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Before: MS. SUCHITRA KAMBLE & SHRI PRASHANT MAHARISHI
This appeal is filed by the assessee against the order dated 25.09.2014 passed by the Ld. CIT(Appeals)-XXII, New Delhi for AY 2008-09.
The Grounds of appeal are as under:
1. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the levy of penalty of Rs. 6,15,679/- under section 271(1 )(c) of the Act.
2. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that in absence of valid satisfaction having been recorded in the order of assessment, levy of penalty was not in accordance with law. 2.1 That furthermore, the learned Commissioner of Income Tax (Appeals) has also failed to appreciate that in absence of specific charge having been levied in the order of assessment, penalty levied even on this ground was not in accordance with law.
3. That further, the Ld. Commissioner of Income Tax (Appeals) has failed to appreciate that sum of Rs. 18,11,352/- represented the peak amount of deposits in the bank account with Axis Bank and such sum brought to tax under section 68 of the Act under a conditional surrender could not be held to be a sum for which, assessee intentionally and knowingly has concealed particulars of income thereby furnished inaccurate particulars of his income. 3.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the amount brought to tax had been offered by the assessee to buy peace of mind and voluntarily during the course of assessment proceedings and therefore, such declaration by the assessee 3.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that during the course of penalty proceedings, the assessee had submitted that the entire evidence may kindly be examined afresh and learned Assessing Officer should not have mechanically proceeded to rely upon the findings of the order of assessment so as to impose penalty.
4. That the Ld. Commissioner of Income Tax (Appeals) has also failed to appreciate no penalty was imposable on the following sums disallowed in the order of assessment: S.No. Particulars Amount (Rs.) 1. Disallowance out of travel expenses 1,43,670/- 2. Disallowance of referral charges 2,03,098/- 3. Disallowance out of telephone 15,974/- expenses Total 3,62,742/-
could not be made a basis to levy penalty under section 271 (l)(c) of the Act. It is, therefore, prayed that the penalty levied and sustained may kindly be deleted and appeal of the appellant may kindly be allowed.”
The assessee derived the income from commission under the name and style of M/s Jain Financial Services. During the year under reference total receipts from life insurance commission disclosed at Rs.33,09,638/- and commission from mutual fund was at Rs.24,719/- and commission from share was Rs. 4,84,344/-. After claiming various expenses Net income was disclosed at Rs. 11,48,867/-. During the course of the assessment proceeding, the Assessing Officer observed that the assessee opened a bank account in Axis bank, A/c No. 054010100126687. From the bank record, the Assessing Officer observed that there was an opening balance of Rs.84,881/- and during the year under reference the assessee deposited huge cash in this Bank account. Accordingly the assessee was required to show cause as to why this cash deposit in the bank account be not added as his income from undisclosed sources within the meaning of Section 68 of the Income Tax Act, 1961. The Assessing Officer held that the assessee deposited cash in the bank account on various dates and also withdrawn regularly which means the assessee rotated a certain amount of cash from his income from undisclosed sources. The peak of this amount was worked out and as on 13.02.2008, the maximum peak amount was at Rs.18,11,352/- which the assessee admitted as his income from undisclosed sources. Therefore, the peak of cash deposit of Rs.18,11,352/- was added in the total income as assessee’s income from undisclosed sources within the meaning of Section 68 of the Act. The Assessing Officer subsequently initiated the penalty proceedings u/s 271(1)(c) of the Act and issued notice u/s 274 of the Act on 29.12.2010. The assessee filed reply. The Assessing Officer levied penalty u/s 271(1)(c) of the Act for concealment as well as furnishing inaccurate particulars of the income at Rs.6,15,679/-.
Being aggrieved by the Penalty order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
The Ld. AR submitted that the Assessing Officer disregarded the submissions made by the assessee and imposed penalty by holding that assessee had knowingly and intentionally concealed particulars of income regarding unexplained deposits in his bank account. With regard to disallowance of expenditure the Assessing Officer has not said anything at all in the order to the effect that there was concealment of income or furnishing of inaccurate particulars of income. The Ld. AR further submitted that the entire order is silent regarding the disallowance of expenditure amounts to concealment of income or furnishing of inaccurate particulars of income inviting penalty u/271(1)(c) of the Act. In fact, while computing the penalty, the disallowance of expenditure was also taken into account treating it as concealed income and on which also penalty was imposed. Thus, the penalty order itself is bad. The Ld. AR further submitted that the CIT(A) failed to appreciate that in absence of specific charge having been levied in the order of assessment, penalty levied even on this ground was not in accordance with law. The Ld. AR submitted that sum of Rs. 18,11,352/- represented the peak amount of deposits in the bank account with Axis bank and such sum brought to tax under Section 68 of the Act under a conditional surrender could not be held to be a sum for which assessee intentionally and knowingly has concealed particulars of income thereby furnished inaccurate particulars of his income.
The Ld. DR relied upon the Penalty order and the order of the CIT(A).
We have heard both the parties and perused all the relevant records including the orders of the lower authorities with respect to the quantum proceedings as well as penalty proceedings. We first come to the quantum proceedings wherein the Assessing Officer vide order dated 29.12.2010 made addition of Rs. 18,11,352/- stating that penalty proceedings initiated separately for concealment/furnishing of inaccurate particulars of income. Similarly in the end of the said order, the Assessing Officer also recorded these twin charges. In the penalty order dated 23.06.2011 wherein the Assessing Officer has levied penalty on twin charges. The CIT(A) vide order dated 25.09.2014 in para 8.13 has also confirmed the penalty on these twin charges. In view of the above facts, it is apparent that there is no specific charge raised against the Assessee either furnishing of inaccurate particulars of income or that of concealment of income. Further, the Notice under Section 274 read with Section 271(1)(c) of the Act dated 29.12.2010 also shows that none of the specific charges out of twin charges are cancelled by the Assessing Officer. In view of this, the issue is squarely covered by the decision of the Hon'ble Supreme Court in case of M/s SSA’ Emerald Meadows order dated 23.11.2015. The Hon’ble Apex Court held as under mentioning the Hon’ble Karnataka High Court decision in case of CIT vs. Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565: “3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (for short ‘the Act’) to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565. 4. In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court. The appeal is accordingly dismissed.” In view of this penalty levied by the Assessing Officer of Rs. 6,15,679/- is not sustainable. The appeal of the assessee is allowed.
In result, appeal of the assessee is allowed.
Order pronounced in the open court on 28.06.2018