JAGDISH PRASAD BHARAT KUMAR HUF,NEW DELHI vs. ITO, WARD-36(4), NEW DELHI

heard together and are being disposed of by this common order for the sake of convenience, by dealing with (AY 2014-15) – Jagdish Prasad Avdesh Kumar- HUF and by only reproducing the grounds of this appeal.

Invalid penalty orders u/s. 271(1)© : jurisdictional challenge 1. That on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in sustaining the penalty order passed by the AO u/s. 271(1)(c) as in assessment order passed dated

26.12.2016 same is delightfully vague as to requisite satisfaction of AO to validly initiate penalty proceedings u/s. 271(1B) of the Act and said assessment order also does not disclose under which specific limb penalty charge is made by the AO, accordingly penalty order passed by AO and order of Ld. CIT(A) may please be quashed;

2. That on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in sustaining the penalty order passed by AO u/s. 271(1)(c) as AO has levied penalty without any application of mind in routine and casual manner which is confirmed in arbitrary manner by Ld. CIT(A), accordingly penalty order passed by AO and order of Ld. CIT(A) may please be quashed; Merits of penalty order u/s 271(l)(c) Rs 433,132

3. That on the facts and in the circumstances of the case and in law, Ld CIT-A erred in sustaining the penalty order passed by Ld AO u/s 27l(l)(c) without appreciating assessee ’s contention that: i) Firstly addition made by Ld AO in quantum proceedings u/s 68 of the Act is itself incorrect and made in grave violation to principle of natural justice as no case specific incriminating material is brought on records at any stage so as to draw adverse inference u/s 68 in wake of inundated documentary evidence which have remained totally uncontroverted and simply on basis of innocuous surrender from assessee , addition u/s 68 was made, which can never give rise to valid penalty u/s 271(l)(c) of the Act; ii) Secondly there is no animus and conscious concealment (intentional wrong doing) on part of assessee as evident from fact that assessee has given a bonafide explanation in support of exemption claimed u/s 10(38) on staled LTCG which is based on valid documentary evidence ,so penalty levied u/s 271(1)(c) is patently wrong; iii) Thirdly bonafide conduct of assessee has been above board in extant case as no material fact is ever suppressed/hided or wrongly mentioned in return filed/assessment proceedings, so as to attract lethal consequences of section 271 (1) (c) of the Act; iv) Fourthly, on merits of the claim no where it is objected by Ld AO/CIT-A that extant claim u/s 10(38) of the Act is already decided in favor of assessee by various higher court rulings so penalty u/s 271(l)(c) cannot be levied when addition itself is seriously questionable;

v) Fifthly , penalty u/s 271(1)(c) cant be levied where facts are not validly disproved by Ld AO and case only falls in category of facts not proved, as is the case here; vi) Lastly, on holistic consideration of entire conspectus of the case penalty u/s 271(1)(c) is wrongly levied here as no case is made out against assessee to be visited with draconian consequences of penalty u/s 271(1) (C) of the Act as law does not completely bar assessees to make and validly test a claim through return of income, which is going to be scrutinized and examined by revenue authorities;

4. That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the penalty order passed by Ld AO u/s 271(l)(c) without appreciating any of the contention of assessee, ergo, penalty order passed by Ld AO and order of Ld CIT-A may please be quashed; That the appellant craves leave to add / alter any/all grounds of appeal before or at the time of hearing of the appeal.

But in the instant case, the assesseee intentionally and knowingly has concealed particulars of income. In these circumstances, the statutory penalty amounting to Rs. 4,33,132/- was imposed vide order dated 28.6.2017 u/s. 271(1)© of the Act. Against the penalty order dated 28.6.2017, assessee appealed before the Ld. CTI(A), who vide his impugned order dated 13.7.2018 has dismissed the appeal of the assessee.

- Hon’ble Karnataka High Court decision in the case of CIT & Ors. Vs. M/s Manjunatha Cotton and Ginnig Factory & Ors. (2013) 359 ITR 565 - Apex Court decision in the case of CIT & Anr. Vs. M/s SSA’s Emerald Meadows in CC No. 11485/2016 dated 05.8.2016.

5.1 On the contrary, Ld. DR relied upon the orders of the authorities below. He submitted that the question is whether the assessee has offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income. When the burden to offer explanation placed by the Explanation 1 to Section 271(1)© is not discharged by the Assessee supported by cogent and reliable evidence the onus does not shift on the revenue. Hence, the fact of surrender of income does not alter the position vis-à-vis the Explanation 1 to Section 271(1)© and therefore, the AO is justified in imposing the penalty of Rs. 4,00,747/-.

“…..Keeping in view above facts, I disallow the amount of Rs. 12,96,916/- claimed as capital gain exempted u/s. 10(38) and treat it as income of the assessee for the AY 2014-15 u/s. 68 of the I.T. Act,

1961 and the same is accordingly added back to the taxable income of the assessee. Penalty proceedings u/s. 271(1)© r.w.s. 284 of the Income

Tax Act are being initiated separately as I am that the assessee has concealed the particulars of her income or furnished inaccurate particualras of income.”

6.1 After perusing the aforesaid contents of the assessment order dated 26/12/2016, I am of the view that the AO has initiated the penalty for concealment of particulars of income or furnishing of inaccurate particulars, which is contrary to the provisions of law. I am also of the view that assessment order issued by the AO is bad in law as it does not specify under which limb of section 271(1)© of the Act, the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars.

Therefore, the penalty in dispute is not sustainable in the eyes of law. My aforesaid view is supported by the following decisions:- i) “CIT & Anr. Vs. M/s SSA’s Emerald Meadows – 2015 (11) TMI 1620 – Karnataka High Court has held that Tribunal has correctly allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with Section 271(1)(c) to be bad in law as it did not specify which limb of Section 271(1)© of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of Commissioner of Income Tax vs. Manjunatha Cotton and Ginning Factory (2013) (7) TMI 620- Karanataka High Court. Thus since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion no substantial question of law arises – decided in favour of assessee.” ii) CIT & Anr. Vs. M/s SSA’s Emerald Meadows – Hon’ble Supreme Court of India – reported in 2016 (8) TMI 1145

– Supreme Court. The Apex Court held that High Court order confirmed (2015) (11) TMI 1620 (Supra) – Karnataka High Court. Notice issued by AO under section 274 read with section 271(1)(c) to be bad in law as it did not specify which limb of Section 271(1)© of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income – Decided in favour of assessee.” iii) ITAT, ‘A’ Bench, New Delhi decision dated 05.12.2017 in the case of Ashok Kumar Chordia vs. DCIT passed in to 5790/Del/2014 wherein the Tribunal has observed as under:- “7. We have heard both the parties and perused the orders passed by the Revenue Authorities alongwith the relevant records available with us. Firstly, we have perused the Notice dated 26.3.2013 issued by the AO for initiating the penalty and directing the assessee to appear before him at 11.30 AM on 26/04/2013 and issued a Show Cause to the assessee stating therein that “…..you have concealed the particulars of your income or furnished inaccurate particulars of such income…”. After perusing the notice dated 26.3.2013 issued by the AO to the assessee, we are of the view that the AO has initiated the penalty for furnishing inaccurate particulars of income or concealment of income as well as in the penalty order dated 30.9.2013 AO has stated that he is satisfied that the assessee has concealed particulars of his income, which is contrary to law. In view of above, the penalty is not sustainable in the eyes of law. Our aforesaid view is fortified by the following decisions:- i) “CIT & Anr. Vs. M/s SSA’s Emerald Meadows – 2015 (11) TMI 1620 – Karnataka High Court has held that Tribunal has correctly allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with Section 271(1)(c) to be bad in law as it did not specify which limb of Section 271(1)© of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of Commissioner of Income Tax vs. Manjunatha Cotton and Ginning Factory (2013) (7) TMI 620- Karanataka High Court. Thus since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion no substantial question of law arises – decided in favour of assessee.” ii) CIT & Anr. Vs. M/s SSA’s Emerald Meadows – Hon’ble Supreme Court of India – reported in 2016 (8) TMI 1145 – Supreme Court. The Apex Court held that High Court order confirmed (2015) (11) TMI 1620 (Supra) – Karnataka High Court. Notice issued by AO under section 274 read with section 271(1)(c) to be bad in law as it did not specify which limb of Section 271(1)© of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income – Decided in favour of assessee.”

7.1 However, the Ld. CIT(A) has given clear finding regarding the furnishing of inaccurate particulars. For the sake of convenience, the relevant para no. 5.3.1 of the impugned order passed by the Ld. CIT(A) is reproduced as under:-

“5.3.1 The above findings of the Ld.

CIT(A) clearly establishes that the appellant has concealed the income of Rs. 26,50,500/- and did not declare in the return of income inspite of admitting a disclosure of Rs. 40,00,000/- during survey. Thus, the appellant has furnished inaccurate particulars of his income. The facts of the case clearly reveal that the appellant tried to evade payment of taxes by furnishing inaccurate particulars of income.

Therefore, I hold that the AO was fully justified in levying the penalty u/s. 271(1)(c) of the Act. The penalty levied by the AO is upheld. This ground of appeal is rejected.”

8. Keeping in view of the aforesaid finding of the Ld.

CIT(A), we are of the considered view that the AO has passed the assessment order wherein the AO has recorded his satisfaction on the page 2, 2nd para viz. “I am satisfied that it is a fit case for initiation of penalty proceedings u/s. 271(1)(c) of the Act for furnishing inaccurate particulars of income/concealment of income.” Further the AO vide his

Notice dated 31.12.2007 for initiating the penalty and directed the assessee to appear before him at ---------AM/PM on --------

200------ and issued a Show

Cause to the assessee stating therein that why an order imposing the penalty of amount should not be made u/s. 271(1)(c) of the I.T. Act, 1961.

After perusing the notice dated

31.12.2007 issued by the AO to the assessee, we are of the view that the AO has initiated the penalty for furnishing inaccurate particulars of income/ concealment of income, but in the penalty order dated

06.11.2009 he has stated that he is satisfied that the assessee has furnished the inaccurate particulars of income. In our view the penalty in dispute is not sustainable in the eyes of law, because the AO has not recorded any clear finding whether the assessee was guilty of concealment of income or furnishing of inaccurate particulars of income. Secondly, the notice u/s. 271(1)(c) has been issued to the assessee levying the penalty for furnishing of inaccurate particulars of income/concealment of income, whereas the penalty in dispute has been levied by the AO on account of furnishing of inaccurate particulars. In our view the penalty is not sustainable in the eyes of law.

Our aforesaid view is fortified by the following decisions:- i) “CIT & Anr. Vs. M/s

Emerald Meadows – 2015

(11) TMI 1620 – Karnataka

High Court has held that Tribunal has correctly allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with Section 271(1)(c) to be bad in law as it did not specify which limb of Section 271(1)© of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of Commissioner of Income

Tax vs. Manjunatha Cotton and Ginning Factory (2013) (7) TMI 620- Karanataka High Court. Thus since the matter is covered by judgment of the Division

Bench of this Court, we are of the opinion no substantial question of law arises – decided in favour of assessee.” ii) CIT & Anr. Vs. M/s

SSA’s Emerald Meadows – Hon’ble Supreme Court of India – reported in 2016 (8) TMI 1145 – Supreme Court. The Apex Court held that High Court order confirmed (2015) (11) TMI 1620 (Supra) – Karnataka High

Court. Notice issued by AO under section 274 read with section 271(1)(c) to be bad in law as it did not specify which limb of Section 271(1)© of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income –

Decided in favour of assessee.”

8.1 In the background of the aforesaid discussions and respectfully following the precedents, we delete the penalty in dispute and decide the issue in favor of the assessee and against the Revenue.”

8. In the result, the appeal filed by the Assessee stands allowed.