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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI RAJESH KUMAR & SHRI RAM LAL NEGI
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 18.03.2013 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2006-07.
The only issue raised by the assessee in the various grounds of appeal is that the assessee has assailed the order of Ld. CIT(A) confirming the penalty of Rs.9,35,24,310/- thereby
The facts in brief are that the assessment in this case was framed under section 143(3) of the Act vide order dated 07.11.2008 by making an addition of Rs.27,78,50,000/- received towards share application money for allotment of 55,57,000 equity shares. The allegation of the AO was that the assessee has routed his unaccounted money and thus added the same under section 68 of the Act and penalty proceedings were initiated for filing inaccurate particulars of income. After taking into account the reply of the assessee filed in response to penalty notice issued under section 271(1)(c) of the Act, the AO levied a penalty of Rs.9,35,24,310/- being 100% of the tax sought to be evaded by the assessee vide order dated 28.03.2011 passed under section 271(1)(c) of the Act.
Aggrieved by the order of AO, the assessee preferred an appeal before the Ld. CIT(A) challenging the order passed under section 271(1)(c) of the Act, however, the Ld. CIT(A) also dismissed the appeal of the assessee by observing that AO has rightly imposed the penalty as the assessee has mobilized the unaccounted money by creating various layers of transactions of which the assessee was an ultimate beneficiary and hence dismissed the plea of the assessee that it has concealed income or furnished inaccurate particulars of income. The Ld. A.R. vehemently submitted before us that the penalty order passed by the AO imposing a penalty of Rs.9,35,24,310/- is invalid and can not be sustained in the eyes
3 M/s. Luminant Investments Ltd. (Formerly known as Luminant Investments P. Ltd.) of law as the same has been passed without framing or mentioning the charge against the assessee. In other words, the charge/limb on which the penalty was levied is not mentioned at all in the penalty order. The Ld. A.R. took us through the penalty order to prove his averments and submitted that the said order may kindly be quashed as being non-est and invalid in the eyes of law. The Ld. A.R. submitted that how the assessee can be subjected to such a huge amount of penalty without even discussing or mentioning the charge under which the penalty was proposed to be levied. The Ld. A.R. submitted that this is a fatal mistake on the part of the AO which goes to the route of the penalty order and is not curable. The Ld. A.R., therefore, submitted that the said order may kindly be quashed as being no order in the eyes of law. The Ld. A.R., however, fairly admitted the fact that quantum proceedings have been restored by the Tribunal to the file of the Ld. CIT(A) to decide the issue afresh and till date no order has been passed by the Ld. CIT(A).
The Ld. D.R., on the other hand, submitted that though in the penalty order the AO has forgotten to mention the charge on which the penalty was levied but the same is not relevant at this stage as the quantum appeal has been restored by the Tribunal to the file of the Ld. CIT(A) to decide the issue afresh. The Ld. D.R., therefore, submitted that the penalty issue may also be restored to the file of the Ld. CIT(A) to decide it afresh.
We have heard the rival submissions of the parties and perused the material on record including the penalty order passed under section 271(1)(c) of the Act as well as the 4 M/s. Luminant Investments Ltd. (Formerly known as Luminant Investments P. Ltd.) appellate order. We note that in this case, while passing the penalty order, the AO has not discussed or mentioned the charge on which the penalty was levied. The relevant paras are as under: “5. I have carefully examined the assessee's contention. The opportunities given to the assessee to cross examine the directors of the said companies has been brought cut m detail in She assessment order itself. The DDIT(lnv.). Unit-1(2), Kolkata had given several opportunities to the assessee to cross examine (he parties concerned However, the assessee choose no! to exercise this right of cross examination by seeking adjournment after adjournment Further, the assessment was made after a thorough investigation involving various parties and after giving sufficient opportunities to the assessee to repudiate the findings. As the assessee has chosen not to do so at the assessment stage, its contention, at this stage that, the addition was made merely on the basis of statements of third parties is no tenable.
5.1 The modus operandi discussed in detail in the assessment order clearly indicates that the assessee had mobilized the unaccounted cash by creating various layers of transaction of which the assessee was the ultimate beneficiary. Hence the assessee's contention that it has not concealed the income or furnished inaccurate particulars is not tenable.
5.2 Cumulative effects of all the facts of the case clearly indicate manipulation at every stage of the transactions with an intension of infusing huge amounts of funds into the books of account of the assessee company which was later utilized to repay its dues.
6. Since the assessee has failed to prove the genuinity of the transactions, it is concluded that the assessee has channeled its own unaccounted money into its account in the guise of application money to finance the repayment of its dues to Madhavpura Mercantile Go-op Bank Ltd, Hence it is a fit case to impose penalty u/s 271(1)(c).
7. The penalty imposable is as under: Income / Loss sought to be evaded (Wrong Rs 27,78,50,000 claim of loss) Tax sought to be evaded (Inclusive of SC @ Rs 9,35,24,310/- 10% & EC @ 2% Minimum Penalty leviable – 100% Rs 9,35,24,310/- Maximum penalty leviable -300% Rs.28,05,72,930/-
6.1 However, after considering the facts and circumstances of the case, I levy a sum of Rs.9,35,24,310/- (Rupees Nine crores thirty five lakhs twenty four thousand
5 M/s. Luminant Investments Ltd. (Formerly known as Luminant Investments P. Ltd.) three hundred ten only) by way of penalty u/s. 271i(i)(c) of She income-tax Act, 1961 with a direction to pay the same.
7. This penalty is levied with the prior approval of the Additional Commissioner of Income Tax, Central Range-6, Mumbai vide letter No.Addl CIT Cent. Rg-6/33/271(1)(c)/2010-11, dated 25.03.2011 Notice of demand u/s 156 is issued for of Rs.9,35,24,310/- accordingly.” Thus it is clear from the above that AO has not discussed at all one of the two limbs on which the penalty was proposed to be levied. We are quite convinced with the arguments of the Ld. A.R. that how a penalty could be imposed without AO being satisfied on the charge on which the penalty was proposed to be levied. Thus, the penalty has been levied in a mechanical manner without application of mind. In our view, this is a serious mistake in the penalty order which is incurable at this stage and the penalty order passed by the AO is an invalid order and therefore can not be sustained. We have also considered the request of the Ld. D.R. that the penalty may be restored to the file of the Ld. CIT(A), however, the same can not be accepted at this stage as it will not serve any useful purpose by restoring the appeal to the file of the Ld. CIT(A). This is so because by restoring the penalty to the file of the Ld. CIT(A), the appellate authority can not cure the defect/mistake which has been committed by the AO in the penalty order passed under section 271(1)(c) dated 28.03.2011. Under these facts and circumstances, we are not in a position to sustain the order of Ld. CIT(A) whereby the Ld. CIT(A) has affirmed the order of AO on the issue of penalty. Accordingly, we set aside the order of Ld. CIT(A) by holding that the order of penalty passed under
The appeal of the assessee is allowed.
Order pronounced in the open court on 12.03.2021.