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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
ORDER
PER VIKAS AWASTHY, JM:
This appeal by the assessee is directed against order of CIT(A)-1, Mumbai dated 12/01/2017 for assessment year 2010-11 confirming levy of penalty under section 271(1)(c) of the Income Tax Act 1961 (in short ‘the Act’).
Ms. Arathi Vissanji appearing on behalf of the assessee submitted that the Tribunal in vide order dated 18/01/2019 has deleted the addition made by the authorities below, hence, no (A.Y. 2010-11) penalty under section 271(1)(c) of the Act is leviable. The Ld. Authorised Representative of the assessee furnished a copy of Tribunal order in allowing assessee’s claim of exemption under section 11 & 12 of the Act.
On the other hand, Shri Santuru Kumar Saika appearing on behalf of the Department vehemently defended the impugned order. The Ld. Departmental Representative submitted that the Tribunal has granted part relief to the assessee.
We have heard the submissions made by representatives of rival sides have perused the orders of authorities below. The Assessing Officer vide order dated 25/03/2015 has levied penalty under section 271(1)(c) of the Act in respect of disallowance of assessee’s claim of exemption under section 11 & 12 of the Act. The assessee challenged the order of CIT(A) confirming the disallowance made by Assessing Officer in appeal before the Tribunal in ITA No.544/Mum/2014(supra). The Co-ordinate Bench of the Tribunal after examining the issue allowed the appeal of the assessee in toto. Once the addition/disallowance has been deleted by the Tribunal, the penalty levied on addition/disallowance does not survive.
We further observe that in the assessment order, the Assessing Officer has not recorded satisfaction for initiating penalty proceedings under section 271(1)(c) of the Act . The Assessing Officer in last para i.e. para – 19 of the order has merely stated that “penalty proceedings under section 271(1)(c) initiated issue notice under section 274 r.w.s. 271(1)(c)” The Assessing Officer has not mentioned the charge under section 271(1)(c) of the Act for which penalty is being levied. However, while passing the order under section 271(1)(c) of the Act, the Assessing Officer levied penalty for “furnishing inaccurate particulars of income”. Proper recording of satisfaction specifying charge for which penalty proceedings are initiated is one of the mandatory condition for levy of penalty (CIT & Anr. v. Manjunatha Cotton & Ginning Factory, 359 ITR 565(Kar).). The Hon’ble Jurisdictional High Court in the case of CIT vs. Samson Perinchery reported as 392 ITR 4(Bom) has held that penalty cannot be levied on a charge other than for which satisfaction has been recorded. The relevant extract of the judgment of Hon’ble Jurisdictional High Court reads as under:-
6. The above submission on the part of the Revenue is in the face of the decision of the Supreme Court in T. Ashok Pai v. CIT[2007] 292 ITR 11/161 Taxman 340 [relied upon in Manjunath Cotton & Ginning Factory (supra)] - wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act, carry different meanings/connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice.
Thus in view of our above observation, the penalty proceedings are liable to be quashed. The impugned order is set-aside and the appeal of assessee is allowed.