SAKAL PAPER LTD. vs. DEPUTY COMMSSIONER OF INCOME-TAX,

आदेश / ORDER PER ANIL CHATURVEDI, AM :

15.01.2015 for the assessment years 2007-08 and 2008-09 and

Revenue has filed cross-appeal against the order of Commissioner of

Income Tax (A)-4, Pune for A.Y. 2007-08.

the appeals are for two different assessment years but the facts and

issues involved in both the appeals are identical except for the

assessment year and the amounts involved and therefore the

submissions made by them while arguing one appeal would be equally

applicable to the other appeal also and thus, both the appeals can be

heard together. In view of the aforesaid submissions of both the

parties, we, for the sake of convenience, proceed to dispose of both the

appeals by a consolidated order but however, proceed with narrating

the facts for assessment year 2007-08.

as under :-

3.1 Assessee is a company stated to be engaged in the business of

Printing and Publishing of newspapers and periodicals. Assessee

electronically filed its return of income for A.Y. 2007-08 on

12.11.2007 declaring total income of Rs.10,20,49,650/-. The case

was selected for scrutiny and thereafter assessment was framed u/s

143(3) of the Act vide order dt.15.12.2009 and the total income was

determined at Rs.13,70,91,085/- inter-alia by making additions /

disallowances of Rs.2,67,00,519/- on account of long term capital

gains, Rs.61,15,826/- on account of deduction u/s 80IA of the Act,

Rs.23,05,985/- on account of capital expenditure and Rs.1,24,000/-

on account of deduction u/s 14A of the Act. AO vide order

dt.22.03.2013 levied penalty u/s 271(1)(c) of the Act of

Rs.98,44.900/- only on additions on account of long term capital

gains and withdrawal of deduction claimed u/s 80IA(4) of the Act. For

A.Y. 2008-09 the details of income offered by the assessee, additions

made and penalty levied are as under :

A.Y. Returned Additions Total income Penalty levied income assessed u/s 143(3) in Rs. in Rs. 2008-09 60,60,21,360/- 1,41,60,820/- 62,02,28,533/- Rs.42,48,246/- (Long term capital gains) on long term Rs.1,71,353/- capital gains . (Disallowance u/s 14A)

Aggrieved with the penalty order, assessee carried the matter before

Ld.CIT(A), who vide consolidated order dt.15.01.2015 (in appeal

No.PN/CIT(A)-4/Cir.6/103/13-14) 430/09-10) granted partial relief to

the assessee for A.Y. 2007-08 and dismissed the appeal of the

assessee for A.Y. 2008-09. Aggrieved by the order of Ld.CIT(A),

assessee and Revenue are now in appeal before us. The grounds

raised by the assessee in A.Y. 2007-08 are as under :

“On the facts and under the circumstances of the case the learned Assessing Officer and CIT Appeals erred in :

3.2. The ground raised by the Revenue in appeal No.397/PUN/2015

reads as under :

“1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the penalty levied u/s 271(1)(c) of the I.T. Act, 1961 by the Assessing Officer. Assessee has claimed deduction u/s 80IA(4) without setting off the unabsorbed depreciation and losses of earlier years which is not intended by section 80IA(5). If unabsorbed depreciation / losses of earlier years of 80IA unit are set off there would be no profit for A.Y. 2007-08 to be claimed u/s 80IA(4). Since assessee has claimed ineligible deduction u/s 80IA(4), penalty proceedings u/s 271(1)(c) are clearly attracted for furnishing inaccurate particulars of income.”

3.3. Similar grounds have been raised by assessee in ITA

No.348/PUN/2015 for A.Y. 2008-09.

additional ground to the effect that the satisfaction recorded by the

AO while initiating penalty proceedings u/s 271(1)(c) of the Act was

not correct as the penalty proceedings was initiated for concealment of

income and for furnishing of inaccurate particulars of income. He

submitted that though no specific ground with respect to non-

recording of satisfaction has been taken by the assessee but Rule 11

of the Income Tax (Appellate Tribunal) Rules, 1963 permits the

assessee to raise any ground which was not set forth in the

Memorandum of Appeal for the first time before the Tribunal. He

therefore prayed that the same be admitted for adjudication as it was

a legal issue. The Ld.D.R. objected to it and submitted that no such

ground was urged by the assessee before Ld.CIT(A).

we have heard the rival submissions. It is an undisputed fact that in

the memo of appeal, assessee has not raised any ground with respect

to non-recording of satisfaction by AO but before us, Ld.A.R. has

relied on Rule 11 of Income Tax (Appellate Tribunal) Rules 1963 in

support of raising the oral ground on this issue. A perusal of Rule 11

reveals that there is no blanket bar on the appellant raising additional

ground not set forth in the memorandum of appeal provided that the

leave of the Tribunal is required to be obtained and further the

affected party must be given a sufficient opportunity of being heard in

that issue. In the present case, we find that though the assessee has

not raised the additional ground (which is urged before us orally) in

the memorandum of appeal whereby he is challenging the validity of

penalty order, we have no objection in its admissions as it is a legal

ground. We therefore admit the additional ground on validity of

penalty order.

AO is bad in law and therefore be set aside. He submitted that while

passing the assessment order AO with respect to additions of

Rs.2,67,00,519/- on account of long term capital gains and on

account of deduction u/s 80IA of the Act of Rs.61,15,826/- has

recorded that assessee had furnished inaccurate particulars of income

/ concealed the income. But while passing the penalty order u/s

271(1)(c) of the Act on 22.03.2013 AO had levied penalty for

furnishing inaccurate particulars of income. In support of his

aforesaid contention, he pointed to the findings of AO in the both the

orders. He therefore submitted that while recording satisfaction for

levy of penalty in the assessment order the AO has recorded

satisfaction for levying penalty be invoking both the limbs of

Sec.271(1)(c) of the Act viz. concealment of income as well as

furnishing inaccurate particulars of income, shows that there was

ambiguity in the mind of AO with respect to charge for which the

penalty is to be levied. He therefore relying on the decision of Hon’ble

Bombay High Court in the case of CIT Vs. Samson Perinchery

reported in (2017) 392 ITR 4 (Bom) submitted that in the absence of

proper show cause notice to assessee, penalty u/s 271(1)(c) cannot be

levied and therefore urged that penalty levied by AO be deleted.

Ld.D.R. on the other hand, supported the order of lower authorities.

on record. The issue in the present case is with respect to levy of

penalty u/s 271(1)(c) of the Act. In the present case in A.Y. 2007-08

penalty of Rs.98,44,900/- has been levied u/s 271(1)(c) of the Act on

addition on account of long term capital gains and for withdrawal of

deduction claimed u/s 80IA(4) of the Act. For A.Y. 2008-09 penalty

of Rs.61,15,826/- was levied on addition made on account of

withdrawal of deduction claimed u/s 80IA(4) of the Act. The perusal

of assessment order passed u/s 143(3) of the Act reveals that in the

assessment order AO had recorded satisfaction for concealment of

income / filing inaccurate particulars of income. Thereafter, in the

penalty order passed u/s 271(1)(c) of the Act, AO had levied penalty

for furnishing of inaccurate particulars of income. It is a settled law

that while levying penalty for concealment of income / furnishing of

inaccurate particulars of income, the AO has to record satisfaction

and thereafter come to a finding in respect of one of the limbs, which

is specified under section 271(1)(c) of the Act. The first step is to

record satisfaction while completing the assessment as to whether the

assessee had concealed its income or furnished inaccurate particulars

of income. Thereafter, notice u/s 274 read with Section 271(1)(c) of

the Act is to be issued to the assessee. The Assessing Officer

thereafter has to levy penalty under Section 271(1)(c) of the Act for

non-satisfaction of either of the limbs. While completing the

assessment, the Assessing Officer has to come to a finding as to

whether the assessee has concealed its income or furnished

inaccurate particulars of income. The Hon’ble Bombay High Court in

CIT Vs. Shri Samson Perinchery (supra) has held that where initiation

of penalty is one limb and the levy of penalty is on other limb, then in

the absence of proper show cause notice to the assessee, there is no

merit in levy of penalty.

decision of Hon’ble Bombay High Court in the case of Samson

Perinchery (supra), we are of the view that in the present case, the

basic condition for levy of penalty has not been fulfilled and that the

penalty order suffers from non-exercising of jurisdiction power and

therefore penalty order cannot be upheld. We accordingly set aside

the penalty order passed by AO. Thus, the ground of assessee is

allowed for A.Ys. 2007-08 and 2008-09.

10.1. Since the penalty levied in A.Y. 2007-08 on account of deduction u/s 80IA of the Act has been quashed by us while deciding the appeal of assessee hereinabove, the adjudication of grounds raised by the Revenue become academic and therefore requires no adjudication and therefore the grounds of Revenue are dismissed.

Order pronounced on 18th day of July, 2018.

Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 18th July, 2018. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A)-4, Pune. 4. CIT-III, Pune. 5 �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए” / DR, ITAT, “A” Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार/ BY ORDER

// True Copy //

व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.