions. The manner in which satisfaction has been recorded for

initiating penalty and thereafter the manner in which penalty is levied

is contrary to the law laid down in the case of CIT Vs. Samson

Perinchery 392 ITR 4 (Bom.) and CIT & Another Vs. Manjunatha

Cotton and Ginning Factory 359 ITR 565 (Karn.).

in assessment order dated 08-01-2014 u/s.143(3) r.w.s 153A has

initiated penalty proceedings in respect of addition of undisclosed

interest receipts Rs.64,983/- and undisclosed investment

Rs.2,20,000/- without specifying the charge for initiating penalty

proceedings u/s.271(1)(c). While passing order levying penalty dated

23-05-2014, the AO in para 9 of the order has mentioned both the

3 ITA Nos. 2857 & 2858/PUN/2016 Shaila Pralhad Choudhary

limbs of section 271(1)(c). The manner of recording satisfaction and

the levy of penalty u/s.271(1)(c) is contrary to the law laid down in the

case of CIT Vs. Samson Perinchery (supra) and Manjunatha Cotton &

Ginning Factory (supra).

Department vehemently defended the impugned order and prayed for

dismissing the appeals of assessee.

sides and have perused the orders of authorities below for the

assessment years under appeal, i.e. A.Yrs. 2009-10 and 2010-11. The

assessee has challenged levy of penalty u/s.271(1)(c) r.w. Explanation

5A on the legal issue of recording of satisfaction for initiating penalty

proceedings u/s.271(1)(c) of the Act without clearly mentioning the

charge.

A.Y. 2009-10 :

penalty proceedings have been initiated in respect of two additions.

The first addition is Rs.3,110/- on account of additional income

declared in return of income filed in response to notice u/s.153A. The

AO initiated penalty proceedings u/s.271(1)(c) r.w. Explanation 5A and

has mentioned that the penalty proceedings for “concealing the

particulars of income”. However, at the time of levy of penalty, the AO

in para 8 mentioned both the limbs of section 271(1)(c), i.e. “furnished

inaccurate particulars of income” and “concealment of income”. The

relevant extract of the findings of AO in penalty order reads as under :

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“8. I am satisfied that the assessee has without any reasonable cause, furnished an inaccurate particulars of income and thereby concealed her income to the extent of Rs.2,03,110/- which comprises of addition of Rs.2,00,000/- on a/c of capital introduction and Rs.3,110/- on a/c of admittance of additional income….”

initiated is Rs.2 lakhs on account of unexplained capital. While

initiating penalty, the AO has not specified any of the charge

u/s.271(1)(c). However, while passing the order levying penalty, the

AO has mentioned both the limbs. The relevant extract of penalty

order (para No.8) has already been reproduced hereinabove.

Vs. Manjunatha Cotton and Ginning Factory (supra) held that the

assessee should know the grounds which he has to meet specifically.

Otherwise, the principles of natural justice is offended. On the basis

of such proceedings no penalty could be imposed on the assessee. The

Hon’ble Bombay High Court in the case of CIT Vs. Samson Perinchery

(supra) approved the judgment in the case CIT & Another Vs.

Manjunatha Cotton and Ginning Factory (supra) and held 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.”

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Thus, in view of the fact that in the assessment year under appeal the

manner of initiation of penalty proceedings and thereafter levy of

penalty is contrary to the law laid down by the Hon’ble jurisdictional

High Court, the penalty proceedings are vitiated and the penalty order

dated 23-05-2014 is held to be invalid. Accordingly, the appeal of the

assessee for A.Y. 2009-10 is allowed.

A.Y. 2010-11 :

the penalty proceedings have been initiated u/s.271(1)(c) in respect of

two additions, i.e. (1) undisclosed investment Rs.2,20,000/-, and (2)

undisclosed interest receipts Rs.64,983/-. The AO while recording

satisfaction for initiation of penalty qua above additions has not

mentioned any of the limbs/charge of section 271(1)(c). The AO has

merely recorded “Penalty proceedings u/s.271(1)(1) is separately

initiated”. The AO has failed to specify the charge u/s.271(1)(1), i.e.

whether the penalty proceedings are initiated for “concealment of

income” or “furnishing inaccurate particulars”. Thus, ambiguity in

recording satisfaction is evident writ large from the assessment order.

The AO while passing order levying penalty dated 23-05-2014 has

mentioned both the limbs of section 271(1)(c) of the Act. Relevant

extract of Para No.9 of the penalty order where the AO has mentioned

the charges for levy of penalty read as under :

“9. I am satisfied that the assessee has without any reasonable cause, furnished an inaccurate particulars of income and thereby concealed her income to the extent of Rs.3,30,793/- which comprises of addition of Rs.2,20,000/- on a/c of undisclosed investment in FDR, Rs.64,983/- on account of

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undisclosed interest receipt and Rs.45,810/- on a/c of admittance of additional income….”

both the charges for levy of penalty. Thus, the manner of recording

satisfaction for initiation and levy of penalty is contrary to the law laid

down by the Hon’ble jurisdictional High Court in the case of CIT Vs.

Samson Perinchery (supra). A perusal of assessment order and

penalty order indicates that the Assessing Officer was not clear in his

mind whether the penalty is to be levied for concealment or furnishing

of inaccurate particulars by the assessee. The Assessing Officer is

absolutely silent about the charge u/s.271(1)(c) at the time of

recording satisfaction and thereafter mentioned both the limbs of

section 271(1)(c) at the time of passing order levying penalty. In the

light of the facts of the case as discussed above, the penalty

proceedings are liable to set aside. We hold and direct accordingly.

is quashed and the appeals of assessee are allowed.

Order pronounced on Wednesday, the 02nd day of January,

2019.

Sd/- Sd/- (D. KARUNAKARA RAO) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 02nd January, 2019 Satish

7 ITA Nos. 2857 & 2858/PUN/2016 Shaila Pralhad Choudhary

आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. आयकर आयु� (अपील) / The CIT(A)-12, Pune 3. आयकर आयु� / The Pr.CIT Central, Nagpur 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

//स�यािपत �ित // आदेशानुसार / BY ORDER,

// True Copy // Senior Private Secretary, आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune

ITA Nos. 2857 & 2858/PUN/2016 Shaila Pralhad Choudhary

Date 1. Draft dictated on 01-01-2019 Sr.PS 2. Draft placed before author 01-01-2019 Sr.PS 3. Draft proposed & placed before the AM second member 4. Draft discussed/approved by Second AM Member. 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order.