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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:
This is the appeal filed by assessee against the order of CIT(A)-3,
Pune, dated 25-07-2016 for the A.Y. 2006-07.
Grounds raised by the assessee are extracted here as under :
“On facts and in law, 1. The CIT(A) erred in holding that the penalty order is valid in law without appreciating that the said order was barred by limitation and accordingly, the penalty levied should be deleted. 2. The learned CIT(A) erred in confirming the levy of penalty of Rs.1,01,23,250/- u/s. 271(1)(c) of the Act by holding that the assessee has concealed his income and hence, the A.O. was justified in levying the penalty. 3. The learned CIT(A) failed to appreciate that the addition made of Rs.2,00,50,000/- on which the penalty was levied was made and surmises and presumptions and therefore, no penalty could be levied in respect of such an addition. 4. The learned CIT(A) failed to appreciate that there was no concrete
2 ITA No.2461/PUN/2016 Ramchandra Dada Shinde
evidence that the assessee had actually earned income of Rs.2,00,50,000/- and accordingly, the penalty levied should be deleted. 5. Without prejudice to the above grounds, the assessee submits that the learned CIT(A) erred in confirming the levy of penalty @ 150% and the penalty should be reduced. 6. The appellant craves leave to add, alter, amend or delete 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 include that the assessee is an
individual and derives income from other source. On 20-07-2005, there
was search and seizure action u/s.132 of the Act at the office premises
of Bharati Vidyapeeth Bhavan, 13 Sadashiv Peth, Pune-30 as well as the
residential premises of the assessee. The said search and seizure action
resulted in seizure of cash amounting to Rs.3,15,57,270/- and jewellery
to the tune of Rs.2,95,553/- apart from various incriminating documents
relating to admissions of various institutions of Bharati Vidyapeeth
Group. In response to statutory notice issued, the assessee filed the
3 ITA No.2461/PUN/2016 Ramchandra Dada Shinde
return of income on 26-04-2007 declaring taxable income of
Rs.1,26,75,650/-. At the end of assessment proceedings u/s.143(3) of
the Act, the assessed income is determined at Rs.13,88,81,371/-.
Penalty proceedings u/s.271(1)(c) of the Act was made and levied penalty
of Rs.1,01,23,250/- invoking Explanation-1 to section 271(1)(c) of the
Act. 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 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
4 ITA No.2461/PUN/2016 Ramchandra Dada Shinde
proceedings u/s.271(1)(c) of the Act is relevant for extraction. Therefore,
the same is reproduced as under :
“26. Assessed accordingly. Interest u/s.234A, 234B, 234C charged as per law. Give credit to the taxes paid after verification. Issue DN/Challan accordingly. Issue notice u/s.274 initiating penalty u/s.271(1)(c) of the IT Act, 1961.”
8.1 We also perused the penalty order dated 31-07-2014 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 :
“10. In view of the facts and circumstances of the case discussed above, I am satisfied that the assessee without any sufficient & reasonable cause has committed a default as defined in Expln.1(A) to section 271(1)(c) of IT Act. The amount of Rs.2,00,50,000/- is deemed to represent the income in respect of which particulars have been concealed. This addition has been confirmed by the ITAT, which is the highest fact finding authority. Further, the addition has been made on the basis of documents seized during course of the search u/s.132 of the IT Act, 1961, the contents of which have been admitted by the assessee. But assessee failed to disclose correctly the income earned by him, which is evident from the notings in seized documents. Moreover assessee has taken the stand that the addition is based on presumptions and surmises, which has been found to be false. Hence this case needs to be distinguished from other cases of concealment of income and certainly warrants levy of higher than minimum quantum of penalty. Therefore, the undersigned hereby levies 150% of tax sought to be evaded as penalty u/s.271(1)(c) r.w. Explanation 1 to it of IT Act, 1961.
……
Thus, penalty under section 271(1)(c) of the Act is proposed to be levied at 150% of the tax sought to be evaded of Rs.1,01,23,250/- on the assessee.”
From the above, it is evident that at the time of initiation of penalty
proceedings in the assessment, 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
5 ITA No.2461/PUN/2016 Ramchandra Dada Shinde
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.
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)-3, Pune. 4. The Pr. CIT-1, Pune. 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “बी” ब#च, 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.