MOHAN N. SHETTY,,RAIGAD vs. DEPUTY COMMISSIONER OF INCOME-TAX, PANVEL CIRCLE,, PANVEL

The appeal was heard along with Stay Application moved by the assessee.

The assessee has raised the following grounds of appeal:- May be read without prejudice to each other. (1) It is urged that the penalty initiated / levied and confirmed is without any judicious satisfaction as to the limb of charges, despite the submission was made thereto the AO, hence, the proceeding is without authority of the law, thus, the penalty levied and confirmed without concurrence to make it bad in law, void ab initio. (2) Ld. CIT(A) is erred to confirm the penalty with a claim of malafide intention merely on assumption and surmises as the appellant accepted the assessment order while brushing aside the contract under dispute placed on record to deal the ground of appeal raised on merit or for that matter bringing on record any contumacious conduct of the appellant. (3) Ld. CIT(A) is erred to confirm the penalty without adjudicating the case made u/s 273B of the Income Tax Act, 1961.

The assessee is aggrieved by the order levying penalty under section 271(1)(c) of the Act in the absence of recording of satisfaction as to which limb of said section has not been satisfied by the assessee and further also in holding the assessee to be liable to levy of penalty in such circumstances. The assessee is also aggrieved by non-striking of in-appropriate portion in the notice issued under section 274 of the Act.

The learned Authorized Representative for the assessee in this regard placed reliance on the ratio laid down by the Hon’ble Bombay High Court in CIT Vs. Shri Samson Perinchery in Income Tax Appeal No.1154 of 2014 with other Income Tax Appeals Nos.953 of 2014, 1097 of 2014 and 1226 of 2014, judgment dated 05.01.2017.

The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of authorities below. The learned Departmental Representative for the Revenue also placed reliance on the Third Member decision of Jaipur Bench of Tribunal in Grass Field Farms & Resorts (P.) Ltd. Vs. DCIT (2016) 159 ITD 31 (Jaipur – Trib.), wherein it was held that where penalty proceedings were initiated for both the limbs and even show cause notice also included both the offences, then the assessee got adequate opportunity to explain both the offences and therefore, there was no illegality in levying penalty with reference to only one offence.

We have heard the rival contentions and perused the record. The issue arising in the present appeal is against levy of penalty under section 271(1)(c) of the Act. In the facts of the case, the assessee had furnished return of income declaring total income of ₹ 3,93,58,480/-. The case of assessee was selected under CASS. The assessee was dealing in purchase of agricultural land. The Assessing Officer noted that the assessee had claimed certain expenses as payable on account of development charges and other development costs totaling ₹ 5,10,460/-. The assessee was asked to explain the same. However, in the absence of obtaining confirmation from the parties,

The assessee is aggrieved by the levy of penalty under section 271(1)(c) of the Act, which was upheld by the CIT(A). The case of assessee before us is that in the absence of recording proper satisfaction by the Assessing Officer while initiating penalty proceedings, both initiation and penalty order levying penalty suffers from infirmity, in view of the proposition laid down by the Hon’ble Bombay High Court in CIT Vs. Shri Samson Perinchery (supra).

The case of Revenue on the other hand is that where the penalty proceedings have been initiated on both the counts and even show cause notice has been issued on both the counts, the Assessing Officer had given proper show cause notice to the assessee and levied penalty on one count i.e.

We find that the decision of the Third Member of Jaipur Bench of Tribunal is dated 11.09.2015. However, the jurisdictional High Court in CIT Vs. Shri Samson Perinchery (supra) vide its judgment dated 05.01.2017 after referring to the decision of the Hon'ble Supreme Court in Ashok Pai Vs. CIT (2007) 292 ITR 11 (SC) and the decision of the Hon’ble High Court of Karnataka in CIT & Anr. Vs. M/s. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar) has held that satisfaction of the Assessing Officer has to be with regard to one of two breaches mentioned under section 271(1)(c) of the Act, for initiation of penalty proceedings, would not warrant / permit penalty being imposed for other breaches. The Revenue in this regard has strongly emphasized that where the Assessing Officer has recorded satisfaction in respect of both the limbs and also has given notice in respect of both the limbs and where penalty has been levied on one of the limbs, then the same merits to be upheld as it does not violate the provisions of the Act. However, we find no merit in the said stand of learned Departmental Representative for the Revenue. Penalty under section 271(1)(c) of the Act can be levied only in respect of either of two limbs i.e. either for concealment of income or furnishing inaccurate particulars of income. The Assessing Officer after making additions in the hands of assessee has to record satisfaction in this regard as to which limb of section 271(1)(c) of the Act has not been satisfied by the assessee and

In view of our decision on merits, the Stay Application moved by the assessee is dismissed.

In the result, the appeal of assessee is allowed and Stay Application is dismissed.