NANDU A.RAJPUT,,PUNE vs. ASSISTANT COMMISSIONER OF INCOME TAX,,

आदेश / ORDER

PER VIKAS AWASTHY, JM

In this bunch of appeals filed by the assessee for the assessment years 2006-07 to 2010-11, the assessee has assailed the order of Commissioner of Income Tax (Appeals)-12, Pune dated 06.10.2016 common for the impugned assessment years in confirming levy of penalty u/s.271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).

2 ITA Nos.2832 to 2836/PUN/2016 A.Ys.2006-07 to 2010-11

reasons for levy of penalty in all these appeals are similar, these appeals

are taken up together for adjudication and are disposed of vide this

common order.

01.08.2018. The acknowledgement of the notice available on record

indicates that the notice of the appeals has been duly served on the

assessee. Despite service of notice, none has appeared on behalf of the

assessee to pursue the appeals nor any request seeking adjournment has

been received from assessee/appellant. In such circumstances, we

proceed to decide these appeals in the absence of assessee or his AR with

the assistance of ld. DR and the material available on record.

action u/s. 132 of the Act was conducted in the case of Nandu Rajput

group on 12.10.2010. Notice u/s.153A was issued to the assessee for the

impugned assessment years. In response to the said notice, the assessee

filed separate return of income for the impugned assessment years. The

Assessing Officer in assessment proceedings u/s.143(3) r.w.s.153A of the

Act made additions/disallowances on following counts :

Addition/ Assessment year disallowances 2006-07 2007-08 2008-09 2009-10 2010-11 Receipts of ‘on ✓ ✓ ✓ ✓ ✓ money’ ✓ ✓ ✓ ✓ ✓ Investment in Bungalow

3 ITA Nos.2832 to 2836/PUN/2016 A.Ys.2006-07 to 2010-11

Disallowance ✓ _ ✓ _ ✓ u/s.40(3) _ _ _ Under valuation ✓ _ of work in progress _ _ _ _ ✓ Re-casting of profit

4.1 In assessment year 2006-07, Assessing Officer while making

addition in respect of ‘On money’ and investment in farmhouse/bungalow

at Khanapur initiated penalty proceedings u/s. 271(1)(c) of the Act.

However, no satisfaction was recorded for initiating penalty proceedings

in respect of disallowance u/s. 40A(3) of the Act.

4.2 In assessment year 2007-08, while making additions in respect of

‘On money’ and investment in farmhouse/bungalow at Khanapur,

Assessing Officer initiated penalty proceedings u/s. 271(1)(c) on both the

counts.

4.3 In assessment year 2008-09, the position is similar to assessment

year 2006-07 and penalty proceedings were initiated in respect of receipt

of ‘on money’ and investment in farmhouse/bungalow at Khanapur.

4.4 In assessment year 2009-10, the addition was made on account of

receipt of ‘On money’, investment in farmhouse/bungalow at Khanapur

and under valuation of work in progress. The Assessing Officer initiated

penalty proceedings in respect of all the three additions.

4.5 In assessment year 2010-11, the addition was made on account of

receipt of ‘On money’, investment in farmhouse/bungalow at Khanapur,

4 ITA Nos.2832 to 2836/PUN/2016 A.Ys.2006-07 to 2010-11

disallowance u/s.40A(3) and recasting of profits. The Assessing Officer

initiated penalty proceedings u/s.271(1)(c) in respect of all additions

except disallowance u/s.40A(3) of the Act.

The Assessing Officer levied penalty u/s.271(1)(c) of the Act in

respect of the additions for which satisfaction was recorded. Penalty order

for respective assessment years are of even date i.e. 27.03.2015.

the Commissioner of Income Tax (Appeals). The Commissioner of Income

Tax (Appeals) vide common order for assessment years 2006-07 to 2010-

11 confirmed the levy of penalty on all the additions except investment in

bungalow at Khanapur in assessment year 2006-07.

confirming the levy of penalty, the assessee is in second appeal before the

Tribunal.

supported the impugned order and prayed for dismissing the appeals of

the assessee. The ld. DR submitted that but for search and seizure action,

assessee would not have disclosed this income. Therefore, penalty

u/s.271(1)(c) has been rightly levied by the Assessing Officer and

confirmed by the Commissioner of Income Tax (Appeals).

perused the orders of Authorities below. The facts narrated in the

foregoing paragraphs are not disputed.

5 ITA Nos.2832 to 2836/PUN/2016 A.Ys.2006-07 to 2010-11

ITA No. 2832/PUN/2016 Assessment year 2006-07

assessee for assessment year 2006-07. In assessment year 2006-07, the

Assessing Officer has recorded satisfaction for levy of penalty u/s.

271(1)(c) in respect of two additions i.e. (i) ‘receipt of on money’ on sale of

flats/shops; and (ii) investment in farm-house/bungalow at Khanapur.

We observe that while recording satisfaction in respect of both the

additions, the Assessing Officer has mentioned both the limbs of section

271(1)(c) of the Act i.e. ‘concealment of income’ and ‘furnishing of

inaccurate particulars of income’. The relevant extract of the satisfaction

recorded by the Assessing Officer while making assessment is reproduced

here in below:

- Satisfaction in respect of addition on account of ‘On Money’ recorded at the end of para 3 of Assessment Order.

“Since the above additional income offered to tax by the assessee only after the search action in his case, penalty proceeding u/s.271(1)(c) of the I.T Act, are being separately initiated in this case for concealing the income and for furnishing inaccurate particulars of income.”

- Satisfaction in respect of addition on account of undisclosed investment in bungalow/ farm house at Khanapur.

“4.1.8…………..Further, considering the above facts of the case, penalty proceedings u/s. 271(1)(c) of the I.T. Act are being separately initiated in this case for furnishing inaccurate particulars of income and concealing the income.”

The manner in which satisfaction has been recorded by the

Assessing Officer in respect of both the additions clearly indicates

6 ITA Nos.2832 to 2836/PUN/2016 A.Ys.2006-07 to 2010-11

ambiguity in the mind of Assessing Officer qua the exact charge for

levying penalty u/s. 271(1)(c) of the Act.

the time of levy of penalty. The Assessing Officer while passing order

levying penalty u/s. 271(1)(c) of the Act records that penalty is being

levied for concealing the income by furnishing inaccurate particulars of

income. The relevant para of the penalty order dated 27.03.2015 reads as

under:

“11. Hence in view of the above discussion it is hereby held the assessee has tried to conceal the income by furnishing inaccurate particulars of income and is thus liable for penalty u/s.271(1)(c) of the I.T. Act, 1961 and hence it is a fit case for levy of penalty u/s. 271(1)(c).”

A perusal of the penalty order reveals vagueness with respect to

charge for levying penalty u/s.271(1)(c) of the Act is perpetual. The

Hon'ble Bombay High Court in the case of CIT Vs. Samson Perinchery

reported as 392 ITR 04 and the Hon'ble Karnataka High Court in the case

of CIT Vs. Manjunatha Cotton & Ginning Factory, reported as 359 ITR

565 (Kar) has held that concealment of income and furnishing of

inaccurate particulars of income are two different expressions carrying

different connotations. Recording of satisfaction for levy of penalty u/s.

271(1)(c) on one charge and levy of penalty on another charge would make

the penalty order unsustainable in the eye of law. Similarly, recording of

satisfaction citing both charges and levy of penalty on one of the charges

and vise-versa would also vitiate penalty proceedings. Where the

satisfaction for levy of penalty u/s.271(1)(c) is recorded by citing both the

charges of section in a mechanical manner and the penalty is also levied

in a casual manner by referring to both the charges of section 271(1)(c),

7 ITA Nos.2832 to 2836/PUN/2016 A.Ys.2006-07 to 2010-11

such an order levying penalty is not legally sustainable. The Tribunal has

been consistently taking a view that penalty order is vitiated where

satisfaction has been recorded by the Assessing Officer for levying penalty

u/s.271(1)(c) by mentioning both the limbs of section 271(1)(c) of the Act.

Thus, in view of the facts of the case, we are of considered view that

penalty levied u/s.271(1)(c) of the Act in assessment year 2006-07 falls

short of the legal requirement as envisaged under the provisions of

section 271(1)(c) of the Act and various legal pronouncements.

Accordingly, penalty order is set aside and subsequent proceedings

arising there from are quashed.

assessment year 2006-07 is allowed.

ITA Nos. 2833 to 2836/PUN/2016 Assessment Years 2007-08 to 2010-11

to the facts in assessment year 2006-07. In assessment years 2007-08 to

2010-11, additions are made for similar reasons. In assessment years

2009-10 and 2010-11, some more additions have been made. However,

the satisfaction recorded by the Assessing Officer in respect of all the

additions is on similar lines and hence, suffers from ambiguity. Orders

levying penalty are also worded in identical manner perpetuating

ambiguity. Therefore, findings given by us in assessment year 2006-07

would mutatis-mutandis apply to assessment years 2007-08 to 2010-11.

Accordingly, order levying penalty for the respective assessment years are

8 ITA Nos.2832 to 2836/PUN/2016 A.Ys.2006-07 to 2010-11

set aside and appeals of the assessee for all the assessment years i.e. 2007-08 to 2010-11 are allowed.

Order pronounced on Friday, the 28th day of September, 2018.

Sd/- Sd/- (डी. क�णाकरा राव/D. KARUNAKARA RAO) (�वकास अव�थी /VIKAS AWASTHY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 28th September, 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)-12, Pune. 4. The Pr. CIT, Central, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, 5. पुणे / DR, ITAT, “B” 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.