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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER D. KARUNAKARA RAO, AM
There are two appeals filed by the Revenue under consideration involving A.Yrs. 2009-10 and 2011-12. They are filed against the separate orders of CIT(A)-1, Pune commonly dated 24-05-2016. Both the appeals are filed against the penalties levied u/s.271(1)(c) of the Act. Appeal-wise adjudication is given in the following paragraphs.
2 ITA Nos.1547 & 1548/PUN/2016 Construction Catalysers Pvt. Ltd.,
ITA No.1547/PUN/2016 A.Y. 2009-10
Grounds raised by the Revenue are extracted below :
“1. The Ld.CIT(A) has erred on the facts and circumstances of the case, in deleting the penalty u/s.271(1)(c) of the Act against additional income offered in return of income filed in response to notice u/s.148 of the Act. 2. The Ld.CIT(A) has erred on the facts and circumstances of the case in relying the decision of the Karnataka High Court in the case of CIT Vs. Manjunatha Cotton and Ginning Factory and Hon. Mumbai Tribunal in the case of Vipul Life Science Ltd. in present case although the case laws are not applicable in the present facts of the case.
Before us, at the outset, Ld. AR for the assessee submitted that the tax
effect in the filed by the Revenue is below Rs.20 lakhs. He submitted that
the appeal filed by the Department is liable to be dismissed on account of
low tax effect. The Ld. AR pointed that as per CBDT Circular No.3/2018
dated 11th July, 2018, the monetary limit for filing of appeal by the
Department before the Tribunal is Rs.20 Lakhs, therefore, the appeal filed by
the Department is not maintainable.
On the other hand, the Ld. DR for the Revenue defended the
assessment order and prayed for reversing the findings of the CIT(A) in the
appeal. However, the Ld. DR fairly admitted that the tax effect in the present
appeal filed by the Department is less than Rs.20 Lakhs.
Both sides heard. On perusal of the orders of the Revenue, we find
undisputedly this is a case where penalty levied by the AO u/s.271(1)(c) of
the Act is Rs.13,84,920/-. The CBDT circular No.3/2018 dated 11th July,
2018 raised the monetary limit of tax effect for filing of appeal by the
Department before the Tribunal to Rs.20 Lakhs. The circular applies to the
pending appeals of the Department before the Tribunal too. Thus, in view of
3 ITA Nos.1547 & 1548/PUN/2016 Construction Catalysers Pvt. Ltd.,
the CBDT circular, we are of the opinion that the present appeal of the
Revenue is liable to be dismissed on account of low tax effect without going
into the merits of the penalty.
In the result, the appeal of the Revenue is dismissed.
ITA No.1548/PUN/2016 A.Y. 2009-10
Briefly stated relevant facts of the case include that assessee is a
company and engaged in the business of providing services of designing,
developing, building, constructing and allied activities pertaining to
construction industry. Assessee filed the return of income on 29-09-2011
disclosing income of Rs.2,98,09,974/-. Based on the information received
from the Maharashtra Sales Tax Department, AO noticed that assessee made
purchases from suppliers namely, (1) M/s. Sunrises Enterprise; (2) M/s.
Balkrishna Trading Pvt. Ltd. and (3) M/s. Sagar Enterprise amounting to
Rs.82,16,409/-. The said suppliers are found to be in the list of suspected
suppliers who provided accommodation entries to the assessee. At the end
of the assessment proceedings u/s.143(3) r.w.s. 147 of the Act, after
examining the details relevant to the said purchases, the AO disallowed the
said sum of Rs.82,16,409/-. Penalty proceedings u/s.271(1)(c) of the Act
was initiated on the assessee and levied penalty of Rs.27,92,760/-.
In the First Appellate proceedings, the CIT(A) relying on the judgment
of Hon’ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton &
Ginning Factory 359 ITR 565 (Kar.) and the decision of Mumbai Bench of the
Tribunal in the case of Vipul Life Sciences Ltd. reported in 57 taxmann.com
25 deleted the said penalty levied by the AO.
4 ITA Nos.1547 & 1548/PUN/2016 Construction Catalysers Pvt. Ltd.,
Aggrieved with the order of CIT(A) the Revenue is in appeal before the
Tribunal with the following grounds :
“1. The Ld.CIT(A) has erred on the facts and circumstances of the case, in deleting the penalty u/s.271(1)(c) of the Act against additional income offered in return of income filed in response to notice u/s.148 of the Act. 2. The Ld.CIT(A) has erred on the facts and circumstances of the case in relying the decision of the Karnataka High Court in the case of CIT Vs. Manjunatha Cotton and Ginning Factory and Hon. Mumbai Tribunal in the case of Vipul Life Science Ltd. in present case although the case laws are not applicable in the present facts of the case.
Before us, at the outset, Ld. Counsel for the assessee 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. Thus, he
prayed for confirming the order of the CIT(A).
Per Contra, Ld. DR for the Revenue relied on the order of AO.
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 proceedings
u/s.271(1)(c) of the Act is relevant for extraction. Therefore, the same is
reproduced as under :
5 ITA Nos.1547 & 1548/PUN/2016 Construction Catalysers Pvt. Ltd.,
“05. …….Further, the assessee has concealed particulars of its income and furnished inaccurate particulars of its income. Penalty proceedings under section 271 (1)(c) of the Act are being initiated separately.”
12.1 We also perused the penalty order dated 26.06.2014 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:
“6.3……………………….This fact on its own, as a solitary factor may not be sufficient but read in conjunction with overall conduct of the assessee would definitely be a pointer to the factum of the assessee having indulged in an act of concealment of income in the form of bogus purchases. In view of above facts it is held that assessee has furnished inaccurate particulars of income within the meaning of section 271(1)(c) of the Act only with a view to avoid tax and has committed default in view of provisions of section 271(1)(c) and explanation there off, hence he is liable for penalty .”
From the above, it is evident that at the time of initiation of penalty
proceedings in the assessment, AO mentioned both limbs of clause (c) of
section 271(1) of the Act. But in the penalty order, the AO mentioned only
one limb i.e. “furnished inaccurate particulars of income”. This manner of
recording of satisfaction suggests the existence of ambiguity in the mind of
the AO with reference to the applicable limb of clause (c). 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, we set aside the order of CIT(A) and direct the AO to delete the
penalty. Accordingly, the grounds of appeal raised by the Revenue are
dismissed and allowed in favour of the assessee.
In the result, the appeal of the Revenue is dismissed.
6 ITA Nos.1547 & 1548/PUN/2016 Construction Catalysers Pvt. Ltd.,
To sum up, both the appeals of the Revenue are dismissed.
Order pronounced on 03rd day of August, 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 : 03rd August, 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)-1, Pune 4. The Pr.CIT-1, 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.