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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI D.KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
There are two appeals filed by the assessee under consideration against the consolidated order of CIT(A)-12, Pune, dated 26-02-2016 for the Assessment Years 2006-07 & 2007-08. Both the appeals relate to penalty levied u/s.271(1)(c) of the Act and the grounds raised by the assessee are also identical in both the years.
We shall take up the appeal ITA No.1042/PUN/2016 relating to A.Y. 2006-07 first.
Assessee raised the following grounds of appeal. The following Grounds of appeal are taken without prejudice to each other: On facts and in law,
The assessee submits that the penalty order passed u/s. 271(1)(c) was null and void since the Id A.O. had not recorded proper satisfaction as to whether the assessee had concealed his income or furnished inaccurate particulars of income and hence, the same may be declared null and void. 2. The learned CIT(A) erred in confirming levy of penalty of Rs. 6,60,000/- on the ground that the assessee had concealed his income.
The learned CIT(A) erred in not appreciating that the amount of Rs. 22,00,000/- incurred on painting and renovation of Modibaug flat had been considered as perquisite and deemed income in the Appellant's hands in the Return filed u/s. 153A in order to avoid litigation and to buy peace and hence, there was no question of levying penalty in respect of the said amount offered by the appellant. 4. The Id CIT(A) failed to appreciate that the issue regarding the taxability of Rs.22,00,000/- in the hands of the assessee as a perquisite was a debatable one and no penalty could be levied in respect of such an issue on which two opinions were possible and accordingly, the penalty levied should be deleted.
The Appellant craves leave to add to, alter, amend, modify and / or delete any or all of the above Grounds of Appeal.”
Briefly stated relevant facts for the A.Y. 2006-07 are that the
assessee is an individual and Director of M/s. B.G. Shirke Construction
Technology Pvt. Ltd. There was search and seizure action u/s.132 of
the Act at the residential premises of the assessee on 18-12-2008. In
response to notice u/s.153A of the Act, assessee filed the return of
income on 15-09-2009 declaring income of Rs.51,95,580/- as against
the original return of income declaring total income of Rs.26,95,584/-.
Search resulted in seizure of certain loose papers relating to the
expenses incurred on Modibaug flat owned by the assessee. The said
expenses works out to Rs.28,92,356/-. Assessee offered the same for
taxation. The expenses on account of Modibaug flat including
contingency amount was declared by the assessee at Rs.25,00,000/-
during the search action. At the end of the assessment u/s.143(3) of
the Act, r.w.s.153A of the Act, the income of the assessee is accepted at
Rs.51,95,580/-. Penalty proceedings were initiated against the
assessee for concealing the particulars of income and levied penalty of
Rs.6,60,000/-.
Aggrieved with the penalty order passed by the AO, the assessee
challenged the same before the CIT(A). The CIT(A) after considering the
submissions of the assessee upheld the penalty levied by the AO.
Aggrieved with the order of CIT(A) the assessee is in appeal before
us with the grounds extracted above.
Before us, referring to Ground No.1 relating to recording of
satisfaction by the AO, Ld. Counsel for the assessee submitted that the
AO initiated the penalty proceedings on one limb and levied the penalty
on both the limbs of section 271(1) of the Act. Ld. Counsel submitted
that such penalty is not sustainable in law and therefore, prayed for
quashing the penalty order. In support of this legal ground, he relied
on various decisions of Pune Benches of the Tribunal and the judgment
of Hon’ble jurisdictional High Court in the case of CIT Vs. Shri Samson
dated 05-01-2017 Perinchery as well as the judgment of Hon’ble
Karnataka High Court in the case of CIT Vs. Manjunatha Cotton and
Ginning Factory 359 ITR 565.
On the other hand, Ld. DR for the Revenue relied on the orders of
the AO/CIT(A).
We heard both the parties on this legal issue and perused the
orders of the Revenue on the issue of initiation and levy of penalty
u/s.271(1)(c) of the I.T. Act, 1961. We have considered the submissions
made by the Ld. Counsel for the assessee on the issue relating to
recording of satisfaction by the AO and the decisions relied upon by
him. We find the AO vide order dated 31-12-2010 initiated the penalty
proceedings holding as under :
“4.2 . . . . . . . . . . . . . . The assessee has disclosed this income of Rs.22,00,000/- as per the details above, representing modibaug expenses as perquisite. As the assessee had concealed particulars of this income in the original return, penalty proceedings u/s.271(1)(c) of the Income Tax Act are initiated.”
8.1 Further, we find the AO vide penalty order dated 30-06-2011
levied the penalty of Rs.6,60,000/- by holding as under (Para 11) :
“11. With the above discussion, I am satisfied that the assessee has concealed the income or furnished the income or furnished inaccurate particulars of such income and the case of the assessee is a fit case for levy of penalty u/s.271(1)(c) of the I.T. Act, 1961……”
8.2 On going through the orders of the Revenue, we find it is a clear
case that the AO initiated the penalty proceedings for the offence stating
that “the assessee has concealed particulars of his income” and
levied the same stating that the “assessee has concealed the income
or furnished the income or furnished inaccurate particulars of
such income”. Therefore, it is a case where the AO did not have
clarity of thought and AO suffered from ambiguity in his mind with
regard to the applicable limb of clause (c) of section 271(1) of the Act to
the facts of the case. Therefore, we find the penalty order of the AO
falls short of legal requirement on the issue of recording of satisfaction.
Such penalty order is unsustainable in law legally. This view was
already taken by the Pune Bench in a series of cases. The manner of
initiating and levying of penalty without making reference to the specific
limb of clause (c) is unsustained. AO is under obligation to specify the
correct limb at the time of initiation as well as at the time of levy of
penalty. Therefore, the penalty levied by the AO is unsustainable on
technical grounds. This view of ours get strength by the judgment of
Hon’ble jurisdictional High Court in the case of CIT Vs. Shri Samson
Perinchery as well as the judgment of Hon’ble Karnataka High Court in
the case of CIT Vs. Manjunatha Cotton and Ginning Factory (supra).
8.3. Further, we find, in a recent case, the Mumbai Bench of the
Tribunal in the case of Sachin Manohar Deshmukh Vs. ACIT – ITA
No.3767/Mum/2016, dated 23-03-2018 has dealt with an identical
issue and quashed the penalty order of the AO. The operational para
No.12 of the order of the Tribunal is extracted here as under :
“12. We have given a thoughtful consideration to the issue before us, and after deliberating on the facts are of the considered view that now when the A.O after recording his satisfaction had initiated the penalty proceedings in the body of the assessment order for furnishing inaccurate particulars and concealment of income, therefore, putting the assessee to notice and calling upon him to explain as to why penalty may not be imposed on him under Sec. 271(1)(c) for concealment of income or furnishing of inaccurate particulars of income, followed by imposing of penalty under Sec. 271(1)(c) in his hands for „furnishing of inaccurate particulars of income‟, can in no way be construed as having fairly put the assessee to notice as regards the default/defaults for which penalty was sought to be imposed in his hands. We are of the considered view that a failure on the part of the A.O to clearly put the assessee to notice as regards the default/defaults for which penalty under Sec. 271(1)(c) is sought to be to be imposed on him, has to be visited with and accorded the same treatment as in a case where the A.O had failed to strike off the irrelevant default in the ‘Show cause’notice, because, in both the situations the assessee is not informed and rather is left guessing of the default/defaults for which he is being proceeded against for. We thus in the backdrop of our aforesaid observations are of a strong conviction that as the A.O had clearly failed to discharge his statutory obligation of fairly putting the assessee to notice as regards the default/defaults for which he was being proceeded against, therefore, are of the considered view that the penalty under Sec. 271(1)(c) of Rs.12,14,140/- imposed by the A.O in clear violation of the mandate of Sec. 274(1) of the Act, cannot be sustained. We thus not able to persuade ourselves to subscribe to the imposition of penalty by the A.O, therefore, set aside the order of the CIT(A) who had upheld the same. The penalty of Rs.12,14,140/-imposed by the A.O under Sec.271(1)(c) is quashed in terms of our aforesaid observations.”
8.4 In view of the above discussion, we are of the opinion that the
CIT(A) is not justified in upholding the levy of penalty. Thus, we reverse
the order of CIT(A) and direct the AO to delete the penalty. Accordingly,
Ground No.1 relating to legal issue is allowed.
Consequently, adjudication of grounds raised by the assessee on
merits become academic and therefore, the said grounds are dismissed
as such.
In the result, appeal of the assessee is partly allowed.
ITA No. 1043/PUN/2016 A.Yr. 2007-08
Since the facts, issues, decision of the AO/CIT(A), arguments and
counter arguments are same as that of appeal ITA No.1042/PUN/2016
for A.Y. 2006-07, the decision given in the said appeal applies to this
assessment year too. Therefore, with similar reasoning, we direct the
AO to delete the penalty and the grounds raised by the assessee are
partly allowed.
In the result, the appeal of the assessee is partly allowed.
To sum up, both the appeals of the assessee are partly allowed.
Order pronounced in the open court on this 01st day of June, 2018.
Sd/- Sd/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक सद�य �याियक सद�य /JUDICIAL MEMBER लेखा लेखा सद�य सद�य / ACCOUNTANT MEMBER �याियक �याियक सद�य सद�य लेखा लेखा सद�य सद�य
पुणे Pune; �दनांक Dated : 01st June, 2018 सतीश आदेश क� आदेश क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत
अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. 3. The CIT(A)-12, Pune 4. CIT-12, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “A Bench” Pune; 5. गाड� फाईल / Guard file. 6. आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार
स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune