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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:
This is the appeal filed by assessee against the order of CIT (Appeals)-4, Pune, dated 28.07.2016 for the A.Y. 2006-07.
Briefly stated relevant facts include that the assessee is an individual engaged in the business of running of garage and also hiring trucks. Assessee filed the return of income on 27.01.2007 declaring total income of Rs.1,90,640/-. Assessee purchased a land admeasuring 5000 sq.ft. located at Plot No.11, S.No.30/1 at Dhanakwadi, Taluka Haveli, Dist. Pune for a sum of Rs.27,500/-. Assessee incurred certain expenses on the said land/shops. In the absence of any material, AO
2 ITA No.2340/PUN/2016 Shri Abdulwaris Chandsab Shaikh
worked out the total cost of acquisition and construction there on at
Rs.1,85,900/-. AO also noticed that assessee has taken a loan from
Jijamata Sahakari Bank Ltd. by mortgaging these shops. However, he
did not repay the loan. The assessee sold these shops to repay the loan.
The sale price as per the sale deed is at Rs.16,31,129/- including stamp
duty. Thus, the AO invoking the provisions of section 50C of the Act
determined the taxable income of the assessee at Rs.16,37,797/-. AO
levied penalty of Rs.2,97,775/- u/s.271(1)(c) of the Act for furnishing in
accurate particulars of income.
The core issue in this appeal is that a sum of Rs.16,00,000/- was
credited in the capital account of the assessee being sale of shops at
Dhankawadi, Taluka Haveli, Dist. Pune but no capital gain was offered
for taxation.
In the First Appellate proceedings, the CIT(A) confirmed the said
penalty levied by the AO u/s. 271(1)(c) of the Act.
Aggrieved with the order of CIT(A), the assessee filed the present
appeal before the Tribunal by raising the following grounds.
“1. The learned CIT(A)-4, Pune erred in law and on facts in confirming levy of penalty amounting to Rs. 2,97,775/- u/s 271(l)(c) of ITA, 1961 on addition made on account of LTCG amounting to Rs.14,45,229/-. The learned CIT(A) and learned AO ought to have appreciated that appellant has not offered such capital gain under bona-fide belief that capital gain does not arise on transfer of asset due to overriding title. 2. The learned CIT(A)-4, Pune erred in law and on facts in confirming penalty on the analogy that appellant has concealed particulars of income; without appreciating that the appellant has shown the sale proceeds of said shops in its Capital Account, submitted along with return of income. 3. The learned CIT(A)-4, Pune erred in law and on facts in confirming levy of penalty without appreciating that explanation offered by appellant was found to be bona-fide & has not been rejected by revenue authorities.
3 ITA No.2340/PUN/2016 Shri Abdulwaris Chandsab Shaikh
The learned CIT(A)-4, Pune erred in law and on facts in confirming levy of penalty without appreciating fact that learned AO recorded satisfaction with respect both the limbs, i.e. "concealing particulars of income" as well as "furnishing inaccurate particulars of income" with respect to same addition. Learned I-T authorities erred in not specifying any particular limb out of the two limbs for justifying the penalty. 5. The appellant craves leave to add / modify / alter / delete all / any of the grounds of appeal.”
Before us, at the outset, Ld. Counsel for the assessee referring to
ground No.4 (legal in nature) 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.
Per Contra, Ld. DR for the Revenue relied on the orders of
AO/CIT(A).
We heard both the parties on this specific legal issue, i.e. recording
of proper satisfaction by the AO. We perused the order of the AO and
find the satisfaction recorded by the AO for initiating the penalty
proceedings u/s.271(1)(c) of the Act is relevant for extraction. Therefore,
the same is reproduced as under :
4 ITA No.2340/PUN/2016 Shri Abdulwaris Chandsab Shaikh
“5. …….In view of the provisions of sec. 50C of the Act, the sale consideration is taken at Rs.16,31,129/- to which assessee has no objection. He has not disputed the valuation before Stamp Valuation Officer. Penalty proceedings u/s.271 (1)(c) have been initiated for concealment of income/furnishing inaccurate particulars of income.”
7.1 We also perused the penalty order dated 27.05.2009 and find the
satisfaction recorded by the AO for levying the penalty u/s.271(1)(c) of
the Act is relevant for extraction. The said satisfaction reads as under:
“7. From the facts mentioned above, it is evident that the assessee has furnished inaccurate particulars of income within the meaning of provisions of section 271(1)(c) and has also failed to consider correct amount of Rs.16,31,129/- being the full value of consideration u/s.50C of the I.T Act, 1961. The assessee is, therefore, liable for penalty u/s.271(1) (c) of the I.T. Act.”
From the above, it is evident that at the time of initiation of penalty
proceedings in the assessment, AO mentioned both limbs of clause (c) of
section 271(1) of the Act. But in the penalty order, the AO mentioned
only one limb i.e. “furnished inaccurate particulars of income”. 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)
direct the AO to delete the penalty. Accordingly, the grounds of appeal
raised by the assessee are allowed on technical ground.
5 ITA No.2340/PUN/2016 Shri Abdulwaris Chandsab Shaikh
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.
In the result, appeal of the assessee is partly allowed.
Order pronounced on Ist 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 : 01st August, 2018. Satish
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)-4, Pune. 4. The Pr. CIT-3, Pune. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “बी बी बी” ब�च, बी 5. 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.