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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: DR. ARJUN LAL SAINI
PER Bench: Captioned appeal filed by the Assessee, pertaining to the Assessment Year (AY) 2012-13, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-4, Ahmedabad [in short “the ld.CIT(A)”]in Appeal No. CIT(A)-4/10014/2018-19dated 16.05.2019 which in turn arises out of apenalty order passed by Assessing Officer under section 271(1)(c)of the Income Tax Act, 1961 [hereinafter referred to as the “Act”].
The grounds of appeal
filed by the assessee are as follows: “1. The Learned Commissioner of Income Tax (Appeals)-4, Ahmedabad has erred in law and on facts of the case in confirming the order of the Assessing Officer of levying penalty of Rs.36,96,378/- u/s 271(1)(c) of the Act.
2. The Learned Commissioner of Income Tax (Appeals)-4, Ahmedabad has erred in law and on facts of the case in confirming the order of the Assessing Officer of (A.Y.12-13) Shaileshkumar S Patel 2 levying penalty though the initiation for penalty proceedings has been made vide notice dated 18.11.2015, which is defective in as much as the said notice was issued for furnishing inaccurate particulars of income or concealment of income and hence, deemed to be null and void.
3. The appeal against addition of Rs.1,22,24,800/- has duly been admitted by the Hon’ble High Court of Gujarat vide order dated 17.12.2018 in Tax Appeal No. 1337 of 2018 on substantial question of law, and hence, levy of penalty is required to be deleted.
4. Your application prays to reserve the right to add, alter, amend and /or withdraw any of the above grounds of appeal.”
The facts of the case which can be stated quite shortly are as follows: The assessee before us is an individual and filed his return of income for A.Y. 2012-13 on 28.09.2012, declaring total income for Rs.2,51,380/-. The order under section 143(3) was passed on 27.08.2019 and the income was assessed at Rs.2,56,380/- by adding lump sum addition on account of travelling expenses. Afterwards, the assessing officer had received information by central circle 2(4), Ahmedabad that assessee had purchased some piece of land at Sujanpur, Patan with five co-partners and the consideration agreed between parties was Rs.6,11,24,000/-. As per Banakhat dated 06.11.2010, the amount of Rs.1.50 crores was paid by the purchaser to the seller. The sale deed of these lands was executed in Financial Year 2011-12. On inquiry, the information found to be true. Therefore, Assessing Officer, reopened the case under section 147 of the Act, and issued notice under section148 of the Act on 27.10.2015. The Assessing Officer assessed income of Rs.1,24,81,180/- by adding Rs.1,22,24,800/- under section 68 assuming that assessee was unable to prove the source of the same income and concealing the same. The penalty was initiated under section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars and thereby concealing income. After considering the reply of the assessee, the Assessing Officerimposed penalty under section 271(1)(c) of the Act to the tune of Rs.36,96,378/-.
On appeal, ld CIT(A) confirmed the penalty. Aggrieved, the assessee is in further appeal before us.
(A.Y.12-13) Shaileshkumar S Patel 3
5. Shri S. R. Shah, Learned Counsel for the assessee pleads that assessee had filed an appeal in quantum proceeding before the Hon’ble jurisdictional High Court of Gujarat and Hon’ble High Court of Gujarat had admitted the appeal of the assessee. Since, the appeal has been admitted by the Jurisdictional Hon’ble Gujarat High Court, therefore additions made by the Assessing Officer are debatable and hence the penalty should be deleted. To bolster his arguments, the Ld. Counsel relied on the order of the Hon’ble High Court of Karnataka in the case of Ankita Eleotronics (P.) Ltd. (2017) 79 taxmann.com 34 (Karnataka) wherein it was held as follows: “14. In the present case, the details of the claim were provided by the assessee. The question is as to whether on such details, deductions could be allowed or not is still in doubt. Such questions have been admitted for determination by the High Court in the appeal filed by the assessee. The Apex Court in the aforesaid case of Reliance Petroproducts (supra) also held that "merely because the assessee had claimed the expenditure, which claim was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by AO for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the legislature". 15. In view of the aforesaid decision, we do not find any good ground to differ with the view taken by the Tribunal and we are also of the opinion that no substantial question of law, as framed by the appellant in the appeal, requires determination by this Court.”
6.The Ld. Counsel further argued that notice issued by the Assessing Officer under section 271(1)(c) of the Act is defective.The Defective notice is placed at paper book page no.
The Ld. Counsel, therefore pointed out that it is not certain whether assessee has been penalized for furnishing of inaccurate particulars of income or concealment of income, hence there is no definite charge imposed by the Assessing Officer by issuing notice under section 271(1)(c) of the Act, hence penalty should be deleted.
Apart from this, the Ld. Counsel also submitted that in the assessment order, the Assessing Officer has initiated the penalty proceedings on both the limbs, therefore
(A.Y.12-13) Shaileshkumar S Patel 4 initiation of penalty proceedings is itself defective and hence penalty has to be deleted.
8.On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.
9.We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that the Assessing Officer has initiated the penalty under section 271(1) (c ) of the Act, on account of both limbs, that is, concealment of income and furnishing of inaccurate particulars of income. The notice issued by the assessing officer under section 271(1) (c ) of the Act, is reproduced below:
From the above notice, under section 271(1) (c ) of the Act, it is vivid that there is no any definite charge/ accusation on the assessee, whether initiation of penalty proceeding is on account of ‘concealment of income’ or on account of ‘furnishing inaccurate particulars of income’.
(A.Y.12-13) Shaileshkumar S Patel 5 11.We note that in penalty order under section 271(1) (c ) of the Act, the assessing officer observed as follows: “On the facts and circumstances of the case as narrated above, it is fit case for levy of penalty under section 27(1)(c) of the I.T.Act. The default of concealment of income and it’s source and furnishing inaccurate particulars of income are willful and deliberate with an intention to avoid tax. The reply of the assessee is not acceptable in this respect as narrated above. Therefore, I am convinced that the assessee has committed default of concealment of income and it’s source and furnishing inaccurate particulars of income and thus rendered itself liable for penalty under section271(1)(c) of the Income Tax Act.”
Thus, it is clear from penalty order that assessing officer has initiated and imposed penalty on both limbs,“concealment of income and for furnishing of inaccurate particulars of income”, hence there is no definite charge on the assessee.
We note that Hon`ble Supreme Court in the case of T Ashok Pai - 292 ITR 11 (SC) held. that “concealment of income” and “furnishing of inaccurate particulars of income” carry different connotations. The Hon`ble Gujarat High Court in case of Manu Engineering Works -122 ITR 306 (Guj.) held. that the penalty order has to be clear as to limb for which it is levied and the position being unclear penalty is not sustainable. Further, on the identical facts, Hon`ble Gujarat High Court in case of Nayan C. Shah vs. ITO [Tax Appeal No. 543 of 2012 (Guj- HC)] held. as follows: "11. Another notable aspect of the matter is that while the Assessing Officer has imposed penalty on the ground that the assessee has furnished inaccurate particulars of income, the Tribunal has set aside the order of the Commissioner (Appeals) by holding that the assessee has suppressed the actual particulars of income by not making disallowance under section 40(a)(ia) of the Act. Thus, the Assessing Officer has imposed penalty on the ground of furnishing inaccurate particulars, whereas the Tribunal has upheld. the order of the Assessing Officer on the ground of concealment of particulars. It is by now well settled that while issuing a notice under section 271(1)(c) of the Act, the Assessing Officer is required to specify as to what is the default on the part of the assessee, as to whether the case is one of furnishing inaccurate particulars, or whether it is a case of concealment of income, or both. In the facts of the present case, the Assessing Officer has proceeded on the footing that inaccurate particulars were filed by the assessee, whereas the Tribunal has held. that the assessee had suppressed particulars for the year under consideration. Under the circumstances, the Tribunal, having confirmed the penalty imposed by the Assessing Officer on the ground of suppression of actual particulars in respect of which the assessee was (A.Y.12-13) Shaileshkumar S Patel 6 not put to notice, the order of the Tribunal is rendered unsustainable on this ground also."
13.Coordinate Bench of ITAT Surat in the case of Allarakhu B Memon vs. ITO [in (Srt. Trib)], on similar facts, held as follows: “4. We have duly considered rival contentions and gone through the record carefully. Hon'ble Gujarat High Court has considered this aspect in the case of Snita Transport (supra). Reference to para 9 of this judgment is worth to note.It reads under: "9. Regarding the contention that the Assessing Officer was ambivalent regarding under which head the penalty was being imposed namely for concealing the particulars of income or furnishing inaccurate particulars, we may record that though in the assessment order the Assessing Officer did order initiation of penalty on both counts, in the ultimate order of penalty that he passed, he clearly held that levy of penalty is sustained in view of the fact that the asses see had concealed the particulars of income. Thus insofar as final order of penalty was concerned, the Assessing Officer was clear and penalty was imposed for concealing particulars of income. In light of this, we may peruse the decision of this Court in case of Mann Engineering Works (supra). In the said decision, the Division Bench came to the conclusion that language of "and/or" may be proper in issuing a notice for penalty, but it was incumbent upon the Assessing Authority to come to a positive finding as to whether there was concealment of income by the assesses or whether any inaccurate particulars of such income had been furnished by them. If no such clear cut finding is reached by the authority, penalty cannot be levied. It was a case in which in final conclusion the authority had recorded that "I am of the opinion that it will have to be said that the assessee had concealed its income and/or that it had furnished inaccurate particulars of such income. "It was in this respect the Bench observed that "Now the language of "and/or" may be proper in issuing a notice as to penalty order or framing of charge in a criminal case or a quasi-criminal case, but it was incumbent upon the IAC to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. No such clear cut finding was reached by the IAC and, on that ground alone, the order of penalty passed by the IAC was liable to be struck down. "
A perusal of the above paragraph would indicate that the Hon'ble High Court found that user of expression "and/or" in between concealment of income or furnishing of inaccurate particulars while inviting explanation of the assessee, may not be any procedural irregularity or fatal to the proceedings, but if the AO failed to record a finding, while visiting the assessee with penalty, then that would be fatal to the proceedings itself. In other words, while passing final order, the AO has to record a specific finding exhibiting the fact that penalty is being imposed for furnishing inaccurate particulars or concealment of income. In the light of the above, let us take note of penalty order in the case of Shri Allarakhu Babubhai Memon. It reads as under: "6. In these circumstances, the assessee has failed to offer any plausible explanation, I am satisfied that the assessee has willfully, knowingly and without reasonable cause furnished inaccurate particulars of its income and thus, tried to conceal the income so as to evade (A.Y.12-13) Shaileshkumar S Patel 7 payment of tax thereon. Thus, Explanation 1 to section 271 of the Income-tax Act, 1961 is clearly applicable to the case of the assessee for furnishing inaccurate particulars of income and concealing the income for which it is liable to for penalty u/s.271(1)(c) of the Income-tax Act, 1961. I, therefore, levy a minimum penalty @100% of Rs. 98,9101- as against the maximum penalty leviable @ 300% of Rs.296730/- in this case. "
A perusal of the above finding would indicate that in the first two lines, he wished to impose penalty for furnishing inaccurate particulars of income. Thereafter, he invoked Explanation 1 to section 271(1)(c) which provides that if any addition is being made to the total income of the assessee, for which the assessee failed to give any explanation or his explanation was found to be false, then qua that addition it will be deemed that the assessee has concealed income. Both these situations are contradictory to each other in the above order. Therefore, this order is not sustainable in view of decision of Hon'ble Gujarat High Court cited supra. Similar finding in para-6 are being recorded in the cases of other two assesses. In view of the above discussion, penalties in the case of each assessee are not sustainable. We allow all three appeals, and delete penalty imposed by the AO.
14 Therefore, in our opinion, the basis of levy of penalty itself is not correct. Apart from this, assessee`s appeal in quantum proceedings has been admitted by Hon`ble jurisdictional High Court, therefore issue in quantum proceedings are debatable, hence penalty on debatable issue should not be levied, as held by Hon`ble High Court of Karnataka in the case of Ankita Electronics (Pvt) Ltd (supra), hence penalty order under section 271(1)(c) of the Act, needs to be quashed. Accordingly, we quash the penalty order under section 271(1) (c) of the Act.
15.In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 29th June, 2022