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Income Tax Appellate Tribunal, “A” 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)-II, Nashik, dated 27.11.2014 for the A.Y. 2009-10.
Grounds raised by the assessee are extracted here as under:
“1. The Ld.CIT(A) has grossly erred in law and on facts in confirming the jurisdiction over the case of appellant with the Dy. CIT Circle-1, Jalgaon on the date of imposition of penalty, even though the case of appellant was transferred to the JCIT u/s.127 of the I T Act on the said date. The finding of the CIT(A) may please be vacated and penalty order be held as bad in law for want of jurisdiction and quash the penalty order. 2. The Ld.CIT(A) has grossly erred in law and on facts in confirming the jurisdiction over the case of appellant with the Dy CIT Circle- 1,Jalgaon on the date of imposition of penalty, without rebutting any contention and decisions relied upon by the appellant and hence Penalty order may please be quashed.
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The Ld.CIT(A) has grossly erred in law and on facts in confirming the penalty, even though A.O. has not recorded the satisfaction at the time of imposing the penalty in terms of section 271(1)(c) of the I.T. Act and hence, penalty order is bad in law and therefore, the same may be annulled.
On the facts and in the prevailing circumstances of the case, the learned CIT(A) has grossly erred in confirming the penalty u/s.271(1)(c) of the I T Act, even though A.O failed to record clear finding, as to whether, appellant has furnished inaccurate particulars of income Or concealed the income. Therefore, penalty order is bad in law and hence, penalty may please be cancelled.
On the facts and in the prevailing circumstances of the case, the learned A.O has erred in imposing the penalty u/s.271(1)(c) of the I T Act, without establishing any alleged facts/thing and bringing any corroborative evidence on record and hence, penalty be deleted.
On the facts and in the prevailing circumstances of the case, the learned CIT(A) has grossly erred in confirming the penalty imposed of Rs.24,76,555/-, u/s.271(1)(c) of the I T Act, on the following alleged addition, merely it was confirmed in appeal.
(a) An addition of Rs.9,11,134/- was made considering the shortages arrived at in business as excess quantity, which during the appellate proceedings, as insisted, has surrendered for taxes only.
(b) An addition of Rs.63,75,000/- was made presuming that appellant must have paid this amount to her husband.
Neither A.O nor CIT(A) has brought any sort of evidence on record even in penalty proceeding to establish the said so called alleged income cited above of Rs.72,86,134/-, and hence, penalty be deleted.
The Appellate craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of the appeal, if deemed necessary at the time of hearing of the appeal.”
Briefly stated relevant facts include that the assessee is an
individual and is running two show rooms of jewellery at Jalgaon and
Aurangabad under the name and style of M/s. R.C Bafna Jewellers.
Assessee filed her return of income for the assessment year under
consideration on 30.09.2009 declaring total income at
Rs.30,11,75,820/-. During the assessment, AO assessed the total
income of assessee at Rs.36,07,76,277/- as against returned income of
Rs.30,11,75,820/- and made following additions under various heads:
Sr. Additions made under Amount (Rs.) No various heads 1 Jewellery business 9,11,134/- 2 Vehicles Expenses 10,87,262/-
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3 Telephone expenses 60,000/- 4 Personal use 1,20,000/- 5 Shop expenses 1,00,000/- 6 Boxes account 15,00,000/- 7 Kavi Samelan Expenses 2,15,675/- 8 Business profit u/s.28 (iv) 2,44,62,169/- 9 u/s.40A(2)(b) 2,55,550/- 10 Interest payment 49,23,531/- (8,10,106/-+41,13,425/-) 11 Disallowance u/s. 14A 27,85,226/- r.w.r.8D 12 Thief account 50,400/- 13 Unexplained investment in 63,75,000/- Nimgaon Plot 14 Addition u/s.50C 1,67,54,510/-
Penalty proceedings u/s.271(1)(c) was initiated by the Assessing Officer
and a penalty of Rs.24,76,555/- was levied on the following additions:
On A/c of short fall in Gold Account Rs.9,11,134/- 2. Out of Boxes expenses Rs.15,00,000/- 3. Out of unexplained investment in Nimgaon Plot Rs.63,75,000/- 4. Addition u/s. 50C Rs.1,67,54,510/-
In the First Appellate proceedings, the CIT(A) confirmed the said
penalty levied by the AO.
Aggrieved with the order of CIT(A), the assessee filed the present
appeal before the Tribunal with the grounds extracted above.
Before us, at the outset, Ld. Counsel for the assessee referring to
grounds 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
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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).
On hearing both the parties on this technical issue of failure of AO
in mentioning different satisfaction with reference to one of the limbs of
clause (c) of section 271(1)(c) of the Act, we find the AO made couple of
additions, i.e. (1) on account of jewellery business amounting to
Rs.9,11,134/- and (2) on account of unexplained investment in a plot
amounting to Rs.63,75,000/- and the satisfaction on both the accounts
is only restricted to the language, i.e. “Penalty u/s.271(1)(c) are
separately initiated”. In this regard, the contents of last line of Para
No.4.2 (page 5 of the assessment order) are relevant. For the second
addition, the contents of the last line of Para No.16.3 of the assessment
order (Page 22 of the assessment order) are relevant. In this context, we
proceed to extract the satisfaction recorded by the AO in respect of these
additions for initiating the penalty proceedings u/s.271(1)(c) of the Act is
relevant for extraction and the same read as under :
“4.2 Since the investment in above purchase has been made outside books of account. Hence, it is added u/s.69 of the Income Tax Act, 1961 @15105 per 10 gram valuing at Rs.9,11,134/- towards the income of the assessee. Penalty u/s.271(1)(c) is also initiated on this point.”
“16.3 ………….. Hence, only Rs.63,75,000/- is added towards the income of the assessee u/s.69B. As it has been presumed that Shri Ratanlal Bafna have not charged more money being husband of the assessee than recorded in settlement. Penalty u/s. 271(1)(c) are separately initiated.”
We also perused the penalty order dated 19.02.2014 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:
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“In view of the facts of the case, I have no hesitation in holding that the assessee had filed inaccurate particulars of income and concealed the income to the tune of Rs.72,86,134/-(63,75,000/- + 9,11,134/-) and made himself liable for penalty u/s.274 r.w.s 271(1)(c) of the Income tax Act, 1961. In the light of the above discussion, I , therefore, levy penalty of Rs.24,76,555/- (Rupees Twenty Four Lakhs Seventy Six Thousand Five Hundred Fifty Five only) as against maximum penalty leviable at the rate of 300 times of the tax sought to be evaded i.e.74,29,665/-.”
From the above, it is evident that the AO mentioned both the limbs of
clause (c) of section 271(1) of the act. Considering the arguments of the
Ld. Counsel for the assessee and relying on decisions cited (supra), we
find the satisfaction given by the AO on both the counts fell short of the
legal requirement. This manner of recording of satisfaction suggests the
existence of ambiguity with reference to applicability of specific limb.
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, the order of CIT(A) is set-aside and
direct the AO to delete the penalty. Accordingly, the grounds of appeal
raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced 19th 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 : 19th July, 2018. Satish
6 ITA No.2304/PUN/2014 Smt. Taradevi Ratanlal Bafna
आदेश की &ितिलिप अ(ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��थ� / The Respondent. 2. 3. The CIT(Appeals)-II, Nashik 4. The CIT-II, Nashik. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “ए” ब#च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड& फ़ाइल / Guard File. 6.
आदेशानुसार / BY ORDER, // True Copy //
Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.