SHETH CORP P.LTD,MUMBAI vs. ASST CIT CEN CIR 4(2), MUMBAI

Briefly the facts are the assessee, a company, filed its return of income originally on 27.09.2012 declaring loss of Rs.5,44,79,722. Subsequently, a search and seizure operation u/s 132 of the Act was conducted on the assessee group on 04.10.2012. Post search, the M/s.Sheth Corp Pvt.Ltd. assessee on 09.02.2013 filed a revised return of income declaring loss of Rs.5,29,62,977. During the search / survey, certain documents were impounded which revealed cash payment made by the assessee to the tune of Rs.6,40,000. During the assessment proceedings, the Assessing Officer after calling upon the assessee to explain the source of such cash payment found the explanation of the assessee unsatisfactory, hence, made addition of the said amount u/s 69C of the Act. On the basis of the addition so made, the Assessing Officer initiated proceedings for imposition of penalty u/s 271(1)(c) of the Act and ultimately imposed penalty of Rs.1,97,760 under the said provision. The assessee challenged the imposition of penalty before the CIT(A). However, the learned first appellate authority upheld the imposition of penalty by holding that the assessee has furnished inaccurate particulars of income and has also concealed the particulars of income.

The learned AR submitted, in the assessment order the Assessing Officer has not recorded any satisfaction about the specific limb of section 271(1)(c) for violation of which he intended to impose penalty. He submitted even in the show cause notice issued u/s 274 r.w.s. 271 of the Act, the Assessing Officer has not specified the specific limb of section 271(1)(c) for which he intended to impose penalty. He submitted, in the penalty order also the Assessing Officer has not mentioned the exact charge for which he has imposed penalty u/s 271(1)(c) of the Act. He, therefore, submitted, imposition of penalty is M/s.Sheth Corp Pvt.Ltd. improper. In support of his contention, the learned AR relied upon the following decisions :-

(i) The ITAT Mumbai Benches in the case of Mrs.Indrani Sunil Pillai v. ACIT [ITA No.1339/Mum/2016, order dated 19.01.2018] (ii) The Hon’ble High Court of Judicature at Hyderabad for the State of Telungana and the State of Andhra Pradesh in the case of The Principal CIT v. Smt.Baisetty Revathi [ITTA No.684 of 2016 – order dated 13.07.2017] (iii) The Hon’ble Supreme Court in the case of CIT v. M/s.SSA’s Emerald Meadows [ITA No.380/2015 – order dated 05.08.2016] (iv) The Hon’ble High Court of Judicature at Bombay in the case of CIT v. Shri Samson Perinchery [ITA No.1154 of 2014 & Ors. – order dated 5th January, 2017]

The learned Departmental Representative relied upon the finding of the Commissioner of Income-tax (Appeals).

We have considered the rival submissions and perused the materials on record. The assessee has raised additional ground on the following legal issues “In the absence of satisfaction of the Assessing Officer regarding the specific charge for which the penalty is to be imposed whether the penalty imposed can be sustained?” Since, the issue raised in the additional ground is a purely legal issue, and can be decided on the basis of facts available on record, we admit the additional ground and proceed to decide it at the outset. It is evident, the basis of imposition of penalty u/s 271(1)(c) of the Act is the addition made of Rs.6,40,000 u/s 69C of the Act. However, while initiating proceedings for imposition of penalty u/s 271(1)(c) of the Act in the M/s.Sheth Corp Pvt.Ltd. assessment order, the Assessing Officer has not recorded any satisfaction whether the assessee has furnished inaccurate particulars of income or concealed particulars of income or both. The Assessing Officer has initiated proceedings for imposition of penalty mentioning as under:-

Even, in the show cause notice issued u/s 274 r.w.s. 271 of the Act on 06.06.2014, which is unsigned and copy of which was placed before us by the learned AR, the Assessing Officer has not specified the specific limb of section 271(1)(c) for the violation of which he proposes to impose penalty by striking off the inappropriate words. Thus, it is a clear case where the Assessing Officer has failed to record any satisfaction whether the assessee has furnished inaccurate particulars of income or concealed the particulars of income as per the mandate of section 271(1)(c) of the Act. In fact, in the penalty order itself the Assessing Officer has not stated whether the penalty imposed is for furnishing inaccurate particulars of income or concealing particulars of income. This fact shows, the Assessing Officer himself was not sure which limb of section 271(1)(c) is attracted. Therefore, in our considered opinion, the imposition of penalty u/s 271(1)(c) of the Act in the facts of the present case is unsustainable in view of the decisions cited before us. Therefore, we delete the penalty imposed u/s 271(1)(c) of the Act.