PRAVINCHANDRA P. CHOKSHI,NASHIK vs. ASSISTANT COMMISSIONER OF INCOME-TAX,

ITA 2084/PUN/2016Status: DisposedITAT Pune02 November 2018AY 2004-059 pages

AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the Assessing Officer failed to specify the appropriate limb of Section 271(1)(c) at the time of initiating and levying the penalty. This ambiguity renders the penalty order unsustainable in law.

What were the facts?

The Assessing Officer initiated penalty proceedings under Section 271(1)(c) of the Income Tax Act. The assessees contended that the initiation and levy of penalty suffered from ambiguity as the Assessing Officer did not specify which limb of clause (c) was invoked.

What were the issues?

Whether the penalty levied under Section 271(1)(c) is valid when the Assessing Officer fails to specify the limb of the section invoked, leading to ambiguity.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show 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 Factory
359 ITR 565 · 2013 · HC · Read judgment
2,590 citing
CIT v. Shri Samson Perinchery
392 ITR 4 · 2017 · HC
417 citing

Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE

For Appellant: Shri Pramod Shingte

For Respondent: Shri Rajesh Gawli

Hearing: 23.10.2018Pronounced: 02.11.2018

Heard together (2 matters)

ITA No.2078/PUN/2016

ITA No.2079/PUN/2016

Read from the judgment's own cause title. This page is filed under one of them.

आदेश/ ORDER

PER D. KARUNAKARA RAO, AM :

There are bunch of three assessees under consideration involving seven appeals by the respective assessees. These 7 appeals relates to the assessment years 1998-99 in the case of Navinchandra P. Choksi, assessment year 2003-04 in the case of Prakash P. Choksi and assessment years 2000-01 to 2004-05 in the case of Pravinchandra P. Chokshi. Considering the commonality of the issues, the facts, the arguments of the AR/DR, etc, we proceed to adjudicate all these 7 appeals in this composite order.

Before us, at the outset, ld. Counsel for the assessee submitted that the common issue of levy of penalty u/s 271(1)(c) of the Act. As per ld. AR, the penalty proceedings, initiated by the Assessing Officer in all these appeals, suffer from ambiguity in the mind of the Assessing Officer while recording the satisfaction at the time of initiating the penalty proceedings u/s 271(1)(c) of the Act. We shall take up assessee-wise appals in the following paragraphs.

ITA No.2080/PUN/2016 (A.Y. 2000-01) (Pravinchandra P. Chokshi)

First, we shall take up the bunch of five appeals. The lead appeal ITA No.2080/PUN/2016 in the case of Pravinchandra P. Chokshi relates to the

ITA Nos.2078 to 2084/PUN/2016

assessment year 2000-01. The finding on this appeal has bearing on the

rest of the four appeals.

According to the ld. AR, the appeal shall have to be allowed in favour

of assessee on the legal issue. Deviating from the grounds on the merits of

penalty and referring to the assessment order, ld. Counsel for the assessee

brought our attention to the contents of para 5.8 and submitted that both

the limbs of clause (c) of section 271(1) of the act were referred to while

initiating the penalty proceedings u/s 271(1)(c) of the Act. Further,

referring to penalty order, ld. Counsel for the assessee submitted that no

reference is made in limb of clause (c) of section 271(1) of the Act while

levying the penalty. He brought our attention to the contents of para 7 of

the penalty order. 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 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.

On the other hand, ld. DR for the Revenue heavily relied on the

orders of the Assessing Officer and the CIT(A).

Without going to the merit, we focus our attention on the said

satisfaction recorded for initiating the penalty proceedings by the Assessing

Officer and find relevant to extract para 5.8 of the assessment order and

para 7 of the penalty order in the following paragraphs :-

Assessment Order :

“5.8 .......... For concealing the income and furnishing the inaccurate particulars of income the penalty proceedings us 271(1)(c) are separately initiated.”

ITA Nos.2078 to 2084/PUN/2016

Penalty Order :

“7. ......... I am satisfied that this is a fit case for levy of penalty u/s 271(1)(c) of the Act.”

The legal requirement of making a clear cut reference to the

applicable limb of clause (c) of section 271(1) of the Act is not met by the

Assessing Officer. Considering the above facts, we are of the opinion that

this is a case where the AO invoked both the limbs at the time of initiation

and none is cited while levying the penalty u/s 271(1)(c) of the Act. Thus,

the satisfaction suffers from ambiguity in the mind of the AO.

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

appropriate limb of clause (c) of section 271(1) of the Act at the time of

initiation as well as at the time of levy of penalty. In view of the above 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.

Since we have allowed the oral ground raised by the assessee, in our

view, adjudication of grounds raised by the assessee in the appeal on

merits becomes an academic exercise. Therefore, the said ground is

dismissed as academic.

ITA Nos.2081 to 2084/PUN/2016 (Four Appeals : A.Ys. 2001-02 to 2004-05) (Pravinchandra P. Chokshi)

Regarding the other four appeals of the assessee for the assessment

years (A.Y. 2001-02 to 2004-05), we are of the opinion that the assessee

ITA Nos.2078 to 2084/PUN/2016

validly made similar ambiguity-linked allegation qua the satisfaction

recorded by the Assessing Officer in the assessment orders/penalty orders.

Thus, we are of the opinion that the assessee is entitled to relief on the

technical grounds. Accordingly, on technical issue the grounds raised by

the assessee in all the four appeals of the assessee are dismissed.

Considering the relief granted by us on the technical ground, we are

of the opinion that the grounds raised on merits of the levy of penalty need

to be dismissed as academic. Hence, they are dismissed as academic in all

the four years.

10.

In the result, the all the five appeals of the assessee are partly

allowed.

ITA No.2079/PUN/2016 (A.Y. 2003-04) (Prakash P. Choksi)

11.

Sri Prakash P. Choksi filed a solitary appeal for the A.Y. 2003-04 on

the issue of levy of penalty u/s 271(1)(c) of the Act. Referring to the

assessment order, ld. Counsel for the assessee brought our attention to the

contents of para 7.1 and submitted that no limb was referred to in the

assessment order while “initiating” the penalty proceedings u/s 271(1)(c)

of the Act. Further, referring to penalty order, ld. Counsel for the assessee

submitted that no reference is made at all to any limb of clause (c) of

section 271(1) of the Act while levying the penalty. He brought our

attention to the contents of para 4 of the penalty order.

12.

Without going to the merit on hearing both counsels, we focused our

attention on the said satisfaction recorded by the Assessing Officer and find

relevant to extract para 7.1 of the assessment order and para 7 of the

penalty order in in the following paragraphs :-

ITA Nos.2078 to 2084/PUN/2016

Assessment Order :

“7.1 .......... Since the assessee has not shown the interest income of Rs.46,233/- for taxation in the return of income, the penalty proceedings u/s 271(1)(c) is being initiated separately.”

Penalty Order :

“7. ......... I am satisfied that it is a fit case for levy of penalty u/s 271(1)(c).”

13.

From the above, it’s obvious that the requirement of making specific

reference to specific limb was not met by the Assessing Officer in this case.

Considering the above facts, we are of the opinion that this is a case where

the AO invoked both the limbs at the time of initiation as well as levying the

penalty. Thus, the satisfaction suffers from ambiguity in the mind of the

AO.

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.

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

appropriate limb of clause (c) of section 271(1) of the Act 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

ITA Nos.2078 to 2084/PUN/2016

issue. Thus, the order of CIT(A) is set-aside and direct the AO to delete the

penalty on technical grounds.

14.

Since we have allowed the oral ground raised by the assessee, in our

view, adjudication of grounds raised by the assessee in the appeal on

merits becomes an academic exercise. Therefore, the said ground is

dismissed as academic.

15.

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

ITA No.2078/PUN/2016 (A.Y. 1998-99) (Navinchandra P. Choksi)

16.

Sri Navinchandra P. Choksi filed a solitary appeal for the A.Y.

1998-99 on the issue of levy of penalty u/s 271(1)(c) of the Act. Referring

to the assessment order, ld. Counsel for the assessee brought our attention

to the contents of para 5.12 & 6 and submitted that no limb was referred to to the contents of para 5.12 & 6 and submitted that no limb was referred to

in the assessment order while “initiating” the penalty proceedings u/s

271(1)(c) of the Act. Further, referring to penalty order, ld. Counsel for the

assessee submitted that no reference is made at all to any limb of clause (c)

of section 271(1) of the Act while levying the penalty. He brought our

attention to the contents of para 5 of the penalty order.

17.

Without going to the merit on hearing both counsels, we focused our

attention on the said satisfaction recorded by the Assessing Officer and find

relevant to extract para 5.12 & 6 of the assessment order and para 5 of the

penalty order in the following paragraphs :-

Assessment Order :

“5.12 .......... For concealing the income and furnishing the inaccurate particulars of income the penalty proceedings under section 271(1)(c) is being initiated separately.” “6. ......... For concealing the income and furnishing inaccurate particulars of income penalty proceedings u/s 271(1)(c) is being initiated separately.”

ITA Nos.2078 to 2084/PUN/2016

Penalty Order :

“5. ......... ......... On carefully considering the above facts and the details available on record, I am satisfied that this is fit case for levy of penalty u/s 271(1)(c) of the Act.”

18.