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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
आदेश / ORDER आदेश आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This appeal is filed by the Assessee against the order of CIT(A)-11, Pune, dated 27.11.2015 for the Assessment Year 2012-13.
Briefly stated relevant facts of the case are that the assessee is a company engaged in construction of Development of Earthen Dams, Hydroelectric Projects etc. There was search in the premises of the assessee on 24-08-2011 u/s.132 of the Act. During this action, assessee offered additional income of Rs.25 crores for the assessment year under consideration. Assessee included the additional income in the returns filed in response to notice u/s.153A of the Act and claimed deduction u/s.80IA(4) of the Act. However, the AO disallowed the claim of deduction u/s.80IA(4) of the Act and initiated penalty proceedings u/s.271AAA of the
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Act and eventually levied penalty of Rs.2,78,48,625/-. In the First
Appellate proceedings, the CIT(A) confirmed the penalty levied by the AO.
Aggrieved with the confirmation of penalty, the assessee is in appeal before
us with the following grounds/additional grounds :
“1. On the facts and in the circumstances of the case the Learned CIT(Appeals) has erred in law and on merit in upholding the penalty under section 271AAA of Rs.2,78,48,625/-when there was no undisclosed income after the order of the CIT (Appeals). 2. On the facts and in the circumstances of the case the Learned CIT(Appeals) has erred in law and on merit in upholding the Penalty Order under section 271AAA of the Income tax Act,1961. 3. The appellant craves for leave to amend, modify or add to any of the above grounds of appeal and /or take any additional ground of appeal, if necessary.”
Additional Grounds :
“1. The assessee submits that the penalty order passed u/s.271AAA by the learned A.O be declared null and void since no proper satisfaction has been recorded by the learned A.O. in the assessment order. 2. The assessee further submits that the notice issued u/s.274 r.w.s.271AAA by the learned A.O. is also invalid in law since no it has been issued without proper application of mind and therefore, the penalty order passed u/s.271AAA may be declared bad in law. The assessee submits that the additional grounds raised are legal in nature and as all the facts are on record, the assessee requests for admission of the above additional ground of appeal.”
Before us, Ld. Counsel for the assessee submitted that this is a case
where action u/s.132 of the Act was took place on the assessee on
25-10-2011. Assessee offered the sum of 25 crores in the search action
and filed the return of income. Subsequently, assessee revised the income
by decreasing the income offered by the assessee during the search action.
However, rejecting the claim of the assessee, the AO made addition of the
same and initiated penalty proceedings u/s.271AAA of the Act. Bringing
our attention to the additional ground filed by the assessee, Ld. Counsel
submitted that the AO failed to record proper satisfaction while initiating
the penalty. Ld. Counsel submitted that “undisclosed income” is the
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essence of the penalty u/s.271AAA of the Act and drew our attention to the
definition of “Undisclosed income”. This section applies to the cases
covered by the search action initiated on or after 01-06-2007 but before
01-07-2012 and the limbs of “concealment of income” or “furnishing of
inaccurate particulars of income” are not borne out of the provisions. He
drew our attention to Para No.10 of the assessment order where
satisfaction was recorded by the AO initiating penalty proceedings
u/s.271AAA of the Act. The last sentences of the para read as under :
“10. ..................... ................Since the assessee has concealed the particular of income, penal proceedings u/s.271AAA of the I.T. Act, are initiated separately.”
Further, he brought our attention to the penalty order dated 02-03-2015
and highlighted the fact that the penalty was leviable for the reason that
“undisclosed income was detected and unearthed by the Department
by way of action u/s.132 of the Act”. Contents of Para No.9 of the
penalty order are relevant. Thus, Ld. Counsel summed up that this is a
case where the AO initiated the penalty proceedings for the default of
“concealing the particulars of income” and the penalty was actually
levied for “undisclosed income detected by the Revenue by way of
action u/s.132 of the Act”. Ld. Counsel summed up by stating that the
penalty initiation suffers from ambiguity in the mind of the AO.
Referring to the additional grounds raised by the assessee which are
legal in nature, Ld. Counsel submitted that the additional grounds raised
by the assessee should be admitted for adjudication as no fresh facts are
required to be investigated and all the material facts are available on
record. For this proposition, Ld. Counsel relied on various decisions
including the decision of Hon’ble Supreme Court in the case of NTPC Ltd.
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Vs. CIT reported in 229 ITR 383, the decision in the case of Jute
Corporation of India reported in 187 ITR 688 and the decision of Hon’ble
Bombay High court in the case of Ahmedabad Electricity Company reported
in 199 ITR 351.
In support of his contentions, Ld. Counsel brought our attention to
the order of Tribunal in the case of ACIT Vs. Shri Vikas Baurao Takawane
in ITA No.2245/PUN/2014, dated 26-07-2017 and submitted that similar
issue came up for adjudication before the Tribunal. In this case, the
Tribunal held that such initiation and levy of penalty amounts to existence
of ambiguity in the mind of the AO. Ld. Counsel relied on the contents of
Para Nos. 6 and 7 of the said order of Tribunal (supra).
On the other hand, Ld. DR for the Revenue relied heavily on the
orders of the AO/CIT(A).
We heard both the sides and perused the orders of the Revenue. We
have also considered the decision relied on by the Ld. Counsel in the case
of Shri Vikas Bapurao Takawane (supra) and the arguments on the
additional grounds raised by him. On going through the facts of the case
narrated above, we are of the opinion that the additional grounds raised by
the assessee are required to be admitted for adjudication by virtue of
binding decisions on the same. We proceed to adjudicate the core issue of
penalty levied by the AO u/s.271AAA of the Act and confirmed by the
CIT(A) on the additional grounds first.
7.1 On satisfaction issue, we find the AO initiated the penalty
proceedings u/s.271AAA of the Act for the default of “concealing the
particulars of income” whereas the penalty was actually levied for
“undisclosed income detected by the Revenue by way of action
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u/s.132 of the Act”. This manner of recording of satisfaction suggests
the existence of ambiguity in the mind of the AO and the resultant penalty
order is unsustainable in law legally. AO is under obligation to specify the
correct default at the time of initiation as well as at the time of levy of
penalty uniformly. For this proposition, we rely on the 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.
Further, we have perused the order of Pune Bench of the Tribunal in
the case of Shri Vikas Bapurao Takawane (supra). In this case, we find the
Tribunal had an occasion to deal with an identical issue. Contents of Para
No.6 and 7 of the said order are relevant. We therefore proceed to extract
the said paragraphs below for the sake of completeness of the order.
“6. A bare perusal of section 271AAA shows that the penalty is levied in respect of undisclosed income. The expression ‘undisclosed income’ has been defined in Explanation to section 271AAA of the Act. Penalty u/s. 271AAA is not levied for concealment of income and/or furnishing of inaccurate particulars of income. A perusal of assessment order shows that the Assessing Officer while recording satisfaction for levying penalty u/s.271AAA has categorically stated that the penalty proceedings are initiated for concealment of income and furnishing of inaccurate particulars of income. Thus, it is evident that the Assessing Officer was not clear in his mind while recording satisfaction whether the penalty is to be levied under the provisions of section 271(1)(c) or the provisions of section 271AAA of the Act. Similarly, in the order levying penalty u/s.271AAA, the Assessing Officer levied penalty for concealment of income. There is no reference of ‘undisclosed income’ either in the assessment order or the order levying penalty u/s. 271AAA of the Act. The ‘undisclosed income’ as defined in Explanation to section 271AAA means any income represented either wholly or partly by any money, bullion, jewelry or other valuable article or things or any entry in the books of account or other documents or transactions found in the course of search which has not been recorded in the books of account or disclosed to the designated Income Tax Authority before the date of search. In the present case, the Assessing Officer has failed to specify the ‘undisclosed income’ unearthed during the search as envisaged under the provisions of section 271AAA of the Act.
The manner in which the entire penalty proceedings are conducted right from initiation to the order levying penalty, including issuance of notice shows that there was ambiguity and vagueness in the mind of Assessing Officer with regard to the charge and the provisions under which penalty is to be levied. As a result, the notice levying penalty
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is also ambiguous and hence bad in law. We do not find any infirmity in the impugned order deleting penalty u/s.271AAA of the Act. We concur with the reasons given by Commissioner of Income Tax (Appeals) in deleting the penalty. The impugned order is upheld and the appeal of the Revenue is dismissed.”
In view of the above deliberation on this issue, we are of the opinion that
the penalty order is liable to be quashed on this legal issue itself. Thus,
we set aside the order of CIT(A) and direct the AO to delete the penalty.
Accordingly, the additional grounds of appeal relating to the legal issue are
allowed on technical grounds without going into the merits of the issue.
Since we have allowed the additional grounds (legal in nature)
adjudication of regular grounds on merits becomes academic in nature.
Therefore, the grounds raised by the assessee on merits are dismissed.
In the result, appeal of the assessee is partly allowed on
technicalities.
Order pronounced on this 19th day of September, 2018.
Sd/- Sd/-
(SUSHMA CHOWLA) (D.KARUNAKARA RAO) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 19th September, 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)-11, Pune. 3. आयकर आयु� / The CIT, Central, Pune. 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “ए” / DR ‘A’, 5. 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.