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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This appeal is filed by the Assessee against the order of CIT(A)-7, Pune, dated 05-02-2016 for the Assessment Year 2009-10.
Briefly stated relevant facts of the assessee include that it is a company engaged in the business of manufacturing of Industrial Paints and Thinners. Assessee filed the return of income on 19-09-2009 declaring total income of Rs.1,11,68,411/-. Based on the information received from DG Investigation, Pune, regarding the Hawala transactions, the AO issued notice u/s.148 dated 22-03-2013 on the assessee. It was noticed by the AO that the assessee made purchases from couple of suppliers who are in the suspected list of Hawala dealers, the details of which are given below :
ITA No.1123/PUN/2016 M/s. Kankoo Paints Pvt. Ltd.,
Sr.No. Name of the party Amount supplying bogus bills 1 International trade agency 20,280/- 2 Namrata Trading Co. 4,29,520/-
In response to notice u/s.148, assessee filed revised return showing the
amount of Rs.4,49,800/- and the same was accepted by the Department
proposing no addition. However, the AO made addition of Rs.1,21,114/- on
account of exempt income since the same is unsupported by any
documentary evidence. Penalty proceedings u/s.271(1)(c) were initiated for
concealing and furnishing inaccurate particulars of income. Eventually,
the AO levied the penalty of Rs.1,94,054/- on both the items (i.e.
Rs.4,49,800 and Rs.1,21,114/-) mentioned above.
In the First Appellate proceedings, the CIT(A) confirmed the penalty
levied by the AO. Contents of Para Nos. 9 and 9.2 of the order of CIT(A) are
relevant. Aggrieved with the same, the assessee filed the present appeal
before the Tribunal challenging the confirmation of penalty with the
following grounds :
“1. The Ld.CIT(A) Pune has erred in confirming the penalty of Rs.1,94,054/- levied u/s.271(1)(c) as it is bad in law & against the facts and circumstance of the case.
The Ld.CIT(A) Pune failed to consider the fact that A.O. has not brought any evidence to show that the assessee has consciously concealed any particular of income or gave inaccurate particulars of income & so as to justify levy of penalty u/s.271(1)(c) of the I.T. Act, 1961.
(a) A.O. as well as CIT(A) failed to prove that there was a deliberate & malafide intention being concealing the income by the assessee.
(b) There is no finding either by the A.O. or by CIT(A) that the explanation offered by the assessee or given on behalf of assessee is false or not bonafide or it is not a plausible explanation.
The appellant may be permitted to amend or alter any of the above ground of appeal or add a new ground of appeal any time before the hearing of appeal or during the course of appeal hearing.”
ITA No.1123/PUN/2016 M/s. Kankoo Paints Pvt. Ltd.,
At the outset, in the proceedings before us, Ld. Counsel for the
assessee raising the oral ground relating to recording of satisfaction by the
AO at the time of initiation of penalty proceedings, and submitted that this
is a case where the AO failed to record valid satisfaction in the assessment
order as well as during the levy of penalty u/s. 271(1) of the Act.
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 the case of CIT Vs. Manjunatha Cotton and Ginning Factory 359 ITR
565, Ld. Counsel demonstrated that the penalty levied by the AO and
confirmed by the CIT(A) 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.
Per Contra, Ld. DR for the Revenue relied on the orders of AO/CIT(A).
On hearing both the parties on the issue of applicability of limb,
satisfaction thereof in matters relating to penalty u/s.271(1)(c) of the Act,
we find the AO made addition of Rs.1,21,114/- invoking the provisions of
section 147 of the Act and initiated the penalty proceedings saying
“assessee has concealed the particulars of its income by furnishing
inaccurate particulars thereof”. Contents of Para No.4.6 of the
assessment order are relevant. While making the assessment as per the
revised return of income, the AO noticed that the revision was required
considering the need for offering additional income of Rs.4,49,800/- on
account of alleged bogus purchases. In this regard, the penalty was
initiated vide the contents of Para No.3.1 of the assessment order by stating
ITA No.1123/PUN/2016 M/s. Kankoo Paints Pvt. Ltd.,
“therefore, it is clear that the assessee has concealed and furnished
inaccurate particulars of his income.” Subsequently, the penalty was
levied on the said additional income for the default “assessee has
concealed income to the extent of Rs.4,49,800/- by way of claiming bogus
purchases and of Rs.1,21,114/- by way of claiming excess expenses which
are required to have been disallowed under rule 8D of the I.T. Rule by
furnishing inaccurate particulars of its income and made itself liable
for levy of penalty u/s.271(1)(c) of the Act...........” (Para No.6 of the penalty
order). Considering the above facts, we are of the opinion that this is a case
where the AO invoked both the limbs at the time of initiation as well as
levying the penalty. Thus, the satisfaction suffers from ambiguity in the
mind of the AO.
Therefore, we are of the opinion that, considering the above referred
binding judgments, such penalty order is unsustainable in law legally. It is
a settled legal proposition that the AO is under obligation to specify the
appropriate limb of clause (c) of section 271(1) of the Act at the time of
initiation as well as at the time of levy of penalty. In view of the above
deliberation on this issue, without going into the merits of the penalty, 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 on technical grounds.
Since we have allowed the oral ground raised by the assessee, in our
view, adjudication of grounds raised by the assessee in the appeal on
merits becomes an academic exercise. Therefore, the said ground is
dismissed as academic.
ITA No.1123/PUN/2016 M/s. Kankoo Paints Pvt. Ltd.,
In the result, appeal of the assessee is partly allowed on
technicalities.
Order pronounced on this 03rd day of October, 2018.
Sd/- Sd/- (िवकास अव थी /VIKAS AWASTHY) (डी. क�णाकरा राव/D. KARUNAKARA RAO) �ाियक सद�/JUDICIAL MEMBER लेखा सद�/ACCOUNTANT MEMBER
पुणे / Pune; िदनांक / Dated : 03rd October, 2018. Satish
आदेश देश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : देश देश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत
अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-7, Pune. 3. आयकर आयु� / The Pr.CIT-6, Pune. 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “बी 5. बी बी” / DR ‘B’, बी ITAT, Pune; गाड� फाईल / Guard file. 6. आदेशानुसार/ BY ORDER,स आदेशानुसार आदेशानुसार आदेशानुसार
// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune.