CATRACK ENTERTAINMENT LIMITED,MUMBAI vs. INCOME TAX OFFICER 11(1)(1), MUMBAI

The present appeal has been preferred by the assessee against the order dated 05.10.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2007-08.

The only issue raised by the assessee is against the order of Ld. CIT(A) upholding the order of AO imposing penalty under section 271(1)(c) of the Act.

At the outset, we would like to mention that neither assessee nor his representative appeared before us to represent the hearing despite service of notice on the assessee. The case was first listed for hearing on 27.02.2019 and adjourned to 2 M/s. Catrack Entertainment Ltd. 25.04.2019 due to non appearance of the assessee or his representative while Bench did not function on 25.04.2019 and thereafter the case was adjourned to 18.06.2019. Even on that date neither assessee nor authorised representative appeared to attend the hearing nor any adjournment application was received. We are therefore deciding the appeal of the assessee after hearing the Ld. D.R. and considering the merits of the case.

The facts in brief are that the assessment in this case was framed vide order dated 30.11.2009 passed under section 143(3) assessing the total income at Rs.11,13,570/- as against the return loss of Rs.8,493/-. The only addition made was in respect of amount payable to ETC Channel, Punjab which was shown at Rs.10,70,462/-. As the arbitration proceedings were pending the AO issued notice under section 133(6) dated 03.11.2009 and ETC Channel, Punjab was asked to give a copy of accounts appearing in their books of accounts balance outstanding as on 31.03.2007 which was replied by the ETC Channel, Punjab vide letter dated 10.11.2009 which stated that the amount outstanding was nil and accordingly the same was added back under section 41(1) of the Act and therefore the AO initiated the penalty proceedings under section 271(1)(c) of the Act without pointing out that whether the assessee has filed inaccurate particulars of income or has concealed the particulars of income. Thereafter, the penalty was imposed after issuing notice under section 274 read with section 271(1)(c) of the Act. Finally the penalty was levied by the AO vide order dated 15.03.2013 passed under section 271(1)(c) by holding that the assessee has concealed his income and also filed inaccurate particulars of income within the meaning of section 271(1)(c)

In the appellate proceedings, the Ld. CIT(A) affirmed the order of AO on the ground that assessee has not co-operated in the assessment proceedings and has not raised any ground on imposition of penalty and only raised the issue on merit.

After hearing the Ld. D.R. and perusing the material on record, we observe that the penalty has been levied in respect of addition made under section 41(1) qua the amount shown as payable to ETC Channel, Punjab when the said party showed the amount as nil whereas assessee has shown the amount as payable to the said party. The AO has simply stated in the assessment order that the penalty is initiated under section 271(1)(c) separately without stating that how the said addition falls under 4 corners of section 271(1)(c). In other words, it was neither stated to be on account of concealment of particulars income nor for furnishing of inaccurate particulars of income and thus there is no satisfaction recorded in the assessment order.

Similarly, in penalty order, the penalty was imposed for both the charges. We are unable to comment upon as to how the penalty notice has been issued as the case is being heard ex- parte as we do not have the copy of the notice issued under section 271(1)(c). Thus the penalty as imposed by the AO in a mechanical manner without recording satisfaction and therefore can not be sustained. Even on merit, the penalty is levied only in respect of liability of Rs.10,70,462/- shown as payable to ETC

In the result, the appeal of the assessee is allowed.