M/S. NAMRATA CITY CENTRE,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX,

PER D. KARUNAKARA RAO, AM:

There are two appeals filed by assessee against the consolidated order of CIT(A)-12, Pune, dated 12-08-2016 for the A.Yrs. 2011-12 & 2012-13. These appeals are filed in connection with the penalty levied u/s.271(1)(c) of the Act. Assessee raised similar ground in both the appeals.

We shall first take up appeal ITA No.2449/PUN/2016.

ITA No.2449/PUN/2016 A.Y. 2011-12 2. The solitary ground raised by the assessee is extracted here as under :

2 ITA Nos.2449 & 2450/PUN/2016 M/s. Namrata City Centre

“The CIT(A) has erred in confirming the penalty of Rs.5,96,374/- levied under section 271(1)(c) of the Income Tax Act, 1961.”

assessee is a firm and filed the return of income on 27-09-2011

declaring total loss of Rs.7,31,023/-. There was search action u/s.132

of the Act in the Namrata Group of cases on 12-02-2013. Certain

incriminating documents were seized. Assessee disclosed additional

income at Rs.31.47 lakhs on account of receipt of on-money above the

agreement value of flats/shops. In response to notice u/s.153C of the

Act, assessee filed the return of income on 09-12-2013 declaring total

income of Rs.24,16,677/- and the income returned was accepted.

However, the AO levied penalty of Rs.5,96,374/- u/s.271(1)(c) of the Act

for concealment of income and furnishing of inaccurate particulars. In

the First Appellate proceedings, the CIT(A) upheld the penalty levied by

the AO.

Similarly, for the A.Y. 2012-13, the AO levied penalty of

Rs.42,17,130/- with identical ‘satisfaction’. CIT(A) confirmed the said

penalty based on the reasoning given in A.Y. 2011-12.

the Tribunal with the aforesaid ground extracted above for both the

assessment years.

oral ground which is legal in nature and 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

3 ITA Nos.2449 & 2450/PUN/2016 M/s. Namrata City Centre

legal requirement of making a specific reference to of the limb of clause

(c) of section 271(1) of the Act and relying on various binding judgments

in the case CIT Vs. 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 :

“5. The disclosure in respect of A.Y. 2011-12 has been adhered by the assessee while filing return in response to notice u/s.153C. These facts also prove that the above stated on-money had been received by the assessee but it was not disclosed by it while filing its original return of income on 27-09-2011. This undisclosed income of Rs.31.47 lakhs could not have come to the notice of the department but for the search/survey action in the case of the assessee group. Hence, these facts prove that there was a concealment of income in the original return of income and hence the undersigned is satisfied that the assessee is liable for penalty proceedings u/s.271(1)(c) of concealment of income and furnishing of inaccurate particulars, accordingly, penal proceedings u/s.271(1)(c) are hereby separately initiated.”

7.1 We also perused the penalty order dated 28-09-2015 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 Nos.2449 & 2450/PUN/2016 M/s. Namrata City Centre

“07. In view of the above facts, I am satisfied that the assessee has furnished inaccurate particulars of its income and thereby has concealed his income for the A.Y. 2011-12. Therefore, I consider this to be a fit case for imposing penalty u/s.271(1)(c) of the I.T. Act, 1961. Accordingly, a penalty of Rs.5,96,374/- is hereby imposed on the assessee u/s.271(1)(c) of the I.T. Act, 1961 which is calculated as under..”

From the above, it is evident that at the time of initiation of penalty

proceedings in the assessment, AO mentioned both the limbs of clause

(c) of section 271(1) of the Act. It happens only when the AO suffers from

ambiguity in his mind. Thus, 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 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 solitary ground

raised by the assessee is allowed.

ITA No.2450/PUN/2016 A.Y. 2012-13

parties are common. Therefore, our decision given in ITA

No.2449/PUN/2016 setting aside the order of CIT(A) shall apply to this

appeal too. Accordingly, the ground raised by the assessee in this

appeal is allowed.

5 ITA Nos.2449 & 2450/PUN/2016 M/s. Namrata City Centre

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)-12, 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.