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Income Tax Appellate Tribunal, LUCKNOW BENCH “B”, LUCKNOW
Before: SHRI MAHAVIR SINGH & SHRI GIRISH AGRAWAL
This appeal by assessee is arising out of the order of Commissioner of Income-tax (Appeals)-2, Lucknow in A.No. CIT(A)-2/LKO/2017-18 dated 17-07-2020. The assessment was framed by Assistant Commissioner of Income-tax, Central Circle-1, Lucknow for the Assessment Year 2008-09 u/s. 143(3) r.w.s.153C of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') vide order dated 31-12-2013. The penalty under dispute was levied by Income Tax Officer, Ward-6(5), Lucknow vide order dated 17.03.2017 u/s. 271(1)(c) of the Act.
The first issue on merits is as regards to the order of ld. CIT(A) confirming the action of the AO in levying the penalty u/s. 271(1)(c) of the Act amounting to Rs.1,59,451/- despite the fact that the assessee has raised specific ground that the penalty notice u/s. 274 r.w.s. 271(1)(c) of the Act does not specified any charge i.e. either having concealed the particulars of income or furnished inaccurate particulars of income as the AO in the primary notice as not strike off in appropriate words.
Brief facts are that the assessee is engaged in the business of sale and purchase of reliance prepaid SIM cards, vouchers and electric items. In the course of requisition u/s. 132A of the Act, in the case of Shri Shafaat Ezaj Siddiqui and Tabish Mansoor, information was provided by ATS regarding various bank accounts in the name of Shri Vinay Pratap Singh, the assessee. The Assessing Officer made addition of cash deposit of Rs.5,92,724/- in the assessee’s bank account i.e. S.B.A/c No.84822200014042 with Syndicate Bank, Indira Nagar, Lucknow.
4. The Assessing Officer also initiated penalty proceedings u/s.271(1)(c) on the above added income of the assessee on the basis of unexplained deposits. The Assessing Officer levied the penalty u/s. 271(1)(c) of the Act on the above concealed income of Rs.5,92,724/- and thereby the levied minimum penalty Rs.1,59,451/- @ 100%. Aggrieved assessee preferred an appeal before ld. CIT(A).
The assessee before ld. CIT(A) contended that the levy of penalty is not valid on the ground that the AO has not specified the charge in the penalty notice issued u/s. 274 r.w.s. 271(1)(c) whereby penalty proceedings are initiated for furnishing of inaccurate particulars of income or for concealing the particulars of income as is mandated by provisions of Section 271(1)(c) of the Act but ld. CIT(A) going through the decision of Hon'ble Madras High Court in the case of Sundaram Finance Ltd. v. ACIT (2018) 93 taxmann.com 250 (Madras High Court) confirmed the levy of penalty and rejected the jurisdictional ground. Aggrieved, now assessee in appeal before us.
None is present on assessee side. On the other hand, Revenue is represented by ld. CIT(DR), Smt. Sheela Chopra. At the outset it is noticed from the penalty notice filed by assessee that the AO has not strike off the relevant clauses mentioned in the notice issued u/s. 274 r.w.s. 271(1)(c), whether the penalty is for furnishing of particulars of income or for concealing the particulars of income. This fact was challenged by assessee before CIT(A). It seems from order passed by Tribunal in quantum in to 687/Lkw/2015 vide order dated 22.02.2021 wherein the very proceedings initiated including the present Assessment Year 2008-09 has been quashed and once assessment is quashed, the penalty will not survive. The Tribunal has quashed the assessment as under:- “8. The above findings of the Tribunal are though with respect to Section 158BC of the Act, the provisions of section 158BC are in pari materia with those of Section 153A of the Act which implies that in respect of assessments u/s. 153A handing over of any documents to the Revenue authorities is a must and in the present case there was no document/statement requistoned by Income Tax Department other than cash therefore, the question of handing over of document by Assessing Officer of searched person to Assessing Officer of other person does not arise and in the absence of handing over of documents the provisions of Section 153C cannot be applied.
The provisions of section 158BD are in pari materia with the provisions of Section 153C as has been held by CBDT itself vide Circular 24/15 dated 31.12.2015 a copy of which is placed in paper book and is reproduced below: “CIRCULAR NO. 24/2015 F.No.279/Misc./140 /2015/ITJ Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes ****** New Delhi, 31st December, 2015
Subject: Recording of satisfaction note under section 1S8BD/153C of the Act - reg.-
The issue of recording of satisfaction for the purposes of section 158BD/153C has been subject matter of litigation, 2. The Hon'ble Supreme Court in the case of M/s Calcutta Knitwears in its detailed judgment in Civil AppealNo.3958 of 2014 dated I2.3.2014(available in NJRS at 2014-LL-0312-51) has laid down that for the purpose of Section 158BD of the Act, recording of a satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person u/s 158BD. The Hon'ble Court held that "the satisfaction note could be prepared at any of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under section 158BC of the Act; or (b) in the course of the assessment proceedings under section I58BC of the Act; or (c) immediately after the assessment proceedings are completed under section }58BCoflhe Act of the searched person."
3. Several High Courts have held that the provisions of section 153C of the Act are substantially similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon'ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT.
The guidelines of the Hon' ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and the "other person" is one and the same, then also he is required to record his satisfaction as has been held by the Courts. 5. In view of the above, filing of appeals on the issue of recording of satisfaction note should also be decided in the light of the above judgement. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD/153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court. (Ramanjit Kaur Sethi) DCIT(OSD)(ITJ)CBDT, New Delhi.” 10. In view of above facts and circumstances and judicial precedents Ground No. 2 of the appeal of the assessee is allowed in all the appeals. Since we have allowed Ground No. 2 in favour of the assessee therefore, the other grounds of appeal have not been adjudicated as they were not even argued.”
7. Once the quantum is deleted and assessment is quashed, penalty u/s. 271(1)(c) will not survive. Hence, we delete the penalty and allowed the appeal of the assessee.
In the result appeal of the assessee is allowed.