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Income Tax Appellate Tribunal, DELHI ‘SMC’ BENCH,
Before: SHRI B.P. JAIN
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘SMC’ BENCH, NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER [A.Y. 2006-07] Pramod Kumar Sahal Vs. ITO, 738/3, Jagriti Vihar Ward-2(1) Meerut Meerut PAN : AWKPS 1634 C [Assessee] [Respondent] Date of Hearing : 28.12.2017 Date of Pronouncement : 04.01.2018 Assessee by : Shri M.P.Rastogi, Adv Revenue by : Shri Ashima Neb, Sr. DR ORDER This appeal of the assessee arises from the order of the ld. CIT(A), Aligarh vide order dated 02.01.2017 for A.Y. 2006-07.
The assessee has raised the following grounds of appeal:
“1) That the penalty as imposed by the AO and sustained by the CIT(A) u/s 271(1)(c) at Rs. 4,17,022/- is arbitrary, unjust, invalid and bad in law on various factual and legal grounds.
2) That in the absence of specific charge for which the penalty has been levied for concealment or furnishing of inaccurate particulars of his income, the levy of penalty u/s 271(1)(c) of the Income-tax Act, 1961 {the Act) at Rs.4,17,022/- by the AO and sustained by CIT (Appeals) is arbitrary, unjust and bad in law and at any rate very excessive.
3) That the CIT (Appeals) has erred on facts and under the law making observation that after the introduction of sub- section 1B to section 271 of the Act, the alleged satisfaction as recorded by the AO is sufficient for assumption of jurisdiction to imposed the penalty.
4) That the assessee neither concealed any particulars of income nor has furnished any inaccurate particulars and consequently the penalty as levied by AO u/s 271(1)(c) of the Act at Rs.4,17,022/- on disallowances/addition on ad-hoc basis and sustained by CIT (Appeals) is arbitrary, unjust and bad in law and at any rate very excessive.”
Brief facts of the case are that the assessee filed his return of income on and declared total income at Rs. 1,67,342/-. Subsequently, it was noticed by the AO that income shown from contract was calculated @8% u/s 44AD on total turnover of Rs. 19,47,136/-. A letter was issued to the company from whom such income was received. In response, two replies dated 20.03.2007 and 28.03.2007 were received. In reply dated 20.03.2007, it was mentioned that the company had paid professional/ technical fees of Rs. 19,47,136/- whereas in the reply dated 28.03.2007, it was stated that the company paid Rs. 19,47,136/- to the appellant for contract work. For clarifying the matter, the AO issued letter dated 12.04.2007 and in response the said company clarified that it had issued only letter dated 20.03.2007. Thus, the AO realized that the appellant could not have declared income u/s 44AD as it was not a case of contract work. Accordingly, notice u/s 148 was issued on 07.12.2007 and assessment proceedings were initiated. In response the appellant filed return of income and declared total income at Rs. 1,55,771/- and claimed expenses of Rs. 17,91,365/-. The appellant was asked by the AO to justify the claim of expenses but no vouchers etc. were produced. Under these circumstances, the AO made an addition of Rs. 1,55,680/-. Thus, the total income was assessed at Rs. 3,23,022/- vide order u/s 143(3) dated 22.12.2008. Penalty proceedings u/s 271(1) (c) were also initiated at the same time. Against the assessment, the appellant filed an appeal before the C1T (A), Meerut and vide his order dated 23.08.2013, the Ld. CIT (A) enhanced the income to Rs. 15,57,710/-.
After receipt of the appellate order, the penalty proceedings were resumed and after considering the appellant’s reply in that regard, the AO concluded that he had deliberately furnished inaccurate particulars of income. Accordingly, he imposed penalty of Rs. 4,17,022/-.
I have considered the rival arguments made by both the sides, perused the orders of the A.O and the ld. CIT(A). It was brought to my notice by the ld. counsel for the assessee that the ld. CIT(A) has made enhancement which is not a matter of dispute and accordingly, instead of the Assessing Officer, the ld. CIT(A) should have initiated the penalty proceedings u/s 271(1)(c) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] which is reproduced hereinbelow :
Accordingly, penalty proceedings should have been initiated by the ld. CIT(A) and not by the Assessing Officer in view of the decision of the Hon'ble Allahabad High Court in the case of CIT Vs. Shadiram Balmukand order dated 22.2.1971. The relevant operative part of the order reads as under:
“In the assessment of the assessee, the ITO included an amount of Rs. 9,250/- as undisclosed income and issued notice to the assessee under section 28 of the Indian Income-tax Act, 1922, for levying penalty. In the appeal against the assessment order, the Appellate Assistant Commissioner increased the amount of undisclosed income to Rs. 46,601. Thereafter, the Income-tax Officer made an order imposing a penalty of Rs. 10,000 under section 28(1)(c) of the Act taking into account the income discovered by the Appellate Assistant Commissioner as undisclosed income. In the second appeal from the order imposing penalty, the Appellate Tribunal, holding that the Income-tax Officer did not have the jurisdiction when imposing penalty to take into account the amount added by the Appellate Assistant Commissioner, quashed the entire penalty order as the penalty order could not be treated as severable. On a reference:
Held, that the Appellate Tribunal validly cancelled the levy of penalty of Rs. 10,000 by the Income-tax Officer. Section 28(1)(c) contemplates distinct jurisdictions in the Income-tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal in relation to the proceedings pending before those respective authorities so far as the imposition of penalty is concerned. The authority imposing the penalty can do so only on being satisfied in the course of proceedings before it that a person has concealed the particulars of his income or furnished inaccurate particulars of his income.
As the amount of penalty was a single indivisible sum, it could not be related in any specific part to the concealed income concerning which the Income- tax Officer had jurisdiction” 6. In the facts and circumstances of the case, the Assessing Officer is not justified in levying penalty. Accordingly, the penalty so initiated by the Assessing Officer is directed to be quashed and the grounds of appeal raised by the assessee are allowed.