ASSISTANT COMMISSIONER OF INCOME-TAX vs. M/S. YOG INDUSTRIES LTD.,, AURANGABAD

This bunch of appeals relating to same assessee on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience.

The issue raised in the bunch of appeals filed by assessee and cross appeals filed by Revenue in assessment years 2007-08 and 2008-09 is against levy of penalty under section 271(1)(c) of the Act. However, in order to adjudicate the issue, reference is being made to the facts in ITA No.866/PUN/2015, relating to assessment year 2005-06.

The assessee in ITA No.866/PUN/2015, relating to assessment year 2005-06 has raised the following grounds of appeal:- 1. The learned CIT(A) has erred on facts and in law in confirming 50% of the penalty u/s 271(1)(c) at an amount of Rs.1,69,081/-.

Briefly, in the facts of the case, assessment under section 143(3) r.w.s. 153A of the Act was completed against assessee. The assessee was engaged in manufacturing of craft paper and allied products. Search under section 132 of the Act was conducted at the business and residential premises of different members / concerns of Yog group, Aurangabad on 21.02.2008. Since the search warrant issued in the name of assessee company, notice under section 153A of the Act was issued to the assessee, in response to which the assessee filed return of income declaring total income of ₹ 90,97,000/-. The Assessing Officer while completing assessment vide order dated 30.12.2009 made certain additions in the hands of assessee. First addition was on account of sub- contract payments and in assessment year 2005-06, addition of ₹ 8 lakhs was made. The Assessing Officer initiated penalty proceedings as per Explanation 1 to section 271(1)(c) of the Act for furnishing inaccurate particulars of income. Thereafter, in penalty order levying penalty under section 271(1)(c) of the Act, the Assessing Officer held the assessee to have deliberately furnished inaccurate particulars of its total income and concealing taxable income and hence, it was held to be a fit case for imposition of penalty under section 271(1)(c) of the Act.

The CIT(A) upheld the levy of penalty on account of inflated expenditure on 50% of amount of estimated addition. Further, in assessment years 2007- 08 and 2008-09, penalty was also levied on account of rejection of claim of assessee of revenue expenditure debited to capital work-in-progress.

The Assessing Officer recorded satisfaction and initiated penalty proceedings as per Explanation 1 to section 271(1)(c) of the Act for furnishing

The CIT(A) has deleted aforesaid penalty since it had disclosed all particulars of its claim, against which the Revenue is in appeal.

Despite service of notice, none appeared on behalf of assessee nor any application was moved for adjournment.

The learned Departmental Representative for the Revenue stressed that quantum appeals were pending. However, it was pointed out to the learned Departmental Representative for the Revenue that the issue now stands covered by the Hon’ble Bombay High Court in CIT Vs. Shri Samson Perinchery in Income Tax Appeal No.1154 of 2014 with other Income Tax Appeals Nos.953 of 2014, 1097 of 2014 and 1226 of 2014, judgment dated 05.01.2017. He though stressed that appeals are to be kept pending till disposal of quantum appeals, on perusal of record and after hearing the learned Departmental Representative for the Revenue, we find that the issue raised in present appeal on levy of penalty under section 271(1)(c) of the Act stands squarely covered by the order of jurisdictional High Court in CIT Vs. Shri Samson Perinchery (supra). Once the issue stands covered, then there is no merit in keeping the appeals pending on the ground that quantum appeals are pending. In any case, the quantum appeals and levy of penalty as held by various Courts, are independent proceedings.

The assessee had furnished return of income in response to notice under section 153A of the Act after search was carried out at his business / residential premises. Consequent thereto, assessment proceedings were

Thereafter, the Assessing Officer had held the assessee to be in default observing as under:- “4.10…….. Hence, from the above discussion it is well established that assessee has deliberately furnished inaccurate particulars of its total income and has concealed taxable income to the tune of Rs.9,24,130/-.”

The Assessing Officer has thus, initiated penalty proceedings under Explanation 1 to section 271(1)(c) of the Act, which deals with concealment of income and for furnishing of inaccurate particulars of income, which is the other limb of section 271(1)(c) of the Act. The requirement of law is that the assessee is to be show caused as to which limb of section 271(1)(c) of the Act has not been fulfilled. Thereafter, while levying penalty it is incumbent upon the Assessing Officer to levy penalty for concealment on the limb for which it was initiated. The Assessing Officer has to give a finding in this regard.

The Hon’ble Bombay High Court in CIT Vs. Shri Samson Perinchery (supra) have laid down the proposition with regard to initiation of penalty proceedings on one limb of section 271(1)(c) of the Act and levy on another limb and observed that show cause notice needs to be given to the assessee as to which limb of section has not been fulfilled by it and which makes the

In the facts of present case, where the Assessing Officer while making addition in the assessment order had initiated penalty proceedings for both the limbs i.e. under Explanation 1 for concealment of income and for furnishing inaccurate particulars of income, the said satisfaction so recorded is not as per the requirement of the Act. The Assessing Officer has to come to a finding as to which limb of section has not been fulfilled by the assessee.

Now, coming to the penalty order passed by Assessing Officer, where the assessee was held to have concealed the particulars of income in the form of bogus purchases and to have furnished inaccurate particulars of income. Again, the Assessing Officer has not come to a finding as to which limb of section 271(1)(c) of the Act has not been fulfilled by the assessee. Such an order levying penalty under section 271(1)(c) of the Act on both the limbs of section 271(1)(c) of the Act do not stand and the same is held to be invalid and accordingly, penalty levied under section 271(1)(c) of the Act is deleted. Accordingly, we direct the Assessing Officer to delete penalty levied under section 271(1)(c) of the Act. The grounds of appeal raised by assessee in all the appeals are thus, allowed.

In respect of second issue of additions made in assessment years 2007- 08 and 2008-09 on account of revenue expenditure debited to Capital Work-in- progress, wherein the CIT(A) has deleted penalty and the Revenue is in appeal before us and we find that similar satisfaction has been recorded as in respect of addition made on account of estimated sub-contractor payments. Penalty proceedings were initiated as per Explanation 1 to section 271(1)(c) of the Act

In the result, the appeals of assessee are allowed and appeals of Revenue are dismissed.