NEELAM RANI VERMA,SHAMLI vs. ITO, WARD-1(4), SHAMLI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER Assessment Year : 2015-16 Neelam Rani Verma, Vs. ITO, C/o Panwar Pathology Lab, Ward-1(4), Hanuman Tila, Shamli Road, Shamli. Shamli, UP. PAN: AEIPV1748Q Assessment Year : 2015-16 Kanwar Pal Singh, Vs. ITO, C/o Panwar Pathology Lab, Ward-1(4), Hanuman Tila, Shamli Road, Shamli. Shamli, UP. PAN: BCNPS5303N (Appellant) (Respondent) Assessee by : Shri Nirbhay Mehta, CA Revenue by : Shri S.L. Anuragi, Sr. DR Date of Hearing : 20.02.2019 Date of Pronouncement: 25.02.2019 ORDER

The above two appeals filed by the respective assessees are directed against the separate orders dated 28th June, 2018 of the CIT(A), Muzaffarnagar, relating to assessment year 2015-16.

2. Since identical grounds have been taken by the respective assessees in these appeals, therefore, these were heard together and are being disposed of by this common order for the sake of convenience.

3.1 In appeal, the ld.CIT(A) upheld the action of the Assessing Officer by observing as under:-

“6. In the course of assessment proceedings it was noted by the AO that the appellant has not shown income from trading in future & options for Rs. 1718849/-. The AO has thus made addition of Rs. 1718849/- to the returned income of the appellant and initiated penalty proceedings u/s 271(l)(c) of the Act for concealing the particulars of income and for furnishing of inaccurate particulars of income. The AO has further levied penalty u/s 271(1)(c) of the Act by relying upon Explanation 1(B) to section 271(l)(c) for concealing the particulars of income for Rs.4,89,686/-. The appellant during the penalty proceedings has stated that income from trading in future & options could not be shown due to ignorance and due to bona fide mistake. The appellant further stated that there were no mala fide intentions. The submission of the appellant is a part of statement of facts. The facts of the case along with material on record have been gone through. It is noted that the appellant has derived income from trading in future & options which has not been disclosed in the return of income. The appellant is a professional doctor and ignorance of law cannot be ground for justification/explanation for not showing the above income in the return. The case of the appellant is covered by Explanation 1(B) to section 271(1 )(c) of the Act. It is noted that the appellant has concealed the particulars of income of this account. There is no reasonable cause in the case of the appellant as provided u/s 273B of the Act. Under the facts it is held that the AO was justified to levy penalty u/s 271(1)(c) of the Act. The same is hereby confirmed. Grounds of appeal Nos.l & 6 are dismissed.”

4. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal raising the following grounds:-

1. That on the facts and circumstances of the case and in law, the order passed by CIT (A), Muzafernagar (hereinafter referred to as CIT (A)), is bad in law.

2. That on the facts and circumstances of the case , the CIT-A was not justified in upholding the order imposing penalty as the assessing officer failed to record requisite satisfaction in the assessment order for initiation of penalty proceedings,

3. That on the facts and circumstances of the case, the CIT-A was not justified in upholding the action of the AO for imposing the penalty u/s 271(1) (c) since there is no clear cut finding in the penalty order as to imposition of penalty is for concealment of income or for furnishing inaccurate particulars of income by the appellant,

4. That on the facts and circumstancesof the case, the CIT-A was not justified in upholding the action of the AO for imposing the penalty u/s 271(1) (c) of Rs.4,89,686/-(100% of the tax sought to be evaded) ignoring the fact that the appellant had voluntarily offered to tax the income from F&O transactions emanating from portfolio management services availed by it from SMC Financial Services.

5. That the appellant craves leave to add, alter, modify any of the grounds at the time of hearing or before the hearing.”

“ 9. In our opinion, the legal position is well settled in view of the Supreme Court decisions in Commissioner of Income Tax, Madras. and Anr. v. S.V. Angidi Chettiar (supra) and D.M. Manasvi v. Commissioner of Income Tax, Gujarat, II

Ahmedabad (supra), that power to impose penalty under Section 271 of the Act depends upon the satisfaction of the Income Tax Officer in the course of the proceedings under the Act. It cannot be exercised if he is not satisfied and has not recorded his satisfaction about the existence of the conditions specified in clauses (a), (b) and (c) before the proceedings are concluded. It is true that mere absence of the words "I am satisfied" may not be fatal but such a satisfaction must be spelt out from the order of the Assessing Authority as to the concealment of income or deliberately furnishing inaccurate particulars. In the absence of a clear finding as to the concealment of income or deliberately furnishing inaccurate particulars, the initiation of penalty proceedings will be without jurisdiction. In our opinion, the law is correctly laid down in Ram Commercial Enterprises (supra) and we are in respectful agreement with the same. The reference is answered accordingly.”

“* Have concealed the particulars of your income or furnished inaccurate particulars of such income.”

“10. We have heard both the parties and perused the orders passed by the Revenue Authorities along with the relevant records available with us. Firstly, we have perused the assessment order dated 11.10.2010 passed u/s. 143(3) of the Act and found that AO while completing the assessment has not recorded the satisfaction and has not initiated the penalty proceedings. Similarly, at the time of imposing the penalty u/s. 271(1)© of the Act, the AO has levied the penalty, but did not mention under which limb the penalty has been imposed whether it is on account of inaccurate particulars of income or concealment of income. Therefore, the entire penalty proceedings stand vitiated. 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.” 10.1 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.”

justified in upholding the order imposing penalty as the assessing officer failed to record requisite satisfaction in the assessment order for initiation of penalty proceedings,

3. That on the facts and circumstances of the case, the CIT-A was not justified in upholding the action of the AO for imposing the penalty u/s 271(1) (c) since there is no clear cut finding in the penalty order as to imposition of penalty is for concealment of income or for furnishing inaccurate particulars of income by the appellant,

5. That the appellant craves leave to add, alter, modify any of the grounds at the time of hearing or before the hearing.”

The decision was pronounced in the open court on 25.02.2019.