RAJESH PRABHAKAR BHAVE,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX,

आदेश / ORDER

PER VIKAS AWASTHY, JM

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-4, Pune dated 11.05.2016 for the assessment year 2011-12 confirming levy of penalty u/s.271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).

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account. In the assessment year under appeal, the assessee filed return of

income on 26.07.2011 declaring total income of Rs.25,99,170/-. The case of

assessee was selected for scrutiny under CASS. Accordingly, statutory notice

u/s.143(2) of the Act was issued to the assessee on 16.08.2012. In the course of

assessment proceedings, the Assessing Officer found that during the period

relevant to assessment year 2011-12, the assessee has also received salary from

M/s. Nokia Siemens Network Ltd. The Assessing Officer made following

additions in the returned income:

i) Salary income received from M/s. Nokia Siemens Networks Pvt. Ltd Rs.8,92,172/-.

ii) Interest income earned on FD and savings account Rs.4,58,788/-

The Assessing Officer initiated penalty proceedings u/s.271(1)(c) of the

Act in respect of additions made. The Assessing Officer vide order dated

27.06.2014 levied penalty of Rs.4,17,447/- u/s.271(1)(c) of the Act.

appeal before the Commissioner of Income Tax (Appeals). The First Appellate

Authority vide impugned order confirmed the levy of penalty and dismissed the

appeal of assessee. Now, the assessee is in second appeal before the Tribunal

assailing the levy of penalty on merits. The assessee has also filed additional

ground of appeal challenging levy of penalty on the legal ground of defect in

recording satisfaction. The additional ground raised by assessee reads as under:

“On the facts and in the circumstances of the case and in law the Lower Authorities have erred in levying the penalty u/s.271(1)(c) of the Income Tax Act, 1961 without recording correct satisfaction/charge in the order/notice therefore entire order u/s.271(1)(c) is void-ab-initio and deserves to be struck down.”

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Assessing Officer while recording satisfaction for levying penalty u/s.271(1)(c) of

the Act has mentioned both the charges i.e. furnishing inaccurate particulars of

income and concealing the particulars of income. While passing order levying

penalty, the Assessing Officer has mentioned both the limbs of section 271(1)(c)

of the Act by using the expressions “concealed it’s income by furnishing

inaccurate particulars of income”. The ld. AR submitted that the manner in

which satisfaction has been recorded and the penalty order has been passed

indicates ambiguity in the mind of Assessing Officer with respect to charge for

levying penalty. Concealment of income and furnishing inaccurate particulars of

income are two different expressions and the penalty could not be levied for

both the charges.

vehemently defending the satisfaction recorded at the time of passing

assessment order and the order levying penalty u/s.271(1)(c) of the Act

submitted, that there was no ambiguity in the mind of Assessing Officer while

initiating penalty proceedings. The Assessing Officer has mentioned both the

limbs of section 271(1)(c) of the Act while initiating penalty proceedings and has

levied penalty on same charges. It is not a case, where penalty proceedings have

been initiated on one limb and penalty is levied for another limb of section

271(1)(c) of the Act.

and have perused the orders of Authorities below. We observe that while

recording satisfaction for initiating penalty proceedings u/s.271(1)(c) of the Act,

the Assessing Officer has observed as under:

“4………..Since the assessee has concealed the particulars of income at the time of filing the return of income penalty proceedings under section

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271(1)(c) of the I.T. Act is initiated separately for furnishing inaccurate particulars of income and concealing the particulars of income.”

Officer observed as under:

“6………. I am satisfied that assessee, without sufficient and reasonable cause, under the deliberate intention concealed it’s income by furnishing inaccurate particulars of income to the extent of Rs.13,50,960/-.”

for initiating penalty proceedings reflects vagueness in the mind of Assessing

Officer while recording satisfaction. The charge for levying penalty is not clearly

decipherable from the satisfaction recorded by the Assessing Officer. The

Assessing Officer initiated his satisfaction with the charge of concealment of

particulars of income. However, by the time he concluded his intention to levy

penalty, he introduced other limb of section 271(1)(c) of the Act i.e. furnishing of

inaccurate particulars of income. The Assessing Officer finally mentioned both

the charges u/s.271(1)(c) of the of the Act with conjunction “and”.

Whereas, in the order of levying penalty, the Assessing Officer mentioned

that it is a case of concealment of income by furnishing inaccurate particulars

of income. The Assessing Officer is not clear in his mind with respect to charge

for which penalty is to be levied. The close look at the manner in which both the

charges of section 271(1)(c) of the Act have been mentioned in the assessment

order while recording satisfaction and the in the order levying penalty indicate

that the Assessing Officer was ambiguity in his mind i.e. whether it is a case of

concealment of income or furnishing inaccurate particulars of income.

reported as 292 ITR 11 has held that concealment of income and furnishing

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inaccurate particulars of income are two different expressions carrying different

connotations. In the instant case, as we have pointed earlier, the exact charge

for levying penalty is not clearly decipherable from the recording of satisfaction.

The penalty order is also ambiguous on the charge for which penalty is levied.

The Hon'ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton &

Ginning Factory, reported as 359 ITR 565 (Karn.) has held that the assessee

should be aware of the exact charge on which the Assessing Officer proposes to

levy penalty u/s. 271(1)(c) of the Act so that he can defend the same. Under

similar set of facts where the penalty was levied on both limbs of section

271(1)(c), the Co-ordinate Bench of the Tribunal in the case of Kanhaiyalal D.

Jain Vs. ACIT, in ITA No.1201 to 1205/PN/2014 decided on 30.11.2016 has

held as under:

“26.Where concealment of income and furnishing of inaccurate particulars of income are two different connotations, then as per provisions of the Act, the satisfaction has to be recorded by the Assessing Officer before initiating penalty proceedings as to under which limb the case of assessee falls. In the present set of facts, the satisfaction as recorded by the Assessing Officer which is evident from the assessment order itself does not establish the case of Revenue against the assessee that it is liable for levy of penalty for concealment under which limb i.e. for concealment of income or for furnishing of inaccurate particulars of income. The notice issued under section 274 of the Act by the Assessing Officer also does not show cause the assessee as to make him aware of exact charge levied against him. In the absence of same, it causes prejudice to the right of reasonable opportunity to be allowed to the assessee before levy of penalty under section 271(1)(c) of the Act. Consequently, penalty notice issued in the present case suffers from infirmities i.e. lack of satisfaction and lack of notice being issued in making the assessee aware of exact-charge against him, hence the same is quashed. The penalty proceedings completed pursuant to such notice are vitiated and the same are held to be invalid.”

the penalty order is not sustainable and is liable to be quashed. We direct

accordingly. Thus, additional ground raised in the appeal by assessee is

allowed.

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Order pronounced on Friday, the 22nd day of June, 2018

Sd/- Sd/- (डी. क�णाकरा राव/D. KARUNAKARA RAO) (�वकास अव�थी /VIKAS AWASTHY) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 22nd June, 2018. SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeals)-4, Pune. 4. The Pr. CIT-3, Pune. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy //

आदेशानुसार / BY ORDER,

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