POPATLAL MOHANLAL CHORDIYA vs. ASSISTANT COMMISSIONER OF INCOME-TAX,

आदेश / ORDER आदेश आदेश आदेश

PER D. KARUNAKARA RAO, AM :

This appeal is filed by the Assessee against the order of CIT(A)-2, Aurangabad, dated 17-06-2016 for the Assessment Year 2004-05.

“1. In the facts and circumstances of the case and in law, the impugned penalty of Rs.6,60,000.00 as levied by the Ld. AO and confirmed by the Ld.CIT(A) is patently illegal, bad in law, arbitrary, perverse and devoid of merits and hence the same may please be deleted. 2. The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal, if deemed necessary at the time of hearing of the appeal.”

2.1 Assessee has also raised additional grounds and the same are extracted below :

“1. Since the show cause notice dt.31/12/2007 issued by the learned Assessing Officer u/s 274 r.w.s. 271[1][c] of the IT. Act was vague as it failed to clearly spell out the charge for levy of penalty and did not point out/indicate the alleged default committed by the appellant, the impugned penalty levied by the learned Assessing Officer is patently illegal, bad in law, arbitrary, perverse, without jurisdiction and being devoid of merits, the same may please be deleted.

Regarding addition of Rs.20,00,000.00 made u/s 69C of the LT. Act 1961, on account of alleged unaccounted expenditure the learned Assessing Officer in Para 3[V] on Page No.4 of the assessment order observed that Penalty proceedings u/s.271[1[c] for concealment of income is separately initiated. However finally the learned Assessing Officer vide Para 6 on last page of penalty order has levied the penalty on the ground that the assessee has furnished inaccurate particulars of its income and levied the penalty. In the circumstances the non application of mind on the part of the learned Assessing Officer being obvious, the impugned penalty is bad in law and without jurisdiction being violative of the principles of natural justice and hence the impugned penalty be deleted.

The appellant most respectfully submits that at the time of filing the appeal due to lack of proper legal assistance and through inadvertence and mistake the aforesaid grounds of appeal remained to be raised for which the appellant submits his sincere apologies.

All the aforesaid grounds of appeal are purely legal grounds and go to the root of legality and validity of the impugned penalty order and can be adjudicated on the evidence available on records. For adjudication of all the aforesaid grounds of appeal, no investigation of fresh facts would be necessary.

In fact the above mentioned both the additional grounds of appeal sought to be raised are covered in original ground of appeal No.1 raised in appeal memo. But the appellant does not wish to enter in to the avoidable controversy and hence this application and hence this application.

The present application is filed at the earliest point of time.

If the appellant is not permitted to raise the aforesaid additional grounds of appeal, serious prejudice and injustice shall be caused to him.

If the appellant is permitted to raise the aforesaid additional grounds of appeal, no prejudice or injustice shall be caused to the respondent revenue.

In the circumstances, the balance of convenience is in favour of the appellant.

It is therefore most respectfully submitted that the appellant may please be permitted to raise the aforesaid additional grounds of appeal, for which act of kindness, the appellant shall always remain obliged.”

and is engaged in the business of road contract and hiring of machinery.

There was action u/s.132 of the Act in the group of P.M. Chordiya of

Aurangabad. Assessee was also covered u/s.133A of the Act. The AO on verification of the impounded documents found that many entries in the

rough records have not been reflected in the books of account. In the

assessment u/s.153A r.w.s.143(3) of the Act, the AO made various

additions, the details of which are given below :

Income as per return of income filed Rs.13,71,490/- Add : Addition as discussed in Para 3(I) above Rs.4,95,775/- Addition as discussed in Para 3(II) above Rs.7,75,332/- Addition as discussed in Para 3(III) above Rs.1,53,655/- Addition as discussed in Para 3(IV) above Rs.4,00,000/- Addition as discussed in Para 3(VI) above Rs.32,132/- Addition as discussed in Para 3(VII) above Rs.32,132/- Addition as discussed in Para 3(VIII) above Rs.3,00,000/- Addition as discussed in Para 3(IX) above Rs.56,313/- ----------------------------- Rs.42.13.207/- Total income Rs.55,84,697/- -----------------------

Agricultural income as per return filed Rs.2,81,563/- Less : Disallowance of Agricultural Income as discussed in Para -3(IX) Rs.56,313/- --------------------- Net Agricultural income Rs.2,25,250/- --------------------

AO initiated penalty proceedings u/s.271(1)(c) of the Act and eventually

levied penalty of Rs.6,60,000/-. In the First Appellate proceedings, the

CIT(A) confirmed the penalty levied by the AO.

appeal with the grounds/additional grounds referred above.

additional grounds raised before the Tribunal are purely legal in nature and

no fresh facts are required to be investigated. Referring to the decision of

Hon’ble Supreme Court in the case NTPC Ltd. reported in 229 ITR 383 and

in the case of Jute Corporation of India Ltd. reported in 187 ITR 688 and

the decision of Hon’ble Bombay High Court in the case of Ahmedabad Electricity Company reported in 199 ITR 351 he submitted that the

additional grounds raised by the assessee should be admitted.

raised by the assessee being purely legal in nature and no fresh facts are

required to be investigated, the additional grounds raised by the assessee

are admitted for adjudication.

additional grounds relating to recording of satisfaction by the AO submitted

that this is a case where the AO failed to record valid and legally

sustainable satisfaction in the assessment order while initiating the penalty

proceedings. Highlighting the legal requirement of making a specific

reference to the specific limb of clause (c) of section 271(1) of the Act and

relying on various binding judgments in the case CIT Vs. Shri Samson

Perinchery (2017) 392 ITR 4 (Bom.) as well as the judgment of Hon’ble

Karnataka High Court in the case of CIT Vs. Manjunatha Cotton and

Ginning Factory 359 ITR 565, Ld. Counsel demonstrated that the penalty

levied by the AO is unsustainable in law. In this regard, he brought our

attention to the assessment order as well as the penalty order highlighting

the above legal deficiencies.

orders of the Revenue. We proceed to adjudicate the issue relating to

recording of proper satisfaction by the AO which was agitated by the

assessee raising additional grounds. In this connection, we perused the

assessment order dated 31-12-2007 and find the satisfaction recorded by the AO for initiating the penalty proceedings u/s.271(1)(c) of the Act is

relevant for extraction. Therefore, the same is reproduced as under :

“3(V)............ .......................For this reasons, addition of Rs.20,00,000/- is made to the total income of the assessee. Penalty proceedings u/s. 271(1)(c) for concealment of income is separately initiated.”

9.1 We also perused the penalty order dated 18-03-2013 and find the

satisfaction recorded by the AO for levying the penalty u/s.271(1)(c) of the

Act is relevant for extraction. The said satisfaction reads as under:

“6. In view of the above discussion, I am satisfied that the assessee has furnished inaccurate particulars of its income. I, therefore, levy a penalty u/s.271(1)(c) of the Income-Tax Act, 1961, at Rs.6,60,000/- being the minimum penalty leviable as against the maximum penalty of Rs.19,80,000/- ....”

From the above, it is evident that at the time of initiation of penalty

proceedings in the assessment, AO mentioned the limb “concealment of

income” whereas at the time of levy of penalty, the AO mentioned the limb

“furnished inaccurate particulars of income”. This manner of

recording of satisfaction suggests the existence of ambiguity with reference

to applicability of specific limb. Therefore, we are of the opinion that

considering the above referred binding judgments such penalty order is

unsustainable in law legally. It is a settled legal proposition that the AO is

under obligation to specify the correct limb at the time of initiation as well

as at the time of levy of penalty. In view of the above deliberation on this

issue, without going into the merits of the penalty, we are of the opinion

that the penalty order is liable to be quashed on this legal issue. Thus,

the order of CIT(A) is set-aside and direct the AO to delete the penalty on

technical grounds.

in our view, adjudication of grounds raised by the assessee on merits

becomes an academic exercise. Therefore, the said grounds are dismissed

as academic.

technicalities.

Order pronounced on this 15th day of November, 2018.

Sd/- Sd/- (िवकास अव�थी /VIKAS AWASTHY) (डी. क�णाकरा राव/D. KARUNAKARA RAO) �ाियक सद�/JUDICIAL MEMBER लेखा सद�/ACCOUNTANT MEMBER

पुणे / Pune; िदनांक / Dated : 15th November, 2018. Satish

आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत

अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-2, Aurangabad 3. आयकर आयु� / The Pr.CIT-2, Aurangabad 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “ए” / DR ‘A’, 5. ITAT, Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune.