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Before: SHRI H.S. SIDHU & SHRI PRASHANT MAHARISHI
O R D E R PER H.S. SIDHU, JM
This appeal by the Assessee is directed against the Order of the Ld.
Commissioner of Income Tax (Appeals) (Central), Gurgaon dated 11.9.2013 pertaining to assessment year 2008-09.
The grounds of appeal raised in the assessee’s appeal read as under:-
1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not deleting the penalty of Rs.77,53,678/- fully as levied by Ld. AO and has further erred in sustaining the penalty on 1
the amount of alleged cash payment of Rs.25,00,000/- and profit on shortage of stock of Rs.2,02,84,111/- and that too without assuming jurisdiction as per law and the impugned penalty order being illegal and void ab-initio, more so when assessee's case is covered by explanation 5 to section 271(1)(c) of Income Tax Act, 1961.
2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in sustaining
the action of Ld. AO in levying penalty under the said two heads and the impugned penalty order being contrary to law as the assessment order framed under section 143(3)/153B dated 29-12-2009 and addition made therein was also illegal, beyond jurisdiction and void ab-initio.
That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in sustaining
the action of Ld. AO in levying penalty under the said two heads uls 271(1)(c) which is bad in law, beyond jurisdiction and barred by limitation and contrary to the principles of natural justice and has been passed by recording incorrect facts and findings and without giving adequate opportunity to the assessee and the same is not sustainable on various legal and factual grounds. 2
That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in sustaining
the action of Ld. AO in levying penalty under the said two heads and that too without recording mandatory
"satisfaction" as per law.
That the assessee craves the leave to add, alter or amend
the grounds of appeal at any stage and all the grounds are without prejudice to each other.
3. The brief facts of the case are that a search and seizure operation u/s. 132(1) of the Income Tax Act, 1961 (hereinafter referred as the Act) was carried out at the business premise of the assessee on 24.4.2007. The assessee filed its return of income through e-filing on 30.9.2008, declaring total income of Rs. 9,36,82,650/-. The Assessment in this case was completed u/s. 143(3)/153B of the Act on 29.12.2009 at Rs. 11,11,87,190/- whereby additions on account of stock, depreciation and cash had been made. The issue pertaining to stock was revised u/s. 263 on 15.2.2012 whereby an additional amount of Rs. 53,04,111/- was directed to be added to the assessed income. Meanwhile vide order dated 18.2.2011, the Ld. CIT(A) had confirmed the additions made u/s. 143(3) of the Act vide order dated 29.12.2009 on the basis premise that the same had been agreed upon by the assessee in the course of the assessment proceedings. The impugned penalty order was framed u/s. 271(1)(c) of the Act on 29.3.2012 3 after the receipt of the order of the Ld. CIT(A) and passing of the order giving effect to the order u/s. 263.
4. Against the Penalty order the Assessee appealed before the ld. CIT(A), who vide impugned order dated 11.9.2013 has partly allowed the appeal of the assessee.
5. At the time of hearing, Ld. Counsel of the Assessee has stated that the penalty proceedings ought to fail, the penalty was initiated for furnishing of inaccurate particulars of income/concealment of income. Also the notice dated 19.1.2012 for penalty u/s. 271 read with Section 274 of the I. T. Act, 1961 was ambiguous and vague in as much as it is stated both concealment of particulars of income or furnishing of inaccurate particulars.
For the sake of reference, the copy of Notice dated 19.1.2012 for initiation of penalty proceedings was filed. He further stated that entire penalty proceedings stand vitiated as the notice itself is not in accordance with law and in order to support his contention, he placed the reliance on the following decisions, by filing the copies thereof.
- Hon’ble Karnataka High Court decision in the case of CIT & Ors. Vs. M/s Manjunatha Cotton and Ginnig Factory & Ors. (2013) 359 ITR 565
- Apex Court decision in the case of CIT & Anr. Vs. M/s SSA’s Emerald Meadows in CC No. 11485/2016 dated 05.8.2016.
In view of above, he requested that the penalty in dispute may be cancelled and appeal of the assessee may be allowed.
On the contrary, Ld. DR relied upon the orders of the authorities below.
We have heard both the parties and perused the orders passed by the Revenue Authorities alongwith the relevant records available with us. Firstly, we have perused the Notice dated 19.1.2012 issued by the AO for initiating the penalty and directing the assessee to appear before him at 11.30 AM on 30/01/2012 and issued a Show Cause to the assessee stating therein that:
“*have without reasonable cause failed to furnish me return of income which you were required to furnish by a notice given under section 22(1)/22(2)/34 of the Indian Income Tax Act, 1922 or which you were required to furnish under section 139(1) or by a notice given have without reasonable cause failed to furnish it within the time allowed and the manner required by the said section 139(1) or by such notice.
* have without reasonable cause failed to comply with a notice under section 22(4)/23(2) of Indian Income Tax Act, 1922 or under section 142(1)/143(2) of Income Tax Act, 1961.
* have concealed the particulars of such income or furnished inaccurate particulars of such income.”
7.1 After perusing the notice dated 19.1.2012 issued by the AO to the assessee, we are of the considered view that the AO has initiated the penalty for furnishing inaccurate particulars of income/concealment of income.
Keeping in view of the facts and circumstances of the case and respectfully following the precedents, as aforesaid, we are of the considered view that the AO has issued the notice dated 19.1.2012 for initiating the penalty and directing the assessee to appear before him at 11.30 AM on 30/01/2012 and issued a Show Cause to the assessee stating therein that “*have without reasonable cause failed to furnish me return of income which you were required to furnish by a notice given under section 22(1)/22(2)/34 of the Indian Income Tax Act, 1922 or which you were required to furnish under section 139(1) or by a notice given have without reasonable cause failed to furnish it within the time allowed and the manner required by the said section 139(1) or by such notice.
* have without reasonable cause failed to comply with a notice under section 22(4)/23(2) of Indian Income Tax Act, 1922 or under section 142(1)/143(2) of Income Tax Act, 1961.
* have concealed the particulars of such income or furnished inaccurate particulars of such income.”
8.1 Further the AO vide his assessment order dated 29.12.2009 has issued notice u/s. 274 for penalty u/s. 271(1)© of the Act and vide penalty order dated 29.3.2012 has held that assessee has made a concealment of his income or furnished inaccurate particulars of this income and also observed that it clearly established that the assessee has concealed the particulars of income to the tune of Rs. 2,28,11,648/- and imposed the penalty vide order dated 29.3.2012. In view of above, the penalty is not sustainable in the eyes of law. Our aforesaid view is fortified by the following decisions:- i) “CIT & Anr. Vs. M/s SSA’s Emerald Meadows – 2015
(11) TMI 1620 – Karnataka High Court has held that Tribunal has correctly allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with Section 271(1)(c) to be bad in law as it did not specify which limb of Section 271(1)© of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of Commissioner of Income Tax vs. Manjunatha Cotton and Ginning
Factory (2013) (7) TMI 620- Karanataka High Court.
Thus since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion no substantial question of law arises – decided in favour of assessee.” ii) CIT & Anr. Vs. M/s SSA’s Emerald Meadows –
Hon’ble Supreme Court of India – reported in 2016
(8) TMI 1145 – Supreme Court. The Apex Court held that High Court order confirmed (2015) (11) TMI
1620 (Supra) – Karnataka High Court. Notice issued by AO under section 274 read with section 271(1)(c) to be bad in law as it did not specify which limb of Section 271(1)© of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income – Decided in favour of assessee.” iii) ITAT, ‘D’ Bench decision dated 26.5.2017 in the case of Rajendra Jain vs. ACIT passed in ITA No.
6804/Del/2013 (AY 2006-07) wherein on similar facts and circumstances of the case the Appeal of the Assessee is allowed by deleting the penalty in dispute.
8.1 In the background of the aforesaid discussions and respectfully following the precedents, we delete the penalty in dispute and decide the issue in favor of the assessee and against the Revenue.
In the result, the appeal filed by the Assessee stands allowed.
Order pronounced in the Open Court on 28/09/2017.