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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
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
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.
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.
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.
Per Contra, Ld. DR for the Revenue relied on the orders of
AO/CIT(A).
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.
In the result, appeal of the assessee is allowed.
ITA No.1724/PUN/2016 A.Y.2008-09
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.
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.,
In the result, the appeal of the assessee is allowed.
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.