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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(A)-2, Nashik, dated 27.06.2016 for the A.Y. 2008-09.
Grounds raised by the assessee are extracted here as under:
“1. The learned CIT(A) erred on facts and in law in upholding penalty u/s.271(1) (c) of Rs.2,93,271/-. He failed to appreciate the facts and circumstances of the case in its proper perspective. The learned CIT(A) further failed to appreciate the arguments and contentions advanced in this behalf. 2. The appellant craves leave to add, alter, delete or substitute all or any of the above grounds of appeal.”
Assessee also raised the additional grounds (legal in nature) and the same are extracted as under:
2 ITA No.2094/PUN/2016 Smt. Sadhana Sunil Jain
“Ground No.2 :- On facts and in law, the Hon'ble CIT(A) was not justified in upholding the levy penalty u/s.271(1)(c) when no legally valid notice was issued by the Ld. AO in the name of the appellant for the assessment year under consideration. Ground No. 3 :- On facts and in law, the Hon'ble CIT(A) was not justified in upholding the action of the Ld. AO in levying the impugned penalty when the show cause notice was issued on a general printed form without specifying exactly the nature of offence for which the penalty was initiated and levied. Ground No. 4 :- On facts and in law, the Hon'ble CIT(A) was not justified in sustaining the levy of penalty when the Ld. AO initiated the penalty for furnishing of inaccurate particulars but levied the same for concealment of income. The aforesaid legal grounds of appeal inadvertently remained to be taken at the time of filing of appeal. It may be mentioned that all the facts necessary to decide the additional grounds are already on record and no new evidence is required to be brought on record.”
Briefly stated, relevant facts include that the assessee is an individual
and engaged in the business of cloth trading, shares and interest. Assessee
filed the return of income on 31.10.2011 declaring total income of
Rs.9,79,660/-. AO issued notice u/s. 148 of the Income Tax Act, 1961 on
19.03.2012 as the assessee filed belated return beyond the time limit
prescribed u/s.139 of the Act. During the assessment, AO assessed the total
income of assessee at Rs.11,40,070/- by making addition of Rs.9,97,500/-
u/s.69 of the Act on account of unexplained deposits in the bank account. The
AO levied penalty of Rs.2,93,271/- u/s. 271(1)(c) of the Act for concealment of
income. In the First Appellate proceedings, the CIT(A) confirmed the said levied
u/s. 271(1)(c) of the Act.
Aggrieved with the order of CIT(A), the assessee filed the present appeal
challenging the confirmation of penalty before the Tribunal with the
grounds/additional grounds extracted above.
3 ITA No.2094/PUN/2016 Smt. Sadhana Sunil Jain
Before us, at the outset, Ld. Counsel for the assessee referring to
Additional grounds (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 :
“12. In view of the above, it is crystal clear that assessee failed to explain satisfactory the sources of the deposits made in the bank account. The amount deposited in saving account No.8884 in Chopda Peoples Co op Bank Ltd. by the assessee is therefore treated as income of the assessee from undisclosed sources u/s.69 of the I.T Act, 1961. The assessee herself has supported this view by filing the return of income on 31.10.2011. Accordingly, Rs.9,97,500/- is added to the income of the assessee. Further, Penalty proceedings u/s.271(1) (c) will be initiated separately for concealment of income.”
We also perused the penalty order dated 10.07.2013 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:
4 ITA No.2094/PUN/2016 Smt. Sadhana Sunil Jain
“5. Under the above mentioned facts, the assessee is liable to pay by way of penalty, a sum which shall not be less than Rs.2,93,271/- i.e.100% of the amount of tax sought to be evaded, but which shall not exceed Rs.8,79,813/- i.e.300% of the amount of tax sought to be evaded for furnishing of inaccurate particulars of income. Hence, I direct the assessee to pay by way of penalty, a sum which shall be not less than Rs.2,93,271/- i.e. 100% of the amount of tax sought to be evaded.”
From the above, it is evident that at the time of initiation of penalty proceedings in the assessment, AO mentioned one limb of clause (c) of section 271(1) of the Act whereas while levying the penalty the AO mentioned another limb of said section. This manner of recording of satisfaction suggests the existence of ambiguity with reference to applicability of specific limb. Therefore, we are of the opinion that considering the above referred binding judgments such penalty order is unsustainable in law legally. AO is under legal obligation to specify the correct limb both at the time of initiation as well as at the time of levy of penalty harmoniously. 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, the order of CIT(A) is set-aside and direct the AO to delete the penalty. Accordingly, additional grounds of appeal raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced 23rd day of July, 2018.
Sd/- Sd/- िवकास अव�थी /VIKAS AWASTHY) (डी डी डी. क�णाकरा राव डी (िवकास अव�थी िवकास अव�थी िवकास अव�थी 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 : 23rd July, 2018. Satish
5 ITA No.2094/PUN/2016 Smt. Sadhana Sunil Jain
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. ��यथ� / The Respondent. 2. 3. The CIT (Appeals)-2, Nashik 4. The Pr. CIT-2, Nashik. ि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.