M/S. U.K. JEWELLERS,,PUNE vs. INCOME-TAX OFFICER,,

आदेश / ORDER

PER ANIL CHATURVEDI, AM :

This appeal filed by the assessee is emanating out of the order of 1. Commissioner of Income Tax (A) – 12, Pune dt.24.03.2015 for the assessment year 2010-11.

Assessee is a Partnership firm stated to be engaged in the business of gold ornaments and jewellery. Assessee electronically filed its original return of income for A.Y. 2010-11 on 29.09.2010 declaring

total income as nil. The case was selected for scrutiny and notice u/s

143(2) and 142(1) of the Act dt.08.06.2012 was issued and served on

the assessee. Later, assessment was framed u/s 143(3) of the Act vide

order dt.29.03.2013 and the total taxable income was determined at

Rs.2,97,46,750/- inter-alia by making addition of Rs.3,06,52,888/- on

account of cessation of liability of the credit balance u/s 41(1)(a) of the

Act. On the aforesaid addition, AO vide order dt.27.09.2013 levied

penalty of Rs.91,91,746/- u/s 271(1)(c) of the Act. Aggrieved by the

order of AO, assessee carried the matter before Ld. CIT(A), who vide

order dt.24.03.2015 (in appeal No.PN/CIT(A)-12/ITO Wd-

3(4)/328/2013-14) dismissed the appeal of the assessee. Aggrieved by

the order of Ld.CIT(A), assessee is now in appeal before us and has

raised the following grounds :

“1. On the facts and in the circumstances of the case and in law the CIT (Appeals) has erred in confirming penalty of Rs. 91,91,7461- levied by the Assessing Officer u/s. 271 (1)(c) of the I.T.Act.

2010- 11. Therefore penalty levied U/s 271 (1) (c) of the Act, is unsustainable in law. 4. On the facts and in the circumstances of the case and. in law the CIT (Appeals) has erred in not appreciating that the Assessing Officer has not pointed out as to which inaccurate particulars of income have been furnished by the assessee or as to which particulars of income have been concealed by the assessee. Therefore penalty levied U/s 271 (1)(c) of the Act, is unsustainable in law.”

has raised various grounds but the sole controversy is with respect to

levy of penalty u/s 271(1)(c) of the Act.

order AO with respect to addition of Rs.3,06,52,888/- on account of

cession of liability u/s 41(1) of the Act has recorded that assessee had

furnished inaccurate particulars of income but while passing the

penalty order u/s 271(1)(c) of the Act on 27.09.2013 AO had levied

penalty for concealment of income. He therefore, relying on the

decision of Hon’ble Bombay High Court in the case of CIT Vs. Samson

Perinchery (ITA No.1154 of 2014 order dt.05.01.2017), submitted that

in the absence of proper show cause notice to assessee, penalty u/s

271(1)(c) cannot be levied and therefore urged that penalty levied by AO

be deleted. Ld.D.R. on the other hand, supported the order of lower

authorities.

record. The issue in the present case is with respect to levy of penalty

u/s 271(1)(c) of the Act. In the present case, penalty of Rs.91,91,746/-

u/s 271(1)(c) of the Act has been levied on the addition of

Rs.3,06,52,888/- u/s 41(1) of the Act. The perusal of assessment order

passed u/s 143(3) of the Act reveals that in the assessment order AO

had recorded satisfaction for furnishing of inaccurate particulars of

income. Thereafter, in the penalty order dt.27.09.2013 passed u/s

271(1)(c) of the Act, AO had levied penalty for concealment of income.

Even in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act

dt.28.03.2013 AO has not stated that whether the penalty is for

furnishing of inaccurate particulars of income or for concealing the

particulars of income. It is a settled law that while levying penalty for

furnishing of inaccurate particulars of income and concealment of

income, the AO has to record satisfaction and thereafter come to a

finding in respect of one of the limbs, which is specified under section

271(1)(c) of the Act. The first step is to record satisfaction while

completing the assessment as to whether the assessee had concealed

its income or furnished inaccurate particulars of income. Thereafter,

notice u/s 274 read with Section 271(1)(c) of the Act is to be issued to

the assessee. The Assessing Officer thereafter has to levy penalty

under Section 271(1)(c) of the Act for non-satisfaction of either of the

limbs. While completing the assessment, the Assessing Officer has to

come to a finding as to whether the assessee has concealed its income

or furnished inaccurate particulars of income. The Hon’ble Bombay

High Court in CIT Vs. Shri Samson Perinchery in ITA No.1154 of 2014

with other ITA Nos.953 of 2014, 1097 of 2014 and 1226 of 2014, vide

judgment dated 05.01.2017 held that where initiation of penalty is one

limb and the levy of penalty is on other limb, then in the absence of

proper show cause notice to the assessee, there is no merit in levy of

penalty.

decision of Hon’ble Bombay High Court in the case of Samson

Perinchery (supra), we are of the view that in the present case, the

basic condition for levy of penalty has not been fulfilled and that the

penalty order suffers from non-exercising of jurisdiction power of AO and therefore penalty order cannot be upheld. We accordingly set aside the penalty order passed by AO. Thus, the ground of assessee is allowed.

Order pronounced on 31st day of May, 2018.

Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 31st May, 2018. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to :

आदेशानुसार/ BY ORDER

// True Copy // व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.