THE COSMOS CO-OP. BANK LTD.,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX,

PDF · subscribers
ITA 1724/PUN/2016Status: DisposedITAT Pune14 August 2018AY 2008-095 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 AO failed to record proper satisfaction regarding the specific limb of Section 271(1)(c) under which the penalty was being levied, both at the initiation and penalty order stages. This ambiguity rendered the penalty unsustainable in law.

What were the facts?

The assessee, a cooperative bank, declared a loss in its return of income. The Assessing Officer (AO) assessed the income at a higher figure and levied a penalty under Section 271(1)(c) of the Income Tax Act, which was confirmed by the CIT(A). The assessee appealed against the penalty.

What were the issues?

Whether the penalty levied under Section 271(1)(c) is valid when the Assessing Officer fails to record specific satisfaction regarding the limb of concealment or furnishing of inaccurate particulars of income.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

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, “B” BENCH, PUNE

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

For Appellant: Shri Sunil Ganoo
Hearing: 08.08.2018Pronounced: 14.08.2018

आदेश / ORDER आदेश आदेश आदेश

PER D. KARUNAKARA RAO, AM:

There are two appeals filed by the assessee under consideration involving A.Yrs. 2007-08 and 2008-09. They are filed against the separate orders of CIT(A)-5, Pune, commonly dated 31-05-2016. Penalties levied u/s.271(1)(c) of the I.T. Act is the issue in both these appeals.

We shall first take up the appeal for A.Y. 2007-08.

2 ITA Nos.1723 & 1724/PUN/2016 The Cosmos Cooperative Bank Ltd.,

ITA No.1723/PUN/2016 A.Y.2007-08

2.

Assessee raised the following grounds and the same are extracted

here as under :

“1. In the facts and circumstances of the case and in law, in the absence of conditions precedent for initiation and levy of penalty u/s.271(1)(c) of the I.T. Act, 1961, the impugned penalty is bad in law, patently illegal, void ab initio and hence the same may please be deleted. 2. In the facts and circumstances of the case and in law, the impugned penalty of Rs.8,16,41,860.00 as levied by the learned Assessing Officer u/s.271(1)(c) of the I.T. Act, 1961 and confirmed by the learned CIT(A) being arbitrary, perverse, bad in law and devoid of merits the same may please be vacated. 3. The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal, if deemed necessary at the time of hearing of the appeal.

3.

Briefly stated relevant facts of the case include that the assessee is

a Cooperative Society and is engaged in the business of banking.

Assessee filed the return of income on 29-10-2007 declaring loss of

Rs.111.07 crores (rounded off). In the Assessment, the AO denied various

claims by the assessee and eventually assessed the income of the

assessee at Rs.53,95,04,919/- and levied penalty of Rs.8,16,41,860/-.

In the First Appellate proceedings, the CIT(A) confirmed the penalty

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

appeal before us with the grounds mentioned above.

4.

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

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

valid satisfaction at the time of initiation as well as at the time of levying

the penalty. 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

3 ITA Nos.1723 & 1724/PUN/2016 The Cosmos Cooperative Bank Ltd.,

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.

5.

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

AO/CIT(A).

6.

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 specific legal issue, i.e. recording of proper satisfaction by

the AO, we find that the AO initiated the penalty proceedings

u/s.271(1)(c) of the Act for “for concealing and/or. for filing

inaccurate particulars of income” whereas in the penalty order it was

mentioned as “concealed the particulars of its income and has

committed default within the meaning of section 271(1)(c) of IT Act,

1961……………”. 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.

Thus, we set aside the order of CIT(A) and direct the AO to delete the

4 ITA Nos.1723 & 1724/PUN/2016 The Cosmos Cooperative Bank Ltd.,

penalty. Accordingly, the grounds of appeal raised by the assessee are

allowed on technical grounds without going into the merits of the issue.

7.

In the result, appeal of the assessee is allowed.

ITA No.1724/PUN/2016 A.Y.2008-09

8.

Regarding the appeal for A.Y. 2008-19 too, Ld. Counsel for the

assessee as well as Ld. DR for the Revenue submitted that the

arguments made in Appeal for A.Y. 2007-08 would apply to this appeal

since the grounds, facts, issues and decision of AO/CIT(A) are same.

9.

After hearing both the sides, we find the AO in the assessment

order dated 29-12-2010 initiated penalty proceedings mentioning

“Penalty proceedings are initiated for furnishing inaccurate particulars

of income” whereas in the penalty order dated 28-08-2014, the AO

levied penalty mentioning “I am satisfied that assessee, without sufficient

and reasonable cause, under the deliberate intention concealed it’s

income by furnishing inaccurate particulars of income .” Therefore,

similar ambiguity exists in this appeal too with reference to the

applicable limb of clause (c). The reasoning given by us in Para No.7

above while dealing with appeal for A.Y. 2007-08 would apply to this

assessment year also. Accordingly, we are of the opinion that the appeal

of the assessee should be allowed on technical grounds without going

into the merits of the additions. Thus, the grounds raised by the

assessee are allowed.

5 ITA Nos.1723 & 1724/PUN/2016 The Cosmos Cooperative Bank Ltd.,

10.

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

11.

To sum up, both the appeals of the assessee are allowed.

Order pronounced on 14th day of August, 2018.

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

पुणे / Pune; �दनांक / Dated : 14th August, 2018. Satish

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

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

आदेशानुसार / BY ORDER, // True Copy //

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

More judgments on Section 271(1)(c)

All 25,141 judgments and leading authorities on Section 271(1)(c) →

Recent GST High Court judgments

Search GST case law →