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Before: SHRI H.S. SIDHU & SHRI O.P. KANT
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)-IV, New Delhi dated 21.10.2013 pertaining to assessment year 2006-07.
The grounds of appeal raised in the assessee’s appeal read as under:-
“1. That the order passed by the CIT(A) under the facts and circumstances of the case is not correct in law as the order passed by the AO was bad in law and was liable to be annulled.
2. That the Ld. CIT(A) under the facts and circumstances of the case was not correct in law in sustaining the penalty under section 271(1)(c) of the I.T. Act, 1961 imposed by the AO.
That the appellant craves to add, alter, amend, and withdraw any of the foregoing grounds at the time of hearing.”
3. The brief facts of the case are that the assessee is a property dealer in real estate and has done some business with M/s Nitishree Group of cases and related concerns. A survey operation u/s 133 of the Act was carried out at the business premises of the assessee on 17.2.2006. During the survey, some documents were impounded on the basis of which the assessee voluntarily offered additional income of Rs. 40,00,000/- as per statements recorded on oath on 17.02.2006. However, in the return of income filed, the assessee has shown Rs. 11,49,500/- only as income on sale of plots as well as miscellaneous income. In the assessment, the AO made addition of Rs. 28,50,500/-. The assessee filed appeal before the CIT (Appeals). The ld. CIT(A) vide his order dated 3.4.2008 has confirmed the addition of Rs. 26,50,500/- after allowing a relief of Rs 2,00,000/-. On receipt of the C1T(A)'s order, the AO issued show cause notice to the assessee and after considering the reply submitted by him levied a penalty of Rs. 7,95,150/- which was 100% of tax sought to be evaded. Later on the assessee filed application u/s 154 stating that the CIT (A) has confirmed addition of Rs. 26,50,500/- and penalty on that amount comes to Rs. 7,45,150/-.
Accordingly, the AO modified his order on 5.2.2010 and reduced the penalty to Rs. 7,45,150/-.
Against the Penalty order the Assessee appealed before the ld. CIT(A), who vide impugned order dated 21.10.2013 has dismissed the appeal of the assessee and confirmed penalty in dispute.
At the time of hearing, Ld. Counsel of the Assessee has stated that the penalty proceedings ought to fail, that in terms of the satisfaction note recorded in the assessment order, the penalty was initiated for furnishing of inaccurate particulars of income/concealment of income. Also the notice 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 Assessment order and copy of Notice was filed before the Bench.
She further stated that entire penalty proceedings stand vitiated as the notice itself is not in accordance with law and in order to support her contention, she 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, she 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 assessment order wherein the AO has recorded his satisfaction on the page 2, 2nd para viz. “I am satisfied that it is a fit case for initiation of penalty proceedings u/s. 271(1)(c) of the Act for furnishing inaccurate particulars of income/concealment of income.” We have also perused the notice dated 31.12.2007 issued by the AO for initiating the penalty and directing the assessee to appear before him at ---------AM/PM on --------200------ and issued a Show Cause to the assessee stating therein that why an order imposing the penalty of amount should not be made u/s. 271(1)(c) of the I.T. Act, 1961. After perusing the notice dated 31.12.2007 issued by the AO to the assessee, we are of the view that the AO has initiated the penalty for furnishing inaccurate particulars of income/concealment of income, but in the penalty order dated 06.11.2009 he has stated that he is satisfied that the assessee has furnished the inaccurate particulars of income.
7.1 However, the Ld. CIT(A) has given clear finding regarding the furnishing of inaccurate particulars. For the sake of convenience, the relevant para no. 5.3.1 of the impugned order passed by the Ld. CIT(A) is reproduced as under:-
“5.3.1 The above findings of the Ld. CIT(A) clearly establishes that the appellant has concealed the income of Rs. 26,50,500/- and did not declare in the return of income inspite of admitting a disclosure of Rs. 40,00,000/- during survey. Thus, the appellant has furnished inaccurate particulars of his income. The facts of the case clearly reveal that the appellant tried to evade payment of taxes by furnishing inaccurate particulars of income.
Therefore, I hold that the AO was fully justified in levying the penalty u/s. 271(1)(c) of the Act. The penalty levied by the AO is upheld. This ground of appeal is rejected.”
8. Keeping in view of the aforesaid finding of the Ld. CIT(A), we are of the considered view that the AO has passed the assessment order wherein the AO has recorded his satisfaction on the page 2, 2nd para viz. “I am satisfied that it is a fit case for initiation of penalty proceedings u/s. 271(1)(c) of the Act for furnishing inaccurate particulars of income/concealment of income.” Further the AO vide his Notice dated 31.12.2007 for initiating the penalty and directed the assessee to appear before him at ---------AM/PM on --------200------ and issued a Show Cause to the assessee stating therein that why an order imposing the penalty of amount should not be made u/s. 271(1)(c) of the I.T. Act, 1961. After perusing the notice dated 31.12.2007 issued by the AO to the assessee, we are of the view that the AO has initiated the penalty for furnishing inaccurate particulars of income/concealment of income, but in the penalty order dated 06.11.2009 he has stated that he is satisfied that the assessee has furnished the inaccurate particulars of income. In our view the penalty in dispute is not sustainable in the eyes of law, because the AO has not recorded any clear finding whether the assessee was guilty of concealment of income or furnishing of inaccurate particulars of income. Secondly, the notice u/s. 271(1)(c) has been issued to the assessee levying the penalty for furnishing of inaccurate particulars of income/concealment of income, whereas the penalty in dispute has been levied by the AO on account of furnishing of inaccurate particulars. In our view 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.”
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 26/05/2017.