PRABHAT DAIRY PVT. LTD.,AHMEDNAGAR vs. ASSISTANT COMMISSIONER OF INCOME-TAX,

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ITA 77/PUN/2016Status: DisposedITAT Pune21 August 2018AY 2009-105 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty order was unsustainable in law because the AO failed to record valid satisfaction and did not specify the correct limb of Section 271(1)(c) at the time of initiation and levy. The penalty order was quashed on technical grounds.

What were the facts?

The assessee claimed a deduction under Section 80IB(3) which was denied by the Assessing Officer (AO). The AO initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income and levied a penalty. The CIT(A) confirmed the penalty.

What were the issues?

Whether the penalty levied under Section 271(1)(c) is valid when the Assessing Officer fails to record proper satisfaction and specify the relevant limb of the section.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274,Section 80IB(3)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, “A” BENCH, PUNE

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

For Appellant: Shri S. N. Puranik
Hearing: 13.08.2018Pronounced: 21.08.2018

PER D. KARUNAKARA RAO, AM:

This is the appeal filed by assessee against the order of CIT(A)-2, Pune, dated 10.09.2015 for the A.Y. 2009-10.

2.

Grounds raised by the assessee are extracted here as under:

“1. Commissioner of Income Tax (Appeals) has erred in confirming the Penalty levied by Assessing Officer u/s.271(1)(c). Appellant prays to cancel the same.

2.

Commissioner of Income Tax (Appeals) has erred in bona-fide belief of the Assessee company that certificate of SSI issued by Industries Department is Final Authority even u/s.80IB(14)g, makes the issue clear. Even CIT(A) has accepted & granted relief for Other Years u/s.80IB(14)g-Even for AY 2010- 11.

2 ITA No.77/PUN/2016 Prabhat Dairy Pvt. Ltd.

3.

Commissioner of Income Tax (Appeals) has erred in not appreciating that the issue at the most is debatable as there are divergent views. Appellant urges to cancel the penalty levied. 4. Penalty order is Bad in Law. 5. Appellant prays for just & Equitable Relief. 6. Appellant prays to add, alter, amend and or withdraw the Ground/s during the proceedings.”

3.

Assessee also raised the additional grounds/modified additional

grounds and the same read as under:

“1. On facts and circumstances of the case and in law, The penalty order confirmed by CIT(A) is bad in law. 2. On facts and circumstances of the case and in law, proceedings initiated vide notice u/s.274 r.w.s 271(1) is invalid and bad in law. 3. Appellant prays to add, alter, amend, modify, clarify the ground and /or withdraw the ground/s, during appeal proceedings.” Modified/Additional Ground for Ground No.4 in Form 36.

1.

On facts and circumstance of the case and in law, the penalty order confirmed by CIT(A) is bad in law. 2. On facts and circumstances of the case and in law, proceeding initiated vide notice u/s.274 r.w.s.271(1) is invalid and bad in law. 3. Appellant prays to add, alter, amend, modify, clarify the ground and/or withdraw the ground/s, during Appeal proceedings.”

4.

Briefly stated relevant facts include that the assessee is company

and stated to have been engaged in the business of milk, milk products,

trading in cattle feed, lab equipments and diesel. Assessee filed return of

income declaring total income of Rs.69,02,082/- after claiming deduction

u/s.80IB(3) at Rs.68,61,518/-. In the assessment, the AO denied the

claim of the assessee assessing the total income of the assessee at

Rs.1,37,63,600/- exemption u/s.80IB(3). The Assessing Officer initiated

penalty proceedings u/s.271(1)(c) of the Act as the assessee has furnished

inaccurate particulars of income by way of claiming an unallowable,

incorrect and unwarranted deduction u/s.80IB(3) and levied penalty of

3 ITA No.77/PUN/2016 Prabhat Dairy Pvt. Ltd.

Rs.26,07,622/-. In the First Appellate proceedings, the CIT(A) confirmed

the levied by the AO. Aggrieved with the order of CIT(A), the assessee is in

appeal before the Tribunal with the grounds/additional grounds referred

above.

5.

Before us, at the outset, Ld. Counsel for the assessee, referring to

Additional grounds (legal in nature) and grounds submitted that this is a

case where the AO failed to record valid satisfaction in the assessment

order during which the penalty proceedings were initiated. 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.

6.

Per Contra, Ld. DR for the Revenue relied on the orders of the

AO/CIT(A).

7.

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

On going through the facts of the case and the arguments of the Ld.

Counsel on the legal issues, we are of the opinion that the additional

grounds raised by the assessee should be admitted for adjudication

considering the binding judgments on the admission of additional

grounds. Firstly, we would like to adjudicate the additional grounds (a)

and (b) relevant to recording of satisfaction by the AO. In this connection,

we perused the order of AO and found that the AO while initiating the

4 ITA No.77/PUN/2016 Prabhat Dairy Pvt. Ltd.

penalty proceedings u/s.271(1)(c) of the Act mentioned that “the assessee

has furnished inaccurate particulars of income” whereas while levying

the penalty it was mentioned that “ I am satisfied that it is a fit case for

imposition of penalty u/s.271(1)(c) read with section 274 of the I.T.

Act, 1961 to the extent of Rs.68,61,518/-”. Even in the notice issued

u/s.274 r.w.s. 271(1)(c) of the Act, the AO did not struck off the relevant

limb. This manner of recording of satisfaction suggests the existence of

ambiguity in the mind of the AO with reference to the applicable limb of

clause (c). Therefore, we are of the opinion that considering the above

referred binding judgments such penalty order is unsustainable in law

legally. 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, 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.

8.

Consequently, the adjudication of the grounds raised by the

assessee on merits becomes an academic exercise. Therefore, the relevant

grounds on merits are dismissed as academic.

9.

In the result, appeal of the assessee is partly allowed.

Order pronounced on 21st day of August, 2018.

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

पुणे / Pune; �दनांक / Dated : 21st August, 2018. Satish

5 ITA No.77/PUN/2016 Prabhat Dairy Pvt. Ltd.

आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeals)-2, Pune. 4. The Pr. CIT-1, Pune. 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “ए” ब�च, पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

आदेशानुसार / BY ORDER,

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

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