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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI PARTHA SARATHI CHAUDHURY, JM
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM :
This appeal preferred by assessee emanates from the order of Ld. Commissioner of Income Tax (Appeals)-6, Pune dated 04.10.2016 for assessment year 2008-09 as per following grounds on record:
“On the facts and circumstances of the case and in law :
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The Hon'ble CIT(A) erred in confirming levy of penalty u/s.271(1)(c) in respect of leave encashment expenses of Rs.16,82,776/- added u/s.43B in the assessment order on grounds of concealment of income and furnishing inaccurate particulars. The AO and CIT(A) failed to appreciate that the Leave encashment expenses were reported in Form 3CD and the failure to add back the same in computation of income was a bona-fide mistake. The appellant pleads that the levy of penalty u/s.271(1)(c) is not justified. 2. The appellant pleads that his appeal be allowed and craves leave to add to, alter, amend, modify or withdraw any or all grounds of appeal.”
The main grievance of the assessee is against the imposition and
confirmation of penalty of Rs.5,71,975/- levied under section 271(1)(c) of the
Act.
The brief facts in this case are that the assessee is engaged in the
business of Programmable Logic Controllers (PLC) and parts thereof. The
assessee filed return of income for assessment year 2008-09 on 30.09.2008
declaring total income at Rs.31,94,46,810/-. The assessee revised his return
of income on 31.03.2010 declaring total income at Rs.31,64,46,810/-. The
Assessing Officer completed assessment u/s.143(3)(ii) of the Income Tax Act,
1961 (hereinafter referred to as ‘the Act’) on 27.12.2010 assessing the
income at Rs.32,04,82,990/- making certain disallowance out of the claims
for expenses. The Assessing Officer also made addition of Rs.16,82,776/-
being the disallowance of leave encashment u/s.43B of the Act. The assessee
contested some of the additions in appeal and got relief. The assessee did not
contest the disallowance of leave encashment made u/s.43B of the Act. The
Assessing Officer initiated penalty proceedings u/s.271(1)(c) of the Act but
levied penalty only on the disallowance of leave encashment. The Assessing
Officer levied penalty of Rs.5,71,975/- u/s. 271(1)(c) of the Act for
‘concealment of income’ as well as ‘furnishing of inaccurate particulars of
3 ITA No. 333/PUN/2017 A.Y.2008-09
income’. In the First Appellate proceedings, the CIT(A) confirmed the penalty
imposed of Rs.5,71,975/-u/s. 271(1)(c) of the Act.
Being further aggrieved, assessee preferred this appeal before us. The
Ld.AR for the assessee at the time of hearing based his argument referring to
grounds submitted that this is a case where the Assessing Officer failed to
record valid satisfaction in the assessment order during which the penalty
proceedings were initiated. Highlighting the legal requirement of making a
specific reference to the specific limb of clause (c) of section 271(1) of the Act
and relying on 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 Ld. Counsel demonstrated that the penalty
levied by the Assessing Officer is unsustainable in law. In this regard, he
brought our attention to the assessment order as well as the penalty order
highlighting the above legal deficiencies.
Per Contra, Ld. DR for the Revenue relied on the orders of Assessing
Officer/CIT(A).
We heard both the parties on this specific legal issue, i.e. recording of
proper satisfaction by the Assessing Officer. We perused the order of the
Assessing Officer and find the satisfaction recorded by the Assessing Officer
for initiating the penalty proceedings u/s.271(1)(c) of the Act is relevant for
extraction. Therefore, the same is reproduced as under :
“3.3. Provision for Leave Encashment disallowable under section 43B.
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It is seen from the Tax Audit Report that the assessee has made a provision for leave encashment of Rs.16,82,776/-, which is disclosed in Form 3CD of the report as disallowable under section 43B of the Act. However, in its computation, the assessee has failed to add back the same. Therefore, an amount of Rs.16,82,776/- is disallowed and added back to total income of the assessee u/s.43B of the Act and for furnishing inaccurate particulars of income, penalty proceedings u/s.271(1)(c) of the I.T.Act are initiated separately.”
We also perused the penalty order dated 28.03.2014 and find the
satisfaction recorded by the AO for levying the penalty u/s.271(1)(c) of the
Act is relevant for extraction. The said satisfaction reads as under:
“8……………..hence, I believe that this is a fit case of concealment of income as well as furnishing of inaccurate particulars of income and I , hereby, impose penalty u/s.271(1)(c) of the I.T. Act, 1961…”
From the above, it is evident that so far as assessment order is
concerned, the Assessing Officer has mentioned that penalty proceedings
have been initiated for ‘furnishing of inaccurate particulars of income’.
However, at the time of levying penalty in the assessment, Assessing Officer
mentioned both limbs of clause (c) of section 271(1) of the Act i.e.
‘concealment of income’ as well as ‘furnishing of inaccurate particulars of
income’. This manner of recording of satisfaction suggests the existence of
ambiguity with reference to applicability of specific limb. Therefore, we are of
the opinion that considering the above referred binding judgments such
penalty order is unsustainable in law legally. The Assessing Officer is under
obligation to specify the correct limb at the time of initiation as well as at the
time of levy of penalty. In view of the above deliberation on this issue, we are
of the opinion that the penalty order is liable to be quashed on this legal
issue. Thus, the order of CIT(A) is set-aside and direct the Assessing
Officer to delete the penalty. Accordingly, the grounds of appeal raised by
the assessee are allowed.
5 ITA No. 333/PUN/2017 A.Y.2008-09
In the result, appeal of the assessee is allowed. 8.
Order pronounced on 02nd day of January, 2019.
Sd/- Sd/- D. KARUNAKARA RAO PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER
पुणे / Pune; �दनांक / Dated : 02nd January, 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)-6, Pune. 4. The Pr. CIT-5, 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. 333/PUN/2017 A.Y.2008-09
Date 1 Draft dictated on 01.01.2019 Sr.PS/PS 2 Draft placed before author 02.01.2019 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