ABDULWARIS CHANDSAB SHAIKH,PUNE vs. INCOME-TAX OFFICER,

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ITA 2340/PUN/2016Status: DisposedITAT Pune01 August 2018AY 2006-075 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the AO failed to record valid satisfaction for initiating penalty proceedings by not specifying the correct limb of Section 271(1)(c). The penalty order is therefore unsustainable in law.

What were the facts?

The assessee sold shops for Rs. 16,31,129/- but did not offer capital gains for taxation. The Assessing Officer (AO) initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income.

What were the issues?

Whether the penalty levied under Section 271(1)(c) is sustainable when the AO failed to record proper satisfaction and specify the exact limb of the section invoked.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 50C

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Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, “B” BENCH, PUNE

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

For Appellant: Shri Kishore Phadke
Hearing: 31.07.2018Pronounced: 01.08.2018

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.

2.

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.

3.

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

penalty levied by the AO u/s. 271(1)(c) of the Act.

4.

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

4.

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.”

5.

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.

6.

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

AO/CIT(A).

7.

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

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 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.

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