OIKOS APARTMENTS PVT LTD,BANGALORE vs. COMMISSIONER OF INCOME TAX, (APPEAL)-5, BANGALORE

O R D E R

Per George George K, JM

M/s.Oikos Apartments Pvt.Ltd. penalty u/s 271(1)(c) of the I.T.Act for the enhancement made by him in the quantum assessment (i.e. penalty was imposed on quantum enhancement of Rs.2 crore). The CIT(A) imposed penalty of Rs.57,29,893 being 100% of tax sought to be evaded. The relevant finding of the CIT(A) in imposing penalty of Rs.57,29,893 reads as follow:-

“9. Now I proceed in levying the penalty on the enhancement of the assessment, but the question will arise now as to whether minimum penalty of 100% of tax sought to be evaded to be levied or maximum penalty of 300% of tax sought to be evaded to be levied. The imposition of penalty is a matter of discretion and is to be exercised judiciously after consideration of all relevant circumstances and that even if a minor penalty, the authority competent will be justified in not imposing the penalty, if circumstances so warranted. The appellant has not declared those receipts in the original return of income filed in the year in which it was received. During the appellate proceedings it was observed that the taxation of the consideration as other income by the Assessing Officer is not correct and should have been taxed in the year under appeal. Further, the Assessing Officer has taxed only the money received during the year under consideration instead of the entire consideration of Rs.3.5 crores as capital gain. Therefore, in order to bring the entire consideration of Rs.3.5 crores for taxation, an enhancement notice dated 21/03/2017 has been issued asking the appellant as to why the entire money should not be taxed as capital gains in A.Y.2012-13 and the assessment was enhanced. The details of the same and the tax sought to be evaded is worked out as under: Sl. Income Rupees No.

M/s.Oikos Apartments Pvt.Ltd. 6. The maximum penalty @ 300% of the tax 1,71,89,679 evaded

Thus, the minimum penalty leviable in this case at 100% of the tax sought to be evaded is Rs.57,29,893/- and the maximum penalty leviable being 300% of such tax sought to be evaded is Rs.1,71,89,679/-. In view of the fact and circumstances of the case, taking a liberal view, I hereby consider a minimum penalty is leviable in this case. Accordingly, the minimum penalty of Rs.57,29,893/- is hereby levied.

6. The assessee being aggrieved by the order of the CIT(A) imposing penalty of Rs.57,29,893, has filed this appeal before the Tribunal, raising the following grounds:-

1. That on the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) 5 [(CIT (A)] has grossly erred in imposing penalty under section 271 (1 )(c) without any findings. The penalty imposed may kindly be deleted.

2. That on the facts and in the circumstances of the case and in law, the learned CIT (A) has grossly erred in not passing a speaking order as has been held by various Courts, including the Hon'ble Supreme Court of India. The order imposing penalty may kindly be quashed and the penalty imposed be deleted. 3. That on the facts and in the circumstances of the case, that learned CIT (A) has not given any findings. In para 9 on page 7 of his order he has straightaway proceeded to levy the penalty. There has to be conclusive and categorical findings under section 271 (1 )(c) before any penalty can be levied under that section. The order imposing penalty may, therefore, kindly be quashed and the penalty imposed be deleted. 4. In the order appealed against, the learned CIT (A) has merely repeated his reasons for passing the appellate order in the quantum appeal. On the basis of those reasons, penalty under section 271 (1)(c) cannot be levied. The order imposing penalty may, therefore, kindly be quashed and the penalty imposed be deleted.

M/s.Oikos Apartments Pvt.Ltd.

5. While passing the order imposing penalty, the learned CIT (A) has not considered the reply to the penalty notice submitted by the Appellant on 26.05.2017 wherein detailed reasons have been given as to why penalty cannot be imposed. This reply finds no mention in the order imposing penalty. In fact, on page 5 of the penalty order, the learned CIT (A) has referred to the Appellant's replies dated 21.03.2017 and 24.03.2017 which had been submitted with respect to the main appeal against the assessment order. This only establishes that the learned CIT (A) had pre-decided to levy penalty. The penalty order passed without even reading the Appellant's reply cannot be considered judicious by any yardstick. A simple reading of the order will reveal that it has been passed without application of mind. Such an order cannot be sustained. The order imposing penalty may, therefore, kindly be quashed and the penalty imposed be deleted.

M/s.Oikos Apartments Pvt.Ltd. jurisdictional High Court in the case of CIT v. Dr.Harsha N.Biliangady in of 2014 (judgment dated 10th March, 2015) it was contended that when the High Court had admitted the appeal u/s 260A of the I.T.Act as regards the quantum assessment, the penalty imposed u/s 271(1)(c) of the I.T.Act needs to be quashed because the mere admission of appeal by High Court on substantial question of law would make it apparent that additions made were debatable.

“8. We do not find any reason to hold that the finding given and the conclusion arrived at by the Tribunal as incorrect. We are also of the opinion that where penalty is imposed in respect

M/s.Oikos Apartments Pvt.Ltd. of any addition where the High Court has admitted the appeal on substantial question of law, then the sustainability of the addition itself becomes debatable, and in such circumstances penalty cannot be levied under Section 271(1)(c) of the Act. Penalty can only be imposed for concealment of material particulars or furnishing of inaccurate particulars by the assessee. In the facts of the present case, we are of the view that the assessee cannot be held guilty of the concealment of any material particulars of his income or having furnished inaccurate particulars of such income, so as to attract provisions of Section 271(1)(c) of the Act.”