MULAY BROTHERS PVT. LTD.,,AURANGABAD vs. ASSISTANT COMMISSIONER OF INCOME-TAX,,

Shri Sunil Ganoo appearing on behalf of the assessee filed an additional ground of appeal assailing levy of penalty on account of vagueness in the show-cause notice dated 28-12-2010 issued u/s. 274 r.w.s. 271(1)(c) of the Act and mentioning of inconsistent charge for levying penalty while recording satisfaction and at the time of levy of penalty. The ld. AR submitted that the penalty has been levied u/s. 271(1)(c) for claiming interest charges paid on account of late payment of TDS. The Assessing Officer in assessment proceedings has recorded satisfaction for levy of penalty u/s. 271(1)(c) for furnishing of inaccurate particulars of income. Thereafter, notice dated 28-12-2010 u/s. 274 r.w.s. 271(1)(c) was served on the assessee wherein both the limbs of section 271(1)(c) i.e. concealed the particulars of income or furnished inaccurate particulars of income were mentioned. Whereas in the order levying penalty u/s. 271(1)(c), the penalty has been levied for concealment of particulars of income. The manner in which penalty has been levied clearly shows that there was ambiguity in the mind of Assessing Officer about the charge on which penalty is to be levied. The ambiguity is reflected in the notice and the order levying penalty. The ld. AR submitted that where there is ambiguity in the mind of Assessing Officer with respect to charge for levying penalty, the order levying penalty is not sustainable in the eye of law. To support his contentions the ld. AR placed reliance on the decision of Hon’ble Bombay High Court in the case of Commissioner of Income Tax Vs. Samson Perinchery reported as 392 ITR 4.

On the other hand Dr. Vivek Aggarwal representing the Department vehemently defended the order of Commissioner of Income Tax (Appeals) in confirming the levy of penalty. The ld. DR submitted that the assessee has deliberately claimed interest on delayed payment of TDS amounting to Rs.34,11,198/-. The ld. DR pointed that in para 5 of the penalty order, the Assessing Officer has specifically mentioned that penalty is levied for furnishing inaccurate particulars of income. The ld. DR submitted that there is no particular format for recording satisfaction for levy of penalty. On merits, the ld. DR contended that the assessee has deliberately claimed interest on late payment of TDS. The assessee admitted his mistake during assessment proceedings. Under such circumstances penalty has been rightly levied by the Assessing Officer on wrong claim by assessee. The ld. DR to support his submissions placed reliance on the following case laws :

We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. We have also considered the decisions on which the rival sides have placed reliance in support of their contentions. A perusal of assessment order shows that while recording satisfaction for levy of penalty u/s. 271(1)(c) of the Act, the Assessing Officer has recorded that penalty proceedings are initiated for furnishing of inaccurate particulars of income. The relevant extract of the satisfaction recorded by the Assessing Officer in assessment order reads as under : “Penalty proceedings u/s. 271(1)(c) of the Act are separately initiated for furnishing of inaccurate particulars of income.”

We further observe that in para 5 of penalty order the Assessing Officer has again mentioned that the assessee has furnished inaccurate

From the perusal of penalty order it is evident that the Assessing Officer is not clear in his mind as to under which limb of section 271(1)(c) penalty is to be levied. Whether it is a case of concealment of income or furnishing inaccurate particulars of income. In para 4 of the order the Assessing Officer referred to the expression “particulars have been concealed”, whereas in para 5 the Assessing Officer has observed “the assessee has furnished inaccurate particulars of income”. Both these expressions carry different connotations.

The Hon’ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Samson Perinchery (supra) under similar circumstances where both the expressions were used by Assessing Officer for levy of penalty has held the penalty order bad in law. The relevant extract of the order of Hon’ble High Court reads as under : “6. The above submission on the part of the Revenue is in the face of the decision of the Supreme Court in Ashok Pai v/s. CIT 292 ITR 11 [relied upon in Manjunath Cotton & Ginning Factory (supra)] – wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act, carry different meanings/ connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/ permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice.”

In the present case, as has been pointed earlier the satisfaction has been recorded for initiating penalty on one charge of section 271(1)(c), whereas, penalty has been levied on other charge of section 271(1)(c). The manner in which penalty has been levied falls short of legal requirement as has been enunciated by the Hon’ble Jurisdictional High Court. Accordingly, the additional ground raised in the appeal is allowed.

In the result, the appeal of assessee is allowed.