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Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the assessee against the order of the ld CIT(A)-Ghaziabad dated 16.10.2014 for the Assessment Year 2010-11 wherein penalty levied by the Ld. assessing officer at the rate of 200% under section 271 (1) (C) of Rs. 1313090/– is reduced to 100 % of amount of tax sought to be evaded. Assessee is aggrieved with the levy of the penalty under that section and therefore it has raised the following grounds of appeal:- “1. The income tax officer, Ward-2(3), Ghaziabad erred in facts and law in imposing penalty of Rs. 1313090/- u/s 271(1)(c) of the Income Tax Act, 1961.
2. That the assessee has neither concealed any income nor particulars of income so as to call for penalty u/s 271(1)(c) of the Income Tax Act, 1961.
3. That the ld CIT(A) Ghaziabad has wrongly and illegally confirmed the penalty @100% i.e. Rs. 656545/-. That said penalty of Rs. 656545/- is prayed to be deleted.”
2. Briefly stated the facts of the case is that assessee is an individual, who has offered his business income under section 44AF of the act and filed his return of income on 23/3/2011 for Rs. 3 87260/–. Assessment under section 143 (3) was made on 20/3/2013 wherein an addition of Rs. 2496800/– and Rs. 690310/- was made on account of loss claimed as short term capital loss and excess deduction claimed under section 54F was disallowed Page | 1 respectively. Ld AO also noted satisfaction about furnishing of inaccurate particulars of income while initiating penalty u/s 271(1) (c) of the act. The assessee did not contest the above addition before the appellate authorities as he agreed for this addition during the assessment proceedings. Therefore, the Ld. assessing officer issued notice for levy of penalty under section 271 (1) ©. Assessee submitted before the Ld. assessing officer that assessee himself has submitted with respect to the claim under section 54F of the income tax act that through oversight in the computation rebate of investment in house property amounting to Rs. 7046000/– was claimed fully however as per the computation the same was a allowable at Rs. 6355690/– only. With respect to the short term capital loss on account of the sale of the shares it was stated that assessee has purchased 36500 shares of Suzlon Energy Limited for Rs. 5143318/– on 05/06/2009 and sold the same on 3/2/2010 for Rs. 2650217/– incurring a loss of Rs. 2496800/–. Assessee made payment of Rs. 20 lakhs and Rs. 4.96 Lacs on 8/4/2010 and on 4/5/2010 respectively therefore the Ld. assessing officer was of the view that why a prudent broker will invest an amount of Rs. 51.43 lakhs on behalf of a client for 8 months and that too without charging any interest. Hence, the Ld. assessing officer held that the transaction of purchase of shares seems to be only an arrangement to claim loss, which can be adjusted against long-term capital gain incurred by the assessee. The assessee submitted that assessee has furnished complete details with respect to the transactions entered into by the assessee submitting the bills of purchase and sale of shares from Sino credit and leasing. Further he stated that vide letter dated 19/3/2013 it was submitted that the broker is not cooperating in issuing the copies of contract notes and the necessary evidences as available with the assessee has already been submitted. It was further offered that to buy peace of mind and to avoid multiplicity of legal proceedings the assessee surrenders share loss amounting to Rs. 2496801/– as claimed subject to no penalty under section 271 (1) © to be imposed against the assessee. However the Ld. assessing officer levied the penalty under section 271 (1) © of the act at the rate of 200% of the tax sought to be evaded amounting to Rs. 1313090/– holding that assessee has concealed income of Rs. 3 186801/–.
3. The assessee preferred an appeal before the Ld. CIT (A) and reiterated the same submissions, which were made before the Ld. assessing officer. The Ld. CIT (A) reduced the extent of penalty at the rate of 100 % instead of 200% however upheld the concealment of the income. Therefore, assessee being aggrieved with the order of the Ld. CIT (A) has preferred an appeal before us.
The Ld. authorized representative vehemently submitted that during the course of assessment proceedings the above amount was surrendered by the assessee with a condition that no penalty should be levied on the assessee. He further stated that in the assessment order at Page | 2 page No. 4 Ld. assessing officer has recorded his satisfaction about furnishing of inaccurate particulars of income. He specifically referred to page No 4 at para No. 2.4 of the assessment order. He further stated that the Ld. assessing officer has levied penalty holding that assessee has concealed the income. He specifically referred to page No. 8 of the penalty order passed by the Ld. assessing officer. He therefore submitted that the Ld. assessing officer has initiated the penalty proceedings for furnishing of inaccurate particulars of income however has concluded that assessee has concealed income. He submitted that the charge framed against the assessee was different and the penalty levied on the assessee was on different charge. . He referred to the decision of the Hon‟ble Karnataka High Court in case of CIT versus Manjunath cotton and Ginning Factory (Kar) 359 ITR 565 (2013) wherein it is held that even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty unless it is discernible from the assessment order that it is on account of such unearthing or enquiry concluded by the authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from tax net and as opined by the assessing officer in the assessment order. He further stated that if the explanation offered even though not substantiated by the assessee but is found to be bona fides all facts relating to the same and material to the computation of his total income have been disclosed by the assessee, no penalty could be imposed. He stated that the assessee has furnished the complete information before the Ld. assessing officer merely because of the reason that the share broker has amount outstanding payable for a longer time the addition has been made. He further stated that the assessee should know the grounds, which he is to meet specifically. He further stated that the taking up of the penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. In the end , he further stated that penalty notices have been placed at page No. 39 of the paper book wherein the assessing officer has neither struck off concealment or furnishing of inaccurate particulars, one of the limb specified therein. He therefore relied upon the decision of the Hon‟ble Karnataka High Court, which has been confirmed by the Hon‟ble Supreme Court in case of SSA‟s Emerald Meadows wherein on this ground itself the penalty is held to be bad in law. He therefore submitted that the penalty levied by the Ld. assessing officer and confirmed by the Ld. CIT (A) does not deserve to be sustained in view of the decision of the Hon‟ble Karnataka High Court, which has been affirmed by the Hon‟ble Supreme Court.
The Ld. departmental representative vehemently contested that the assessee if not question during the course of assessment proceedings would not have surrendered the amount is stated by the Ld. authorized representative. He submitted that the surrender made by the assessee is Page | 3 not voluntary and the penalty is levied with respect to the income offered in the return of income and not in the context of what happens during the course of assessment proceedings. He therefore stated that the assessee when court on the wrong foot has surrendered the amount and therefore he is rightly subjected to the penalty proceedings by the lower authorities. In the result, he submitted that the penalty orders of the Ld. CIT (A) may be sustained.
We have carefully considered the rival contention and perused the orders of the lower authorities. There is no dispute about the facts of the case that there are certain additions made into the hands of the assessee during the course of assessment proceedings, which were detected by the Ld. assessing officer during the course of assessment proceedings, on detection the assessee offered them for the taxation and readily agreed to pay the tax thereon. The assessee also did not prefer any appeal before the higher authorities. However looking to the assessment order, with respect to the additions, the Ld. assessing officer vide para No. 2.4 of the order noted that notice under section 271 (1) © is being initiated separately for furnishing inaccurate particulars and judicious decision would be taken on the basis of the facts of the case and after deposit of tax dues by the assessee. However while levying the penalty at page No. 7 and the Ld. assessing officer has noted that he is satisfied that the assessee has willfully concealed his income to the extent of Rs. 3186801/–. Therefore, on conjoined reading of the assessment order as well as the penalty order the Ld. assessing officer initiated penalty for „furnishing inaccurate particulars of income” but levied the penalty for „concealment of income‟. Therefore this issue is squarely covered in favour of the assessee by the decision of the Hon‟ble Karnataka High Court in case of CIT versus Manjunath cotton and Ginning Factory (2013) 359 ITR 565 (Karnataka). Further on looking at the show cause notice issued by the Ld. Assessing Officer under section 274 read with section 271 (1) © of the Income Tax Act it is apparent that he has not struck off one of the alternatives mentioned in that particular notice. On the identical facts and circumstances, where the Ld. assessing officer has not cancelled one of the option the Hon‟ble Karnataka High Court in case of CIT versus SSA Emerald Meadows in /2015 has cancelled the penalty. The Hon‟ble Supreme Court vide order dated 5/8/2016 has also dismissed the special leave petition filed by the revenue against that decision. In view of this and respectfully following the decision of the Hon‟ble Karnataka High Court on both the above points raised by the Ld. authorized representative, we reverse the finding of the lower authorities in levying the penalty under section 271 (1) © of the Income Tax Act on the assessee and cancel the penalty levied by the Ld. Assessing Officer and confirmed by the Ld. CIT (A). In the result, the ground No. 1 of the appeal of the assessee is allowed. Page | 4