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Before: Shri Bhavnesh Saini & Shri L.P. Sahu
ORDER Per L.P. Sahu, A.M.:
This is an appeal filed by the assessee against the order of ld. CIT(A)-XII, New Delhi dated 06.06.2012 for the assessment year 2007-08 on the following grounds :
“1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (CIT(A) is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming
ITA No. 4896/Del./2012 2 penalty of Rs.24,40,094/- levied under Section 271(1)(c)of the Act.
3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming penalty u/s 271(1)(c) of the Act on the following additions and disallowances made by the A.O. S. No. Particulars Amount-Rs. (i) Addition made under section 41(1) on 66,83,450 account of unconfirmed liabilities Tii) Addition on account of sundry creditor, 1,75,000 Sagar Kakkar (iii) Addition on account of loan adjusted in 9,98,014 the ledger of Saraswati Printer (iv) Disallowance under Section 40A(3) 40,283
4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in ignoring the contention of the assessee that the assessee has disclosed all the facts and as such it is neither a case of concealment of income nor furnishing of inaccurate particulars.
5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in the order passed by Id CIT(A) is bad as CIT(A) has not given any finding on merit and disposed of the appeal in a summary manner without adjudicating the grounds raised
by the appellant.
6. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the penalty in respect of addition of 66,83,450/- made under section 41(1) in respect of creditors ignoring the fact that these amounts were due to the creditors and failure to get confirmation was on account of non payment to the creditors.
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7. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming penalty in respect or Rs. 1,75,000/- on account of liability in the name of Sagar Kakkar despite the fact that AO himself had initiated the investigation & made the addition despite taking the same to a logical end.
On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in ignoring the fact that the penalty proceedings are independent of the assessment proceedings as such no penalty u/s 271(1)(c) is leviable in these cases.”
The brief facts of the case are that the assessment of the appellant was completed u/s. 143(3) of the IT Act on 23.12.2009 at a loss of Rs.(-) 28,26,655/- as against loss declared by the assessee at Rs. (-) 1,07,72,552/-, thereby making certain additions, as enumerated in the assessment order dated 23.12.2009. The assessment order was challenged by appellant in appeal before the ld. CIT(A) who after considering the submissions of the assessee and the facts & circumstances of the case, sustained the additions as mentioned hereinabove in the table given in grounds of this appeal. The AO, on the basis of the additions sustained by ld. CIT(A), initiated penalty proceedings u/s. 271(1)(c) of the IT Act and after considering the replies of appellant given in pursuance to the penalty notice, imposed a ITA No. 4896/Del./2012 4 minimum penalty of Rs.24,40,094/- vide order dated 10.12.2010. Being dissatisfied, the appellant carried the penalty matter in appeal before the ld. CIT(A), who after considering the detailed submissions of the assessee, confirmed the penalty imposed by AO vide impugned order, aggrieved by which the appellant is in present appeal before the Tribunal.
At the outset, laying emphasis on ground No. 1, the ld. AR of the assessee submitted that the initiation of penalty proceedings are bad in law ab initio for the reason that the Assessing Officer has failed to specify either in the notice or in penalty order or in satisfaction note as to for which limb of section 271(1)(c), the penalty proceedings have been initiated – whether for concealment of particulars of income or for furnishing inaccurate particulars of such income. Therefore, the penalty imposed is liable to be quashed on this legal aspect in view of the decisions rendered by Hon’ble Karnataka High Court in the case of CIT vs. M/s. Manjunatha Cotton and Ginning Factor & Ors., 2013(7) TMI 620 and in CIT vs. SSA’s Emerald Meadows, (2015) (11) TMI 1620.
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On merits, the ld. AR assailed the penalty order on the following written submissions : “Sundry expenses not paid added u/s 41 The AO in his order u/s 143(3) has dealt the same at Page 2 of his order. Just because the expenses incurred during the year have remained unpaid at the end of the year, the AO added the same invoking the provisions of Section 41 of the Act. The assessee has very clearly submitted before the AO that since the business of assessee has been closed and payments could not be made, these parties did not confirm the balances. During the penalty proceedings in his reply dated 30.11.2010 (PB Pg. 16), the assessee has submitted that out of these six parties, partial payment to two of the parties have been made in the subsequent year. One of the parties, i.e. Usha International has adjusted the amount as advance for the booking of the show in the subsequent year and one of the parties has filed the suit for recovery against the assessee. All the documents pertaining to the said submission including the ledger accounts of the relevant year and the succeeding year were filed before the A.O. (PB Pg. 22-40). In view of these facts, it is quite clear that the amounts are still payable, liabilities are existing, no addition u/s 41 can be made, more so no penalty u/s 271(1)(c) can be levied on such addition. The assessee has made complete disclosure. The AO has picked all facts and figures from the documents submitted by the assessee only this is not a case of concealment or furnishing of inaccurate particulars. Even the AO has not doubted the genuineness of expenses. He has made addition invoking the provisions of Section 41. Addition made on account of a deeming provision does not lead to levy of penalty for concealment of filing of inaccurate particulars. Liability on account of Bitex Fashion Show The AO has dealt the same on Pg 2 last para of his order u/s 143(3). The AO in order to confirm the expenses, sent the notice
ITA No. 4896/Del./2012 6 u/s 133(6), which got duly served. Just because the reply was not received, the AO made the disallowance. The addition so made is not sustainable in view of the judgment of CIT VS. Orrissa Corporation (P) Ltd. 159 ITR 78. However, during the penalty proceedings, in its letter dated 30.11.2010 (PB Pg. 16), made a submission before the AO that the bill so raised by the said person was duly paid during the next financial year. Evidences are at paper book Pages 35-36. In view of the above facts, no penalty u/s 271(1)(c) can be levied. The assessee has made complete disclosure, the AO got all the facts and figures from the documents filed by the assessee only. In view of the above facts that payment has been made in the next year, the expenses cannot be said to be bogus. It was also just a claim which was disallowed by the assessee, penalty u/s271(1)(c) cannot be levied. Reliance Petro Products Ltd vs. CIT 322 ITR 158 (SC) Addition on account of loan adjusted The AO made addition u/s 68 of the Act at page 3 of his order u/s 143(3) of the Act. The penalty has been levied only on addition made as the AO not getting satisfied by the same. Penalty u/s 271(1)(c) cannot be levied on an addition made under section 68 of the Act, in view of the fact that there is no conclusive finding that the credit so appearing is not genuine. Expenses incurred in cash under section 40A(3) The AO made addition of an amount of Rs.40,283 invoking the provisions of Section 40A(3),m being 20% of the expenses incurred in cash, on account of Tour and Travels and Printing & Stationery. The expenses are not held to be not genuine. Section 40A(3) is just a deeming provision.
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All facts and figures are disclosed by the assessee. There is no concealment or furnishing of inaccurate particulars. Penalty cannot be levied on addition made invoking a deeming provision.”
The ld. DR, on the other hand, relied on the orders of the authorities below and urged for sustenance of penalty imposed by the lower authorities.
We have considered the rival submissions and have gone through entire material on record and we find that the entire penalty proceedings initiated in the instant case are vitiated as the notice issued is not in accordance with law, inasmuch as, the said notice nowhere specified whether the proceedings were being initiated for the reason of concealment of particulars of income or on account of furnishing of inaccurate particulars thereof. Even the satisfaction note made in the assessment order or the penalty order also does not indicate whether it was a case of concealment of income or furnishing of inaccurate particulars of income. Therefore, laying our hands on the decisions of Gujrat High Court in the case of Manu Engineering, 122 ITR 306 and Delhi High Court in Virgo Marketing, 171 Taxman 156 where it has been held that levy of penalty has to be clear as to the limb
ITA No. 4896/Del./2012 8 for which it is levied and the position being unclear penalty is not sustainable, we are of the considered opinion that the penalty imposed in the instance case is void ab initio. Similar view has been taken by Hon’ble Karnataka High Court in Manjunatha’s case (supra). We, therefore, cancel the penalty imposed u/s. 271(1)(c) of the Act on this legal aspect itself and hence, we need not to enter into other grounds or reasons for penalty and their explanations extended by the assessee on merits.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 12.04.2017.