SH. VIKAS,MEERUT vs. ITO, MEERUT
In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that the AO failed to specify the exact charge for levying the penalty, which is a mandatory requirement. The introduction of Section 271(1B) does not dispense with this requirement.
What were the facts?
The assessee appealed against a penalty imposed under Section 271(1)(c) of the Income Tax Act. The penalty was confirmed by the CIT(A) despite the assessee arguing that no specific charge was spelt out by the AO in the penalty notice.
What were the issues?
Whether the penalty under Section 271(1)(c) is valid when the AO fails to specify the charge for concealment or furnishing inaccurate particulars. Whether Section 271(1B) overrides the requirement for a specific charge.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cases cited in this judgment(5)Show listHide list
Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.
- CIT v. Manjunatha Cotton & Ginning Factory2,590 citing218 Taxmann 423 · 2013 · HC · Read judgment
- CIT v. Ram Commercial Enterprises Ltd.103 citing246 ITR 568 · 2000 · HC
- New Sorathia Engineering Co. v. CIT90 citing282 ITR 642 · 2006 · HC · Read judgment
- Subramania Iyer v. Union of India16 citing97 ITR 228 · 1974 · HC
- Commissioner of Income Tax v. Rajan and Co.8 citing291 ITR 340 · 2007 · HC
Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI
Before: SMT DIVA SINGH & SHRI PRASHANT MAHARISHIShri Vikas,
PER DIVA SINGH, JUDICIAL MEMBER :
The present appeal has been filed by the assessee assailing the correctness of the order dated 07.01.2015 of CIT (A), Meerut pertaining to 2009-10 assessment year on the following grounds :- “
1) That the penalty as imposed by the AO and sustained by the CIT (A) u/s 271(1)(c) at Rs.11.45,666/- is invalid, arbitrary, unjust and bad in law. 2) That in the absence of specific charge which is the penalty has been levied for concealment of furnishing of inaccurate particular of his income, the levy of penalty u/s 271(1)(c) at Rs.11,45,666/- by AO and sustained by CIT (A) is arbitrary, unjust and bad in law and at any rate very excessive. 3) That the en (A) has erred on fact and under the law making observation that after the introduction of sub section 1. B to section 271, the alleged satisfaction as recorded by the AO is sufficient for assumption of jurisdiction to imposed the penalty. 4) That in the absence of any contrary material about the identity, genuineness of transaction and creditworthiness of cash creditors, the imposition of penalty by the AO merely on account of non acceptance of explanation furnished by assessee and merely on the ground that the addition u/s 68 has been affirmed by CIT (A) is arbitrary, unjust and bad in law and at any rate very excessive. 5) That the observation of CIT (A), which was the basis of confirmation of penalty that "wherever there is difference between the returned and assessed income, there is an inference of concealment as a Rule of law" is untenable and against the law and consequently the penalty as imposed by the AO and sustained by CIT(A) is arbitrary, unjust and bad in law.”
2. At the time of hearing, ld. AR for the assessee invited attention to the assessment order and referring to the same, it was his submission that for the penalty invoked, no specific charge was spelt out by the AO. Similarly, inviting attention to the copy of the penalty order dated 01.05.2013, it was his submission that the penalty has been imposed again without specifying the specific charge. Inviting attention to the impugned order, it was his submission that the specific objection was raised before the CIT (A) and reliance was placed upon the position of law as addressed by Hon’ble Gujarat High Court in case of New Soraphahia Engineering Company vs. CIT – (2006) 282 ITR 642; N.M. Subramanium – 97 ITR 228; D.M. Manasvi vs. CIT – 86 ITR 553 (SC); Ranjan & Company – 291 ITR 340 (Delhi); Hon’ble Delhi High Court in CIT vs. Ram Commercial Enterprises Ltd. – (1998) 246 ITR 568; Hon’ble High Court of Madhya Pradesh in CIT-II vs. Praveen B. Gada (HUF) – 2012) 211 Taxman 166 (M.P.) dated 17.02.2011; and Hon’ble Karnataka High Court in CIT vs. Manjunatha Cotton & Ginning Factory – (2013) 218 Taxman 423 dated 13.12.2012. It was his submission that the penalty order confirmed by the CIT (A) deserves to be set aside in terms of the decision of the Hon’ble Apex Court in S.S. Emerald. Specific attention was invited to copy of the notice issued u/s 271(1)(c) of the Income-tax Act, 1961 (for short ‘the Act’), placed at pages 38 & 39 of the Act so as to point out that in the two notices issued dated 12.12.2011 and 28.03.2013, the AO has not scored off and/or either/or no specific charge not been spelt out. In the circumstances, in terms of the judicial precedent, it was his submission that the penalty order may be quashed. Even on merits, it was his submission that simply because addition has been accepted by the assessee who initially had challenged the impugned order before the CIT (A) but ultimately did not agitate the issue further. This fact by itself is not a ground for levy of penalty.
Ld. Senior DR relied upon the insertion of sub-section 1B of section 271 which has been introduced by the Finance Act, 2008 with retrospective effect form 01.04.1989.
We have heard the submissions and perused the material available on record. It is seen that sub-section 1B of section 271 of the Act, which has been considered, we find has wrongly been understood by the CIT (A) as he has considered the said insertion as overriding the settled legal position namely that the specific charge is required to be spelt out by the AO. The said sub-section is in an entirely different context. The specific provision of sub-section 1B of section 271 addresses the aspect of satisfaction which is deemed to have been constituted where any amount is added or disallowed. It nowhere lays down that the requirement of specific charge is to be dispensed with. The provision is extracted hereunder:- “1B. Where any amount is added or disallowed in computing the total income or loss of an assessee in any order of assessment or reassessment and the said order contains a direction for initiation of penalty proceedings under clause (c) of sub-section (1), such an order of assessment or reassessment shall be deemed to constitute satisfaction of the AO for initiation of the penalty proceedings under the said clause (c).” 4.1 It is also a well settled legal position that simply because addition has been accepted by the assessee, that fact itself cannot be a reason for levy of penalty unless the assessee fails to offer any explanation whatsoever or the explanation offered is not acceptable on facts. In fact where the assessee has offered an explanation, the tax authorities are duty bound to consider the same independently in the penalty proceedings. In the facts of the present case, we find that the order cannot be upheld on the threshold itself as the AO has failed to specify the specific charge whether penalty is to be levied for filing of inaccurate particulars of income or for concealment. In the absence of specific charge being made out in terms of the judicial precedent available, we find that the impugned order cannot be upheld. The penalty is directed to be quashed. 5. In the result, the appeal of the assessee is allowed. Order pronounced in open court on this 03 day of August, 2018. Sd/- sd/- (PRASHANT MAHARISHI) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated the 03 day of August, 2018/TS
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