SADANAND P. ZERWAR,,NANDURBAR vs. DEPUTY COMMISSIONER OF INCOME-TAX,,

The assessee has raised additional grounds of appeal, which read as under:-

The learned Authorized Representative for the assessee pointed out that additional grounds of appeal raised by the assessee goes to the root of the issue and merits to be adjudicated as it affects the jurisdiction of Assessing Officer to pass penalty order under section 271(1)(c) of the Act.

The additional grounds of appeal raised by the assessee are admitted and we proceed to first take up the additional grounds of appeal.

Briefly, in the facts of the case, the assessee had furnished return of income declaring total income of ₹ 15,96,780/- and agricultural income of ₹ 2,42,750/-. The Assessing Officer made addition on account of unsecured loans at ₹ 14 lakhs vide para 3 of assessment order. After making addition, the Assessing Officer recorded satisfaction for initiation of penalty proceedings under section 271(1)(c) of the Act, which was initiated for concealment and furnishing inaccurate particulars of income. The Assessing Officer while levying penalty under section 271(1)(c) of the Act also held the assessee to have concealed and furnished inaccurate particulars of income in respect of income added of ₹ 14 lakhs.

The CIT(A) confirmed the order of Assessing Officer.

The assessee is in appeal against the order of CIT(A).

The learned Authorized Representative for the assessee before us has pointed out that both satisfaction recorded for initiating penalty proceedings under section 271(1)(c) of the Act and for levying penalty for concealment are without proper application of mind and hence, the order passed is bad in law and penalty levied be deleted.

The learned Departmental Representative for the Revenue placed reliance on the orders of authorities below.

We have heard the rival contentions and perused the record. We have already decided similar issue in series of cases, wherein it has been held that while levying penalty for concealment under section 271(1)(c) of the Act, the Assessing Officer must record satisfaction as to whether the assessee has concealed its income or furnished inaccurate particulars of income and accordingly issue show cause notice to the assessee. Thereafter, it was incumbent upon the Assessing Officer to levy penalty on the limb, of which show cause notice has been issued. It is also incumbent upon the Assessing Officer to record satisfaction and levy penalty on one of the limbs of section 271(1)(c) of the Act and the penalty proceedings could not be initiated and completed on both the limbs especially in the case where only one addition has been made in the hands of assessee.

The Hon’ble Bombay High Court in CIT Vs. Shri Samson Perinchery in Income Tax Appeal No.1154 of 2014 with other Income Tax Appeals Nos.953 of 2014, 1097 of 2014 and 1226 of 2014, judgment dated 05.01.2017 held that where there is no proper satisfaction for levy of penalty and in the absence of proper show cause notice to the assessee, there is no merit in levy of penalty.

In the present case, where the Assessing Officer has recorded satisfaction on both the limbs, then such recording of satisfaction is not correct. Further, even the penalty for concealment has been levied for one addition of ₹ 14 lakhs on both the limbs, which is also against provisions of the Act and hence, the order passed under section 271(1)(c) of the Act is both invalid and bad in law. Thus, the additional grounds of appeal raised by the assessee are allowed. Since the penalty order is held to be invalid, we are not addressing the issue raised on merits.

In the result, appeal of assessee is allowed.