SH. MAHAVIR SINGH,MEERUT vs. ITO, MEERUT

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ITA 3234/DEL/2015Status: DisposedITAT Delhi16 November 2017AY 2003-048 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 penalty proceedings were vitiated because the AO failed to record his satisfaction for initiating penalty proceedings and the penalty order was ambiguous regarding the specific ground for imposition (concealment or inaccurate particulars). The Tribunal relied on High Court decisions emphasizing the necessity of recording satisfaction.

What were the facts?

The Assessing Officer (AO) made an addition of Rs. 14,93,000/- as unexplained cash deposit and initiated penalty proceedings. The CIT(A) confirmed the addition. Subsequently, the AO imposed a penalty of Rs. 4,47,900/- under Section 271(1)(c), which was also confirmed by the CIT(A).

What were the issues?

Whether the penalty proceedings under Section 271(1)(c) were validly initiated without the AO recording his satisfaction and without specifying the ground for penalty.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

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Before: SHRI H.S. SIDHU & SHRI L.P. SAHU

O R D E R PER H.S. SIDHU, JM

This appeal by the Assessee is directed against the Order of the Ld.

Commissioner of Income Tax (Appeals), Meerut dated 31.3.2015 pertaining to assessment year 2003-04.

2. The grounds of appeal raised in the assessee’s appeal read as under:-

1.

That the documentary evidence available on t record of the case fully established that the ancestral property was jointly / owned by two persons namely Sh.Mahavlr Singh &

Sh.Sukhbir Singh. Thus on facts and in law two persons either constituted a joint family or Association of person/Body of Individual.

2.

That the deposit in the bank account was in the joint

Mahavir Singh and Sahansar Pal. The assumption that the deposit in the bank account constituted unexplained deposit of Mahavir Singh Individual was erroneous ,illegal and untenable on facts and in law.

3.

That the appellant in Individual status neither concealed

any income nor furnished inaccurate particulars of income.

On facts and in the circumstances of the case, there was no legal warrant to initiate proceedings u/s 271 (1)(c) of the Income Tax Act, 1961. The initiation of proceedings in the name of Mahavir Singh Individual being illegal, void and without jurisdiction deserves to be quashed.

4. That levy of penalty of Rs.4,47,900/- in the name of Sh.Mahavir Singh (Individual) sustained by the Ld. CIT(A)

on the grounds taken and basis adopted and without considering the factual and legal aspects deserves to. be deleted being void, illegal and untenable on facts and in law.”

3. The brief facts of the case are that assessment order u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred as the Act) was passed by the AO in this case on 06.6.2005. In the assessment, additions of Rs. 14,93,000/- was made by considering cash deposit of Rs. 14,93,000/- as unexplained. The AO initiated penalty proceedings for concealment of income on account of the above mentioned addition. The assessee appealed before the Ld. CIT(A), Meerut against the quantum addition. The Ld. CIT(A) dismissed the appeal of the assesse vide his order dated 18.9.2006 and confirmed the addition of Rs. 14,93,000/-. The AO thereafter required the assessee to show cause as to why penalty not be imposed in his case. The assessee did not submit any argument and detail regarding the merit of the case. The AO thereafter passed the penalty order u/s. 271(1)(c) of the Act and imposed a penalty of Rs. 4,47,900/- vide order dated 06.02.2007.

4.

Against the Penalty order the Assessee appealed before the ld. CIT(A), who vide impugned order dated 31.3.2015 has dismissed the appeal of the assessee and confirmed penalty in dispute.

5.

At the time of hearing, Ld. Counsel of the Assessee has stated that Assessee is individual and neither concealed any income nor furnished inaccurate particulars of income. He further stated that on facts and in the circumstances of the case, there was no legal warrant to initiate proceedings u/s. 271(1)© of the Income Tax Act, 1961 and the initiation of proceedings 3 in the name of Mahavir Singh Individual being illegal, void and without jurisdiction deserves to be quashed. He further stated that AO while passing the assessment order dated 6.6.2005 has stated that notice u/s. 271(1)© for the additions have been issued separately, without recording the satisfaction for initiation of penalty proceedings. He further stated that in the penalty order dated 6.2.2007 the AO mentioned that “subsequently a show cause notice u/s. 271(1)© has been issued dated 29.11.2006 fixing date of hearing 14.12.2006, but assessee failed to make the compliance the said notice. It is therefore presumed that assessee has nothing to say in this regard. In my opinion it is fit case for imposition of penalty u/s. 271(1)© of the I.T. Act. Minimum and Maximum imposable penalty comes to Rs. 4,47,900/- and Rs. 14,13,700/-. I imposed the minimum penalty of Rs. 4,47,900/- with the approval of Addl. CIT, Range-I, Meerut.”, which shows that penalty proceedings ought to fail, ambiguous and vague in as much as it is nowhere stated that the penalty was imposed on which account i.e. concealment of particulars of income or furnishing of inaccurate particulars.

In view of the above, he stated that entire penalty proceedings stand vitiated as the same is not in accordance with law and without recording of satisfaction. In order to support his contention, he placed the reliance on the following decisions, by filing the copies thereof.

- CIT vs. Rampur Engg. Co. Ltd. (2009) 176 Taxman 211 (Delhi) (FB) of Delhi High Court.

- CIT vs. Jai Bharat Maruti Ltd. (2007) 165 Taxman 240 (Hon’ble Delhi High Court).

In view of above, he requested that the penalty in dispute may be cancelled and appeal of the assessee may be allowed.

6.

On the contrary, Ld. DR relied upon the orders of the authorities below.

7.

We have heard both the parties and perused the orders passed by the Revenue Authorities alongwith the relevant records available with us. We find that the AO while passing the assessment order dated 6.6.2005 has stated that notice u/s. 271(1)© for the additions have been issued separately, without recording the satisfaction for initiation of penalty proceedings. We further find that in the penalty order dated 6.2.2007 the AO mentioned that “subsequently a show cause notice u/s. 271(1)© has been issued dated 29.11.2006 fixing date of hearing 14.12.2006, but assessee failed to make the compliance the said notice. It is therefore presumed that assessee has nothing to say in this regard. In my opinion it is fit case for imposition of penalty u/s. 271(1)© of the I.T. Act. Minimum and Maximum imposable penalty comes to Rs. 4,47,900/- and Rs. 14,13,700/-. I imposed the minimum penalty of Rs. 4,47,900/- with the approval of Addl. CIT, Range-I, Meerut.”, which shows that penalty proceedings ought to fail, ambiguous and vague in as much as in the penalty order it is nowhere stated that the penalty was imposed on which 5 account i.e. concealment of particulars of income or furnishing of inaccurate particulars. In view of the above, we are of the considered view that the entire penalty proceedings stand vitiated as the same is not in accordance with law and without recording of satisfaction. Our aforesaid view is fortified by the following decisions:-

- CIT vs. Rampur Engg. Co. Ltd. (2009) 176 Taxman 211

(Delhi) (FB) of Delhi High Court wherein it has been held that in our opinion, the legal position is well settled in view of the Holn’ble Supreme Court decision in CIT & Anr. Vs.

SV Angidi Chettiar and DM Manasvi, that power to impose penalty under section 271 of the Act depends upon the satisfaction of the ITO in the course of proceedings under the Act. It cannot be exercised if he is not satisfied and has not recorded his satisfaction about the existence of the conditions specified in cls. (a), (b) and (c) before proceedings are concluded. It is true that mere absence of words ‘I am satisfied’ may not be fatal but such a satisfaction must be spelt out from the order of the Assessing Authority as to the concealment of income or deliberately furnishing inaccurate particulars. In the absence of a clear finding as to the concealment of income or deliberately furnishing inaccurate particulars, the initiation of penalty proceedings will be without jurisdiction. In our opinion, the law is correctly laid down in the CIT vs. Ram Commercial Enterprise Ltd. (2001) 167

CTR (Del) 321 and we are in respectful agreement with the same. This reference is answered accordingly.”

- CIT vs. Jai Bharat Maruti Ltd. (2007) 165 Taxman 240

(Hon’ble Delhi High Court) wherein it has been held that there can be no doubt from a reading of Section 271(1)© that the AO has to be satisfied that the assessee has either concealed the particulars of his income or furnished inaccurate particulars of such income before penalty proceedings can be initiated. The recording of the satisfaction of the AO is sine qua non for the purposes of initiating penalty proceedings u/s. 271(1)(c). On a reading of the assessment order it cannot be discerned that the AO was satisfied, even prima facie, that a case for initiating penalty proceedings was made out. Nowhere has the AO observed in the assessment order that the assesee has either concealed the particulars of his income or furnished accurate particulars of such time. The penalty proceedings against the assessee in the instant case cannot be sustained in law : - CIT vs. Ram Commercial

Enterprises Ltd, (2001) 167 CTR (Del) 321: (2000) 246 ITR 568 (Del) followed, Jay Bharat Maruti Ltd., vs. Dy. CIT (2006) 100 TTJ (Del) 400 affirmed.”

7.1 In the background of the aforesaid discussions and respectfully following the precedents, as aforesaid, we delete the penalty in dispute and decide the issue in favor of the assessee and against the Revenue.

8.

In the result, the appeal filed by the Assessee stands allowed.

Order pronounced in the Open Court on 16/11/2017.

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