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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
PER D. KARUNAKARA RAO, AM:
There are five appeals filed by same assessee against the consolidated order of CIT(A)-11, Pune dated 15-06-2016 for the A.Yrs. 2000-01 to 2002-03 and 2004-05 to 2005-06 respectively. All these appeals relate to penalty levied u/s.271(1)(c) of the Act. Assessee raised similar grounds of appeal as well as an additional ground (legal in nature) in all these appeals. Therefore, for the sake of convenience, we proceed to decide the appeals in this composite order.
We shall first take up appeal ITA No.1961/PUN/2016 for A.Y. 2000-01. ITA No.1961/PUN/2016 A.Y. 2000-01 2. Grounds raised by the assessee are extracted here as under :
2 ITA Nos.1961 to 1965/PUN/2016 Dhananjay Hari Gadgil
“1. The Ld.CIT(Appeals) erred on facts and in law in upholding penalty of Rs.2,60,000/- u/s.271(1)(c) of the Act. He failed to appreciate the facts of the case and the legal position as also the contentions and arguments advanced by the assessee in this regards. 2. The appellant craves leave to add, alter, delete or substitute all or any of the above grounds of appeal.”
2.1 Assessee also raised the following additional ground (legal nature)
and the same reads as under :
“1. The assessee submits that no proper satisfaction was recorded by the Ld. AO in the asst. order and even the notice issued u/s.274 r.w.s.271(1)(c) was without proper application of mind and hence, the penalty order passed u/s.271(1)(c) is bad in law and the penalty levied may kindly be deleted. The assessee submits that the additional ground raised is legal in nature and as all the facts are on record, the assessee requests for admission of the above ground.”
After hearing both the sides and considering the fact that the
additional ground raised by the assessee being purely a legal one and all
facts are already before the lower authorities, therefore, the same is
admitted for adjudication in the light of various binding judgments on
the same.
Briefly stated relevant facts for A.Y. 2000-01 include that the
assessee is an individual and derives income from house property and
income from other source. Assessee filed original return of income on
31-08-2000 declaring total income of Rs.6,36,170/-. There was search
and seizure action u/s.132(1) of the Act at the residential as well as
business premises of Gagdil group in which assessee was also covered.
Notice u/s.153A(a) was issued on the assessee to which he filed the
return of income in Form 2D declaring total income of Rs.17,89,520/-.
In the return filed u/s.153A of the Act, assessee offered undisclosed
income of Rs.11,53,356/- on account of investment made in purchase of
3 ITA Nos.1961 to 1965/PUN/2016 Dhananjay Hari Gadgil
shares of Sangli Bank Ltd., bank deposits, interest income, dividend
income etc. At the end of assessment proceedings u/s.143(3) r.w.s.
153A of the Act, AO levied penalty of Rs.3,81,000/- u/s.271(1)(c) of the
Act. The figures vary for other assessment years. In the First Appellate
proceedings, the CIT(A) upheld the penalty levied by the AO.
Aggrieved with the order of CIT(A) the assessee is in appeal before
the Tribunal with the grounds/additional ground extracted above.
Before us, at the outset, Ld. Counsel for the assessee referring to
Additional ground (legal in nature) submitted that this is a case where
the AO failed to record proper satisfaction in the assessment order
during which the penalty was 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 Nos.1961 to 1965/PUN/2016 Dhananjay Hari Gadgil
“Since the assessee failed to disclose the above income of Rs.11,53,356/- in the original return filed on 31-08-2010, the penal proceedings u/s.274 r.w.s. 271(1)(c) of the Act are separately initiated.”
8.1 We also perused the penalty order dated 25-06-2008 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 :
“5. In view of the above, I am satisfied that the assessee failed to disclose the true and correct income in the original return. For this the provisions of section 271(1)(c) of the Act are clearly attracted. For this failure on the part of the assessee to disclose correct income in the return filed u/s.139 of the Act, a penalty of Rs.3,81,000/- (rupees three lakhs eighty one thousand only) as calculated below is levied after obtaining prior approval of the Addl.CIT, Central Range-1, Pune, vide his letter No.Pn. Addl.CIT/CR-1/Appr.u/s.274/2008-09, dated 24/06/2008. Issue demand notice and challan accordingly.”
From the above, it is evident that at the time of initiation of penalty
proceedings in the assessment order as well as at the time of levying the
penalty, AO did not specify any limb of clause (c) of section 271(1) of the
Act. This manner of recording of satisfaction suggests the existence of
ambiguity with reference to applicability of specific limb. There is no
harmony between the initiation of penalty proceedings and at the time of
levying the penalty. 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, the order of CIT(A) is
set-aside and direct the AO to delete the penalty. Accordingly, the
grounds/additional grounds of appeal raised by the assessee are
allowed.
In the result, appeal of the assessee is allowed.
5 ITA Nos.1961 to 1965/PUN/2016 Dhananjay Hari Gadgil
ITA Nos. 1962 to 1965/PUN/2016 A.Yrs. 2001-02 to 2002-03 and 2004-05 to 2005-06
The facts, issues, decision of AO/CIT(A) and the arguments of the
parties are common. Therefore, our decision given in ITA
No.1961/PUN/2016 setting aside the order of CIT(A) shall apply to these
appeals too. Accordingly, the grounds/additional ground raised by the
assessee in these appeals are allowed.
In the result, the above appeals of the assessee are allowed.
To sum up, all the appeals filed by the assessee are allowed.
Order pronounced on 18th day of July, 2018.
Sd/- Sd/- (िवकास अव थी /VIKAS AWASTHY) (डी. क�णाकरा राव/D. KARUNAKARA RAO) �ाियक सद�/JUDICIAL MEMBER लेखा सद�/ACCOUNTANT MEMBER पुणे / Pune; िदनांक / Dated : 18th July, 2018. Satish
आदेश की 'ितिलिप अ)ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��थ� / The Respondent. 2. 3. The CIT(Appeals)-11, Pune. 4. The Pr. CIT ( Central), Pune. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “बी” ब#च, 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.