NILESH SUBHASH CHOPDA,AHMEDNAGAR vs. DEPUTY COMMISSIONER OF INCOME-TAX,

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ITA 2087/PUN/2016Status: DisposedITAT Pune12 October 2018AY 2009-105 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Assessing Officer (AO) failed to record proper satisfaction regarding the specific limb of concealment or furnishing inaccurate particulars at the time of initiating penalty proceedings and levying the penalty. This ambiguity rendered the penalty order liable to be quashed.

What were the facts?

The assessee's income was assessed, and additions were made under sections 69 and 69C for unexplained investment and expenditure related to a land purchase. Penalty proceedings under section 271(1)(c) were initiated, and a penalty was levied.

What were the issues?

Whether the penalty order under Section 271(1)(c) is valid when the AO's satisfaction is ambiguous regarding the specific limb of concealment or furnishing inaccurate particulars.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 69,Section 69C,Section 274

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(4)Show list

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Income Tax Appellate Tribunal, “A” BENCH, PUNE

Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM

For Respondent: Shri Rajesh Gawli
Hearing: 11.10.2018Pronounced: 12.10.2018

आदेश / ORDER आदेश आदेश आदेश

PER D. KARUNAKARA RAO, AM :

This appeal is filed by the Assessee against the order of CIT(A)-2, Pune, dated 04-05-2016 for the Assessment Year 2009-10.

2.

Grounds raised by the assessee read as under :

The Appellant most respectfully states that each Ground of Appeal herein below is without prejudice to each other. 1. On the facts and in the circumstances of the case and in law, the Order levying penalty u/s.271 (1)( c) as confirmed by the learned CIT(A), is bad in law as the show cause notice issued u/s. 274 of the Act is defective, invalid, and bad in law for it does not specify as to whether penalty proceeding is being initiated for concealing particulars of income or furnishing inaccurate particulars of income. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the penalty order passed by the learned AO without recording the requisite satisfaction regarding concealment of particulars of income or furnishing of inaccurate particulars as required by the provisions of section 271(1)( c) and therefore the levy of penalty is not justified/not tenable.

3.

On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in conforming the Penalty Order passed by the AO, without appreciating that the learned AO has passed the Assessment Order on the basis of his own judgement and that additions under Sec.69 are not sustainable in case of assessment being best judgement Assessment.

4.

On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in conforming the Penalty Order passed by the AO, without appreciating that:

[a] The Appellant has voluntarily come forward and accepted addition subject to non levy of penalty u/s. 271(1)(c) so as to purchase peace of mind and avoid protracted litigation.

(b) The learned AO has passed order levying Penalty without appreciating the submissions of the appellant.

The appellant craves leave to add, amend, alter, vary and/or withdraw any or all the above grounds of appeal and/or to adduce and rely upon such further evidence/additional evidence and/or documents as may be required at any time during the appeal proceedings.

PRAYER:

The Appellant most respectfully prays as under:

1.

The impugned order may kindly be quashed and set aside. 2. The Penalty levied u/s.271(1)(c) may kindly be deleted. 3. Any further Order in the interest of justice and equity may kindly be passed.”

3.

Briefly stated relevant facts include that the assessee is an individual

and is engaged the business of manufacturing of wooden boxes. Assessee

filed the return of income on 30-09-2009 declaring total income of

Rs.17,79,568/-. In the assessment, the issue relating to purchase of plot of

land situated at Sy.No.265/2, Ahmednagar for a consideration of Rs.12

lakhs was under scrutiny. The assessee’s share is 50% in the said

property. The said transaction is not entered in the books of account. The

expenditure incurred thereof in respect of stamp duty and registration

charges are also not recorded in the books of accounts. AO proceeded to add Rs.6 lakhs as unexplained income u/s.69 of the Act and unexplained

expenditure u/s.69C of the Act amounting to Rs. 1,38,485/-. AO also

made other addition of Rs.2 lakhs on account of excess consumption of raw

material and Rs.2 lakhs on account of commission paid to Mrs. Priya

Punamchand Munot/Mrs. Rajeshri Jitendra Munot. Penalty proceedings

u/s.271(1)(c) of the I.T. Act were initiated for “furnishing inaccurate

particulars of income”. Eventually, the AO levied penalty of Rs.2,51,011/-.

4.

In the First Appellate proceedings, the CIT(A) relying on the judgment

of Hon’ble Delhi High Court in the case of Durga Timber Works Vs. CIT 79

ITR 63 and judgment of Hon’ble Allahabad High Court in the case of

Banaras Chemical Factory Vs. CIT 108 ITR 96 confirmed the levy of

penalty. Aggrieved with the order of CIT(A), the assessee is in appeal before

the Tribunal with the aforesaid grounds.

5.

Ld. DR for the Revenue relied heavily on the orders of AO and the

CIT(A) and prayed for confirming the same.

6.

Assessee filed an adjournment application dated 05-10-2018 stating

that the tax consultant who is looking after the tax matters of the assessee

was not coming to duty on account of demise of his younger brother.

However, on going through the facts of the case, we find the present appeal

can be disposed on technical grounds. AO did not mention the satisfaction

validly qua the limb of clause (c) of section 271(1) of the Act. We find

identical cases were heard and allowed by us in many cases. Therefore, we

proceed to decide the appeal on the basis of material available on record

after hearing the Ld. DR for the Revenue.

7.

Heard the Ld. DR for the Revenue and perused the orders of the

Revenue. Assessee raised the grounds relating to recording of proper satisfaction by the AO. In this connection, we perused the assessment

order dated 20-12-2011 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 :

“7. Assessed u/s.143(3). Issue DN/Challan accordingly. Issue notice u/s.271(1)(c) for furnishing inaccurate particular of income.”

7.1 We also perused the penalty order dated 08-06-2012 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:

“................... ........................... Thus the assessee has concealed the particulars of his income within the meaning of section 271(1)(c) of the I.T. Act, 1961.”

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

proceedings in the assessment, AO mentioned the limb “furnishing

inaccurate particulars of income” whereas while levying the penalty, AO

mentioned both limbs “Concealed the particulars of income”. This

manner of recording of satisfaction suggests the existence of ambiguity with

reference to applicability of specific limb. 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. Our decision is fortified by the 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. Accordingly, relevant grounds on the issue of satisfaction are allowed in favour of the

assessee.

8.

Since we have allowed the legal grounds No.1 and 2 raised by the

assessee in the appeal, in our view, the adjudication of other grounds

raised by the assessee on merits in the appeal, becomes an academic

exercise. Therefore, the said grounds are dismissed as academic.

9.

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

technicalities.

Order pronounced on this 12th day of October, 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 : 12th October, 2018. Satish

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

अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-2, Pune. 3. आयकर आयु� / The Pr.CIT-1, Pune. 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.

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