DHANANJAY HARI GADGIL vs. INCOME-TAX OFFICER,

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.”

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.

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.

the Tribunal with the grounds/additional ground extracted above.

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.

AO/CIT(A).

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.

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

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.

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.