ITO11(2)(1), MUMBAI vs. S.K. OFFICE SOLUTIONS PRIVATE LIMITED, MUMBAI

Aforesaid appeal by revenue for Assessment Year [in short referred to as ‘AY’] 2010-11 contest the order of Ld. Commissioner of Income-Tax (Appeals)-18, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-

On the facts and in the circumstances of the case and in law, whether the learned CIT(A) erred in deleting the penalty without appreciating the facts that the AO has levied penalty on the concealment of income that came to light during the course of the survey proceedings u/s. 133A of the I.T. Act.

On the facts and in the circumstances of the case and in law, whether the learned CIT(A) erred in deleting the penalty overlooking the fact that only after the survey proceedings, the assessee was charged to tax on account of the capital gain earned by the assessee.

On the facts and in the circumstances of the case and in law, whether the learned CIT(A) erred in deleting the penalty without appreciating the fact that the AO has levied penalty only after the additions to the total income being confirmed by the CIT(A) for the quantum additions to the total income.”

1 The perusal of penalty order dated 04/03/2016 establish that penalty has been levied for non-disclosure of certain capital gains on sale of gala nos. 605 to 608 situated at Solaris-I, Saki Vihar Road which were unearthed pursuant to survey action u/s 133A on assessee on 23/11/2012. Another addition against which the penalty was levied was on account of estimated additions of Rs.15,735/- against alleged bogus purchases. The Ld. AO has already considered the effect of order of Ld. first appellate authority in quantum appeal while levying penalty against the assessee.

2 The assessment was framed u/s 143(3) on 25/03/2013 wherein at para 3.3, the penalty was initiated by Ld. AO on account of non-disclosure of capital gains, by observing as under: - The penalty proceedings under Section 271(1)(c) are initiated on account of concealing the particulars of income and also on account of furnishing of inaccurate particulars of income. The penalty proceedings on account of addition of alleged bogus purchases were initiated by observing as under: - Penalty Proceedings u/s 271(1)(c) are separately initiated.

3 During penalty proceedings, show-cause notice u/s 274 r.w.s. 271 (1)(c) dated 25/03/2013 was issued to the assessee. Although the assessee contested the imposition of penalty, however, not satisfied with assessee’s explanation, Ld. AO, vide paras 5 & 6 of penalty order dated 04/03/2016 levied impugned penalty by observing as under: - g) In view of the facts enumerated above and on considering relevant facts and circumstances of the case in a fair and objective manner it is concluded without doubt that the assessee has concealed particulars of income / has furnished inaccurate particulars within the meaning of explanation 1 to Section 271(1)(c) of the I T Act, 1961. Since the assessee has failed to offer an explanation, amount added in computing the total income represents the income in respect of which fresh orders have been conceded with thin the meaning of explanation 1(A) of Section 271(1)(c). Thus, I am of the considered view that this is a fit case for imposition of penalty u/s 271(1)(c) of the I.T.Act, 1961. 6. Accordingly, Rs.2,25,73,110/- which represent addition made in assessment order which has been confirmed in the further appeal is deemed the income in respect of which inaccurate particulars of income have been furnished/particulars of income has been concealed. Some minor variations have been made in the quantum of penalty vide rectification orders u/s 154 dated 09/06/2016 and 03/10/2016. 4 M/s. S.K. Office Solutions Private Limited Assessment Year-2010-11

Aggrieved, the assessee contested the levy of penalty on legal grounds as well as on merits before Ld. CIT(A) vide impugned order dated 09/06/2017. The assessee contested the imposition of penalty on legal grounds, inter-alia, by submitting that notice u/s 274 was issued for furnishing of inaccurate particulars of income whereas penalty has been levied for concealment of income under Explanation 1 to Section 271(1)(c) which was impermissible in law since both the allegations carry different connotations. Reliance was placed on various binding judicial precedents to support the aforesaid submissions. The Ld. CIT(A), after due consideration, conquered with assessee’s legal submissions and deleted the penalty by observing as under: - Decision I have carefully considered the facts of the case and submissions of Ld. AR and decide the grounds of appeal hereunder. The ground no. 1.0, 1.1 and 1.2 relate to a common issue wherein the appellant disputed the levy of penalty, on technical reasons, stating that the AO has initiated the penalty in notice u/s.274 for "furnishing inaccurate particulars of income" whereas had levied the penalty for "Concealment of income" within the meaning of Explanation-1 to Sec.271(1)(c) of I.T.Act, 1961. The appellant furnished a copy of notice u/s.274 r.w.s.271 dated 25/03/2013 wherein the AO has ticked the relevant portion of "furnished inaccurate particulars of such income". The Explanation-1 to Sec 27l(1)(c) relate to concealment of income. Further on perusal of the penalty order, it is observed that AO levied the penalty on stating that "Since the assessee has failed to offer an explanation, amount added in computing the total income, represents the income in respect of which fresh orders have been concealed within the meaning of explanation-1 (A) of section 271(1)(c)". Therefore, it is observed that the initiation of penalty has been made for one charge viz. "Furnishing inaccurate particulars of income" whereas the penalty has been levied for different charge viz."Concealment of income". The Hon'ble High Court of Karnataka in the case of Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar) decided that -"The assessee should know the grounds which he has to meet specifically. Otherwise, Principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law."

There is also a force in arguments of Ld. AR that penalty u/s 271(1)(c) cannot be levied under dual charge and could be levied either for "concealment of income" or for "furnishing inaccurate particulars of income; The provision of Sec.271(1)(c) is as under :- "If the assessing officer or the Commissioner appeals or the principal commissioner or commissioner in the course of any proceedings under this Act, is satisfied that any person __ (c) has concealed the particulars of his income or furnished inaccurate particulars of such income". The word "or" used in Sec.271(1)(c) denote that the penalty has to be initiated and levied in either of two charges being for "concealing the particulars of income" or for "furnishing inaccurate particulars of income" and not in respect of both charges. The AO, at para 6 of penalty order, levied the penalty on holding that -"Accordingly Rs.2,25,73,110/- which represent addition made in assessment order which has been confirmed in before appeal is deemed to the income in respect of which inaccurate particulars of income have been furnished/particulars of income has been concealed. "Therefore, AO has not specified that under which charge the penalty has been levied. Thus, following the judicial pronouncements cited above I hold that penalty order should be clear and unambiguous as to under which limb the penalty is initiated and levied and fixing the dual charge is not permissible in law. Accordingly, the penalty levied u/s.271(1)(c) is not sustainable and is hereby deleted. Accordingly ground nos. 1.0, 1.1 and 1.2 are hereby allowed. Thereafter, Ld. CIT(A) has fortified the decision in subsequent paras on the ground that Ld. AO had levied penalty without considering the debatable issue, divergent issues and bona-fide explanations provided by the assessee. Aggrieved by the stand of Ld. first appellate authority, the revenue is in further appeal before us.

After due consideration of impugned order, we find that penalty has been deleted by Ld. CIT(A), inter-alia, by observing that although the penalty was initiated for furnishing of inaccurate particulars of income but finally the penalty has been levied for concealment of income which is impermissible under law. As settled in catena of binding judicial precedent, these two terms carry different meaning / connotations and failure to specify the exact limb for which the assessee was being penalized, would be fatal to the penalty proceedings. The Ld. first appellate authority, in the process of adjudication, has relied upon binding judicial precedents of various Hon’ble High Courts as well as the decision of coordinate bench of the Tribunal, which have already been extracted above. The revenue is unable to controvert the fact that the said rulings squarely apply to the facts of the present case. No distinguishing facts or features could be pointed by the revenue. Therefore, no fault could be found in the adjudication of Ld. first appellate authority.

In result, the revenue’s appeal stands dismissed. Order pronounced in the open court on 09th Aug, 2019 (Sandeep Gosain) (Manoj Kumar Aggarwal) "ाियक सद" / Judicial Member लेखा सद" / Accountant Member मुंबई Mumbai; िदनांकDated : 09/08/2019 Sr.PS:-Jaisy Varghese

""थ"/ The Respondent आयकरआयु"(अपील) / The CIT(A) 3. आयकरआयु"/ CIT– concerned 4. 5. िवभागीय"ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai गाड"फाईल / Guard File 6. आदेशानुसार/ BY ORDER,