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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
Before: SMT. DIVA SINGH & SH. N.S. SAINI
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’, NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SH. N.S. SAINI, ACCOUNTANT MEMBER ASSESSMENT Year: 2014-15 Sh. Trilok Chand Chaudhary Vs ACIT 39, Gadai Pur, Mehrauli, Central Circle -26 New Delhi-110030 New Delhi PAN : AAEPC0683P (APPELLANT) (RESPONDENT) Appellant by: Sh.Pranshu Goel, CA Assessee by: Sh. S. S. Rana, CIT (DR) Date of hearing: 19/12/2018 Date of Pronouncement: 21/12/2018 ORDER PER Diva Singh, JM:
The present appeal has been filed by the assessee assailing the correctness of the order dated 07.09.2018 of CIT (Appeals) -29, New Delhi pertaining 2014-15 assessment year on the following grounds :-
1. That on the facts and circumstances of the case and in law, the Hon’ble CIT(A) erred in confirming the penalty levied by the Ld. ACIT under section 271 AAB of the Act, amounting to Rs.1,95,00,000/-.
2. That on the facts and circumstances of the case and in law, Hon'ble CIT(A) erred in not considering that the initiation of penalty proceedings under Section 271AAB of the Act is itself bad in law.
3. That the penalty order passed by the Ld.AO as upheld by the Hon'ble CIT(A) is bad in law and void-ab-initio as the show-cause notice was issued under Section 271 read with Section 274 of the Act, whereas penalty was imposed under Section 271AAB of the Act; That the order passed by the Ld. AO as upheld by the Hon'ble CIT(A) is bad in law, as the amount on which the penalty is levied is not an 'undisclosed income' in terms of the provisions of Section 271AAB of the Act.
4. That the order(s) passed by the Ld. AO and by the Hon'ble CIT(A), are nonspeaking, laconic, cryptic and devoid of any cogent reasoning;
3. The Ld. AR inviting attention to the records submitted that penalty u/s 271 AAB has been levied upon the assessee without following the due procedure and as a result of these short comings the penalty deserves to quashed. Inviting attention to ground No. 2 raised by the assessee in the present appeal it was his submission that the penalty order may be quashed. The said issue it was submitted had been agitated by ground No.6 before CIT(A) for ready reference the same is extracted from the impugned order reproduce here under :- “6. That the order imposing penalty is bad in law and void ab initio since the show cause notice has been issued u/s 271 rws 274 whereas penalty has been imposed u/s 271 AAB.”
The Ld. CIT DR submitted that thought the issue raised in ground No.3 may have been agitated before the CIT(A) however ground No.2 was not raised before the CIT(A). The Ld. AR inviting attention to the finding recorded by the CIT(A) at pages 19 and 21 submitted inviting attention to the impugned order it was submitted that despite the ground and the arguments the issue has been left undecided and the CIT(Appeals) proceeded to decide the same on the merits of the penalty that too without appreciating the facts and on the jurisdictional challenge passed by the assessee even if only by ground No.6. No findings has been given by the CIT(A) on the legal issue. It was also his submission that the issue agitated in ground No.2 in the present appeal was a subject matter of submissions before the CIT(A) and the objections of the assessee relying upon decision of the courts in the case of CIT Vs. S. Vs. Angidi Chettiar [1962[ 44 ITR 739 (SC) and the Delhi High court in CIT Vs. Rampur Engg. Co. Ltd. [2009] 176 Taxman 211 (Delhi) (FB) had been was relied upon. These submissions have been extracted page 4 and 5 of the impugned order by the CIT (A) himself in para 2.1 and 2.2 as under :- 2.1. At the outset, we would like to draw your Honour's kind attention to thelandmark judgment of the Hon'ble Supreme Court in the case of CIT v. S.V. AngidiChettiar [1962] 44 ITR 739 (SC), wherein, the Hon'ble Court laid down the principle that the power to impose penalty depends upon the J satisfaction of the ITO in the course of proceedings under the Act; it could not j be exercised if he is not satisfied about the existence of conditions specified 1 in the sections of levy of penalty before the proceedings are concluded. The proceeding to levy penalty has, however, not to be commenced by the ITO before the completion of the assessment proceedings by the ITO. Satisfaction before conclusion of the proceeding under the Act, and not the issue of a notice or initiation of any step for imposing penalty is a condition for the exercise of the jurisdiction. 2.2. Furthermore, reliance is also placed on the decision of the Hon'ble Full Bench j of High Court of Delhi in the case of CIT v. Rampur Engg. Co. Ltd. [2009] 176 Taxman 211 (Delhi)(FB), where, Hon'ble Court while dealing with penalty under Section 271 of the Act, clearly reiterated the principles laid down by the Hon'ble Supreme Court in the case CIT v. S.V. AngidiChettiar (supra) and{ held as under: "The legal position is well-settled in view of the Supreme Court's decisions in CIT v. S.V. AngidiChettiar [1962] 44 ITR 739 and P.M. Manasvi v. CIT [19721 86 ITR 557 (SC), that power to impose penalty under section 271 depends upon the satisfaction of the Assessing Officer in the course of the assessment 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) of sub-section (1) of section 271 before the proceedings are concluded. It is true that mere absence of the words 'I am satisfied1 may not be fatal, but such a satisfaction must be spelt out from the order of the Assessing Officer as to the concealment of income or deliberately furnishing of inaccurate particulars. In the absence of a clear finding as to the concealment of income or deliberately furnishing of inaccurate particulars, the initiation of penalty proceedings will be without jurisdiction" The aforesaid principle is reiterated by the Hon'ble jurisdictional High Court in plethora of cases as under: • Diwan Enterprises 246 ITR 571 (Del) • Vikas Promoters 277 ITR 337 (Del) • Super Metal Rerollers 265 ITR 082 (Del) • Shree Bhagwant Fin Co 280 ITR 412 (Del) • Ranjan 8c co 291 ITR 340 (Del) • Manish Iron Store 263 ITR 484 (PH) • DhanjibhaiKanjibhai 189 ITR (Bom) • Rampur Engg. Co 309 ITR 143 (Del)(FB) It has been held in the following cases that recording of satisfaction for the AO in the assessment order is sine qua non for initiating penalty proceedings. Mere observations "penalty proceedings are being initiated separately" is not enough.
The Ld. CIT DR on being confronted with the order could not object to the arguments that the issues raised by the assessee before the CIT(A) have not been decided. It was his submission that the assessee ideally should have raised a specific ground before the CIT(A). The parties ultimately in the circumstances agreed that the issue may be demanded.
We have heard the rival submissions and perused the material available on record. In the facts of the present case it is seen search was conducted upon the assessee wherein the assessee surrendered undisclosed income to the extent of Rs.6.50 crores. The Assessing Officer levied penalty u/s 271 AAB @ 30% relying upon the statement recorded u/s 132 (4) and held that the assessee failed to explain the nature of the undisclosed income. Since the very levy of penalty itself is challenged in the present proceedings accordingly without addressing the correctness etc of the order itself it is deemed appropriate to set aside the impugned order back to the file of the CIT(A) with a direction to first decide the issue raised by the assessee in ground No. 2 and 3 in the present proceedings and thereafter proceeded to decide the issue on merits if need be. Said order was pronounced in the open court in the presence of the parties immediately after the hearing.
In the result, appeal of the assessee is allowed for statistical purposes.