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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER D. KARUNAKARA RAO, AM :
This is the appeal filed by assessee against the order of CIT(Appeals)-2, Pune dated 09.05.2016 for the A.Y.2007-08.
Grounds raised by the assessee are extracted here as under:
“1. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax erred in dismissing the appeal for
2 ITA No.2187/PUN/2016 A.Y.2007-08
the reason of non-attendance without realizing the fact that assessee has not received the notices of the hearing, the order may kindly be restored to file of CIT(A) for re-consideration of appeal on merit. Without prejudice to above ground followings grounds are taken on merit: 2. On the facts and in the circumstances of the case and in law the Lower Authorities have erred in levying the penalty of Rs.2,91,805/- by invoking provisions of section 271(1)(c) of the Income Tax Act, 1961 by rejecting appellant’s contention in this regard.”
Condonation of delay : The Ld. Counsel for the assessee submitted
that there is delay of 2 days in filing this appeal. The delay is occurred due to
some unavoidable circumstances and therefore, the instant appeal could not
be filed with the prescribed time limit of 60 days. Therefore, the Ld. Counsel
of assessee prayed for admitting the appeal for adjudication condoning the
delay in filing the appeal.
After hearing both the sides and considering the short span of delay of
2 days, we are of the opinion that the delay of 2 days in filing appeal is
required to be condoned and taken up the appeal for adjudication.
Briefly stated relevant facts include that the assessee is engaged in the
business of manufacturing of CI and MS components. The assessee filed
return of income on 29.10.2007 declaring total income of Rs.9,35,732/-.
During the assessment proceedings u/s.143(3) of the Act, the Assessing
Officer assessed the total income of assessee at Rs.17,32,730/- by making
addition of Rs.7,97,500/- u/s.68 of the Act on account of unexplained cash
credits the bank account. Penalty proceedings u/s.271(1)(c) of the Act for
concealing particulars were separately initiated. The Assessing Officer levied
penalty of Rs.2,91,805/- u/s. 271(1)(c) of the Act for furnishing in accurate
3 ITA No.2187/PUN/2016 A.Y.2007-08
particulars of income. In the First Appellate proceedings, the CIT(A)
confirmed the penalty imposed of Rs.2,91,805/-u/s. 271(1)(c) of the Act.
Aggrieved with the order of CIT(A), the assessee filed the present
appeal before the Tribunal with the grounds extracted above.
Before us, at the outset, Ld. Counsel for the assessee referring to
grounds submitted that this is a case where the AO failed to record a legally
sustainable satisfaction in the assessment order where the penalty
proceedings were initiated. 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.
Per Contra, Ld. DR for the Revenue relied on the orders of AO/CIT(A).
BEFORE THE TRIBUNAL
We heard both the parties on this specific legal issue, i.e. recording of
proper satisfaction by the AO. We perused the order of the AO and find the
satisfaction recorded by the AO for initiating the penalty proceedings
u/s.271(1)(c) of the Act as well as for levy of penalty are relevant for
extraction. Therefore, the same is reproduced as under:
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Extraction from Para 6 of the assessment order:
“6………………. In respect of the 42 credits, aggregating to Rs.6,85,000/-, the assessee has failed to prove that the cash creditors had capacity to advance monies. In the circumstances, entire amount of Rs.7,97,000/- is treated as unexplained cash credits and taxed under section 68 of the Income Tax Act, 1961. Penalty proceedings under section 271(1)(c) for concealing particulars in respect of this amount are separately initiated.”
Further, we also perused the penalty order dated 29.06.2012 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:
Extraction from the Penalty Order :
“6. In view of the above, I am satisfied that the assessee has furnished inaccurate particulars of income and thereby, concealed his income to the extent of Rs.7,97,700/-.
I , therefore, levy a minimum penalty which is 100% of the tax sought to be evaded under section 271(1)(c) of the Income tax Act, 1961 amounting to Rs.2,91,805/-.”
From the above, it is evident that at the time of initiation of penalty
proceedings in the assessment, AO mentioned one limb of clause (c) of
section 271(1) of the Act i.e. concealment of income. But in the penalty order,
Assessing Officer levied penalty u/s.271(1)(c) of the Act by mentioning
another limb of section 271(1)(c) i.e. furnishing 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. 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, 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.
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Accordingly, the legal grounds of appeal raised by the assessee are allowed on technicalities. In view of the same, we find, adjudication of the merits of penalty, become an academic exercise. Hence, merits-linked grounds are dismissed as such.
In the result, appeal of the assessee is partly allowed.
Order pronounced on 24th day of October, 2018.
Sd/- Sd/- (�वकास अव�थी /VIKAS AWASTHY) (डी. क�णाकरा राव/D. KARUNAKARA RAO) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER
पुणे / Pune; �दनांक / Dated : 24th October, 2018. SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :
अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeals)-2, Pune. 4. The Pr. CIT-1, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
�नजी स�चव /Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.