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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER D. KARUNAKARA RAO, AM:
These are the two appeals filed by common assessee against the
separate orders of CIT(Appeals)-III, Pune, dated 16.12.2009 and 10.12.2012
respectively for the A.Ys. 2005-06 & 2006-07.
ITA No.498/PUN/2010 A.Y. 2005-06
Grounds raised by the assessee in ITA No.498/PUN/2010 are
extracted here as under:
“On the facts and under the circumstances of the case the learned Assessing Officer and CIT Appeals erred in: 1. holding that the assessee concealed the income and/or furnished the inaccurate particulars of income attracting provision s of Sec.271(1)(c) of the Income Tax Act, 1961 and levying the penalty of Rs.23,27,607/-. This action of the being bad in law it is submitted that the penalty of Rs.23,27,607/- be deleted. 2. invoking the provisions of Sec.271(1)(c) and levying penalty of Rs. 28,27,607/-. The action being bad in law and not borne out by the facts it is prayed that the penalty 'be deleted. 3. not accepting and I or not considering the explanation given and submissions made by the assessee and levying penalty of Rs.23,27,607/- U/s.271(1)(c). It prayed that the explanations given by the assessee be considered and accepted and the penalty be deleted. 4. holding the disallowance of claim U/s.80IA could be inferred as conscious concealment of the particulars of income or deliberate furnishing of inaccurate particulars attracting provisions of Sec. 271(1)(c) and levying penalty of Rs.23,27,607/- under the said section. It is prayed that the contention be rejected and the penalty be deleted. The appellant named above craves leave to add, to alter and to modify the grounds of appeal if and when required.
Briefly stated relevant facts include that the assessee is engaged in
printing and publishing of newspaper and periodicals. The assessee filed
return of income on 31.10.2005 declaring total income of
3 ITA No.498/PUN/2010 ITA No.759/PUN/2013
Rs.10,93,06,133/-. The Assessing Officer issued notice u/s.143(2) and
142(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on
22.02.2006 to the assessee. The assessee filed revised return on 11.12.2006
revising the total income to Rs.11,52,23,360/-. During the assessment, AO
assessed the total income of assessee at Rs.16,82,27,990/-. The Assessing
Officer levied penalty of Rs.23,27,607/- u/s.271(1)(c) of the Act for
furnishing in accurate particulars of income by claiming wrong deduction of
Rs.64,88,107/-u/s.80IA(4)(iv)(a) of the Act. In the First Appellate
proceedings, the CIT(A) confirmed the penalty imposed of Rs.23,27,607/-
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 brought our
attention to the assessment order and demonstrated the fact of determining
assessed income at Rs.16,82,27,990/- as against return of income at
Rs.10,93,06,133/-. Penalty was levied u/s.271(1)(c) of the Act in both the
appeals for A.Ys.2005-06 & 2006-07 under consideration. Due to wrong
claim of deduction u/s.80IA(4)(iv)(a) of the Act, Assessing Officer initiated
penalty proceedings u/s. 271(1)(c) of the Act. Bringing our attention to the
assessment order, qua the recording of satisfaction at the time of initiating
penalty proceedings, Ld. Counsel for the assessee demonstrated that
Assessing Officer never made reference to specific limbs of Clause (c) of
Section 271(1) of the Act. In this regard, our attention is drawn to Para 6.4
of the assessment order and submitted that “penalty u/s.271(1)(c) is
initiated for making wrong claim of deduction u/s.80IA(4)(iv)(a) of the Act”.
4 ITA No.498/PUN/2010 ITA No.759/PUN/2013
Further, bringing our attention to the penalty order, Ld. Counsel for
the assessee submitted that penalty was levied for “furnishing inaccurate
particulars of income”. Ld. Counsel for the assessee read out the relevant
lines from Para 4.8 of the penalty order.
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. mentioning
specific limbs of Clause (c) of Section 271(1) of the Act while initiating
penalty proceedings. We perused the order of Assessing Officer for initiating
the penalty proceedings u/s.271(1)(c) of the Act and the same is reproduced
as under :
“6.4. It will be seen from the above working that as on 31.03.2005 there is brought forward loss of Rs.4,20,18,236/- to the assessee and therefore, the assessee is not entitled for any deduction u/s.80IA. The arguments of the assessee that the loss was already set off in the earlier years and, therefore, the claim should be allowed does not carry any weight particularly because the specific provision of the section 80IA(5) requires the assessee to show that there is a profit from the unit and such profit is to be worked out treating the unit as a separate entity. After such treatment there is no profit to the assessee and therefore, the assessee is not entitled for any deduction u/s.80IA(4)(iv)(a). Accordingly, the assessee’s claim for deduction u/s.80IA is rejected. Penalty u/s.271(1)(c) is initiated for making wrong claim of deduction u/s.80IA(4)(iv)(a).”
We also perused the penalty order dated 31.03.2009 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:
“4.8. In view of the facts mentioned above, I am of the considered view that the assessee has committed a default within the meaning of Explanation-1(B) to Section 271(1)(c) of the I.T. Act, 1961, by furnishing inaccurate particulars of income by claiming wrong deduction of Rs.64,88,107/-. I, therefore, levy penalty of Rs.23,27,607/- u/s. 271(1)(c) of the Act……………”
5 ITA No.498/PUN/2010 ITA No.759/PUN/2013
From the above, it is evident that at the time of initiation of penalty
proceedings in the assessment, AO held that penalty u/s.271(1)(c) is
initiated for making wrong claim of deduction u/s.80IA(4)(iv)(a). But at the
time of levying penalty qua in penalty order, AO held that the assessee has
committed a default within the meaning of Explanation-1(B) to Section
271(1)(c) of the I.T. Act, 1961, by furnishing inaccurate particulars of
income by claiming wrong deduction of Rs.64,88,107/-.
Thus, 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. 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.
ITA No.759/PUN/2013 A.Y. 2006-07
Grounds raised by assessee in ITA No.759/PUN/2013 for A.Y.2006-07
reads as under:
6 ITA No.498/PUN/2010 ITA No.759/PUN/2013
“On the facts and under the circumstances of the case the learned Assessing Officer and CIT Appeals erred in: 1. holding that the assessee concealed the income and l or concealed the particulars of income attracting provisions of Sec.271(1)(c) of the Income Tax Act, 1961 and levying the penalty of Rs.1,76,29,666/-. This action being bad in law it is prayed that the penalty of Rs.1,76,29,666/- be deleted. 2. invoking the provisions of Sec.271(1)(c) and levying penalty of Rs.1,76,29,666/-. The action being bad in law it is submitted that that the penalty be deleted. 3. not accepting and I or not considering and l or holding that the arguments the explanation given. submissions made, and arguments advanced by the assessee are not convincing and as such are not acceptable and thereby levying penalty of Rs.1,76,29,666/- U/s 271(1)(c). It is submitted that the explanations given by the assessee be considered and accepted and the penalty be deleted. The appellant named above craves leave to add, to alter and to modify the grounds of appeal if and when required.”
Briefly stated relevant facts include that the assessee filed return of 13.
income on 08.12.2006 declaring total income of Rs.29,07,60,184/-. During
the assessment u/s.143(3) of the Act, AO assessed the total income of
assessee at Rs.34,66,61,540/-. The Assessing Officer initiated penalty
proceedings separately u/s.271(1)(c) of the Act for concealment of income/
filing inaccurate particulars of income and levied penalty of
Rs.1,76,29,666/- u/s.271(1)(c) of the Act for furnishing in accurate
particulars of income. In the First Appellate proceedings, the CIT(A)
confirmed the penalty imposed of Rs.1,76,29,666/- u/s. 271(1)(c) of the Act.
Arguments and counter arguments advanced by Ld. Counsel for the
Assessee are same as that of appeal ITA No.498/PUN/2010 for A.Y. 2005-
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
7 ITA No.498/PUN/2010 ITA No.759/PUN/2013
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.
On hearing 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 is relevant for extraction. Therefore, the same is
reproduced as under:
“……………….I proceed to treat the profit derived on sale of shares which were treated as long term capital assets and short term capital assets as provides derived from trading business. Hence, the profit derived from trading in shares and units of Rs.11,20,27,918.76/- is treated as business income. Penalty proceedings u/s.271(1)(c) are initiated separately for concealment of income/ filing inaccurate particulars of income of Rs.5,28,64,61,185/- which was treated as capital gains.”
We also perused the penalty order dated 28.03.2011 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:
“03.3…………………Hence, it is clear that assessee has avoid the legitimate tax liability by furnishing inaccurate particulars of income within the meaning of section 271(1)(c) of the Act and made itself liable for penalty u/s. 271(1)(c) of the Act. Accordingly, a penalty of the amount of 100% of tax sought to be evaded is levied on assessee………...”
Since the facts, issues, arguments and counter arguments are same
as that of appeal ITA No.498/PUN/2010 for A.Y. 2005-06, the decision given
in the said appeal applies to this assessment year too. Therefore, with
similar reasoning, we direct the AO to delete the penalty and the legal
grounds raised by the assessee are allowed on technicalities. In view of the
8 ITA No.498/PUN/2010 ITA No.759/PUN/2013
same, we find, adjudication of the merits of penalty become an academic exercise. Hence, merits-linked grounds are dismissed as such.
To sum up, both the appeals of the assessee for A.Y.2005-06 & 2006- 07 are partly allowed.
Order pronounced 10th 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 : 10th 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)-III, Pune. 4. The CIT-III, Pune. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
Senior Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.