SHABBIR HUSENI MERCHANT,MUMBAI vs. INCOME TAX OFFICER(IT)-3(2)(1), MUMBAI

आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in A.Y.2014-15 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-57, Mumbai in appeal dated 13/06/2017 (ld. CIT(A) in short) in the matter of imposition of penalty u/s.271(1)(c) of the Income Tax Act, 1961.

Shabbir Husseni Merchant 13/06/2017 the ld. AO had levied the penalty on both the limbs i.e. for concealing the particulars of income or furnishing inaccurate particulars of income. During the penalty proceedings, the assessee had given an explanation that the said receipt of Rs.5,00,000/- pertain to receipt of loan from Saket Exim P Ltd and the same has been reflected in the statement of assets and liabilities of the assessee as on 31/03/2014 as loan received. Merely because the payer had treated the same as brokerage / commission in its books of accounts by reflecting the said transaction in Form 26AS, the same would not automatically become income in the form of brokerage / commission in the hands of the assessee. The ld. AO ought to have made corresponding verification with the said payer and brought evidences on record in support of his addition, which admittedly was not done in the instant case as is discernible from the assessment order. The ld. AO ignored all these submissions and proceeded to levy penalty u/s.271(1)(c) of the Act vide its order dated 13/06/2017 in the sum of Rs.1,20,153/- being 100% tax sought to be evaded on the addition of Rs.5,00,000/-. We find that the reliance placed by the ld. AR on the decision of Hon’ble Delhi High Court in the case of CIT vs. Vikas Promoters Pvt. Ltd., reported in 145 Taxman 300 is very well founded and is directly applicable to the facts of the case before us. The relevant head notes of the said decision are reproduced hereunder for the sake of brevity:-

“Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Whether provisions of section 271(1)(c) are penal in nature and thus, must be strictly construed and element of satisfaction recorded by concerned authorities should be apparent from order itself and it is not for Courts to go into minds of authorities or trace reasons from files of such authorities - Held, yes - Tribunal set aside order of Assessing Officer imposing penalty under section 271(1)(c) on ground that there was no satisfaction recorded by concerned authorities and that assessee had disclosed all material facts while filing its returns and it was not a case of furnishing inaccurate particulars from which it could be inferred that Shabbir Husseni Merchant assessee had concealed its income -Whether appeal against impugned order was without any merit and was to be dismissed - Held, yes”

3.1. Respectfully following the said decision, we hold that this is not a fit case for levy of penalty u/s.271(1)(c) of the Act. Accordingly, the ground raised by the assessee and the additional ground of the assessee deserves to be allowed.

Order pronounced in the open court on this 14/02/2020