M/S. SHIVAJI YASHWANT KARPE,AHMEDNAGAR vs. INCOME-TAX OFFICER, WARD - 4, AHMEDNAGAR

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ITA 3087/PUN/2017Status: DisposedITAT Pune03 October 2018AY 2008-095 pages
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What did the Tribunal hold?

The Tribunal held that the Assessing Officer (AO) failed to record proper satisfaction regarding the specific limb of Section 271(1)(c) for initiating and levying the penalty. This technical deficiency rendered the penalty order unsustainable.

What were the facts?

The assessee had unexplained cash deposits in a bank account, which were added to their income. Penalty proceedings under Section 271(1)(c) were initiated and confirmed by the lower authorities.

What were the issues?

Whether the penalty levied under Section 271(1)(c) is sustainable when the AO fails to record proper satisfaction regarding the specific limb of the section.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274

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Income Tax Appellate Tribunal, “B” BENCH, PUNE

Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM

For Appellant: Shri Pramod Shingte
For Respondent: Shri M.K. Verma
Hearing: 27.09.2018Pronounced: 03.10.2018

आदेश आदेश / ORDER आदेश आदेश

PER D. KARUNAKARA RAO, AM :

This appeal is filed by the Assessee against the order of CIT(A)-2, Pune, dated 11-08-2017 for the Assessment Year 2008-09.

2.

Condonation of Delay : There is delay of 78 days in filing this appeal before the Tribunal. In this connection, Ld. Counsel for the assessee drew our attention to the affidavit given by the assessee dated 26-12-2017 and demonstrated the delay. The contents of the affidavit read as under :

“This order was delivered to my consultant for further action of filing an appeal, however, due to heavy pressure of statutory obligation in the month of October and November, 2017, he could not file the appeal documents in time, which has resulted into the delay in filing the appeal before the Hon’ble Tribunal Due to this reason there is a delay of approximate 78 days.

With this affidavit I most humbly pray before your honours to condone the delay and admit the appeal.”

3.

After hearing the Ld. Counsel for the assessee and perusing the

contents of the affidavit, we are of the opinion that there was a reasonable

cause for the assessee to file the appeal before the ITAT with delay of 78

days. The lapse on the Tax Consultant should not make the assessee

helpless. Therefore, we condone the delay and admit the appeal for

adjudication.

Penalty – Limbs related issue

4.

Briefly stated relevant facts of the assessee include that the assessee

is engaged in Medical profession and also derives income from Agriculture.

During the impugned assessment year, assessee filed the return of income

declaring total income of Rs.1,20,000/-. As per the AIR information, AO

came to know that the assessee is maintaining Savings Bank account with

Dena Bank, Sangamner and the same was not disclosed in the return of

income. In the assessment proceedings u/s.143(3) of the Act, AO made of

addition of Rs.19,82,640/- on account of unexplained cash deposits made

in Dena Bank, Sangamner and rejected the explanation of the assessee that

the said deposits pertain to the Agricultural income of the HUF. Penalty

proceedings u/s.271(1)(c) r.w.s. 274 of the I.T. Act are also initiated on the

assessee for concealing the particulars of income and eventually levied

penalty of Rs.6,03,143/-. The CIT(A), in the quantum proceedings,

confirmed the addition made by the AO. Aggrieved with said order of

CIT(A), the assessee preferred an appeal before the Tribunal and the

Tribunal vide its order dated 12-08-2016 dismissed the appeal of the

assessee.

5.

Against the penalty proceedings u/s.271(1)(c) of the Act also, the

assessee filed an appeal before the CIT(A). The CIT(A) relying on the

judgment of Allahabad High Court in the case of Shanti Swarup Bhatnagar

Vs. CIT 279 ITR 451 as well as the judgment of Hon’ble Madras High Court

in the case of K.Pillai Vs. CIT 108 ITR 612 confirmed the penalty levied by

the AO by holding as under :

“4.5 In the light of aforesaid facts of the case and decisions cited, it is held that the appellant is liable for concealing the particulars of income with regard to cash deposits of Rs.19,82,640/ in the undisclosed bank account maintained with Dena Bank. The addition made by the AO was confirmed by CIT(A) as well as by the ITAT, Pune Bench. I therefore uphold the order of the AO in levying penalty u/s.271(1)(c) at Rs.6,03,143/-.”

6.

Now the assessee filed the appeal challenging the penalty levied by

the AO and upheld by the CIT(A) with the following solitary ground :

“1. On the facts and in the circumstances of the case and in law the Lower authorities have erred in levying the penalty u/s.271(1)(c) a sum of Rs.6,03,143/- by rejecting appellants contention in this regard.”

7.

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 submitted that this is a case where the AO failed to record valid

satisfaction in the assessment order as well as during the penalty

proceedings. 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 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.

8.

Per Contra, Ld. DR for the Revenue relied on the orders of AO/CIT(A).

9.

We heard both the parties and perused the orders of the Revenue.

Before proceeding to adjudicate the solitary issue raised by the assessee,

we proceed to admit the oral ground (legal in nature) raised by the assessee

regarding the recording of proper satisfaction by the AO. In this

connection, we perused the assessment order dated 09-12-2010 and find

the satisfaction recorded by the AO for initiating the penalty proceedings

u/s.271(1)(c) of the Act is relevant for extraction. Therefore, the same is

reproduced as under :

“.............Issue show cause notice u/s.271(1)(c) r.w.s. 274 of the I.T. Act, 1961 for concealing the particulars of income of Rs.19,86,561/- and agriculture income of Rs.30,000/-...............”

9.1 We also perused the penalty order dated 30-03-2016 and find the

satisfaction recorded by the AO for levying the penalty u/s.271(1)(c) of the

Act is relevant for extraction. The said satisfaction reads as under:

“8. .................... ........................... I am therefore satisfied the inaccurate particulars of cash deposited in bank account. Assessee furnished inaccurate particulars of income and thereby concealed the income of Rs.19,82,640/-, being undisclosed cash deposit.”

From the above, it is evident that at the time of initiation of penalty

proceedings in the assessment, AO mentioned the limb “concealed the

particulars of income” whereas while levying the penalty, AO mentioned

both limbs (“furnished inaccurate particulars of income and thereby

concealed the income) of clause (c) of section 271(1) of the Act. This

manner of recording of satisfaction suggests the existence of ambiguity with

reference to applicability of specific limb. 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 correct limb 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 without going into merits of the case.

10.

Since we have allowed the oral ground raised by the assessee, in our

view, adjudication of ground raised by the assessee in the appeal becomes

an academic exercise. Therefore, the said ground is dismissed as academic.

11.

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 आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-2, Pune. 3. आयकर आयु� / The Pr.CIT-1, Pune. 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “बी बी” / DR ‘B’, 5. बी बी ITAT, Pune; गाड� फाईल / Guard file. 6. आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune.

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