KOTHARI RAJENDRA BANSILAL,AHMEDNAGAR vs. INCOME-TAX OFFICER,

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.

“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.”

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.

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.

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.

appeal before the Tribunal with the grounds extracted above.

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.

BEFORE THE TRIBUNAL

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.”

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/-.”

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.

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.