RAJARAM JAISINGH KATE,PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX,

आदेश आदेश / ORDER आदेश आदेश

PER D. KARUNAKARA RAO, AM :

This appeal is filed by the assessee against the order of CIT(A)-3, Pune, dated 21-12-2015 for the Assessment Year 2011-12.

variance with the Original Return then it can be held that the Appellant has furnished inaccurate particulars of income. 4. The Appellant craves leave to add, alter or amend any of the Grounds of the Appeal on before the Appeal”.

nature and the same are extracted here as under :

“1. The appellant submits that the penalty order passed u/s.271(1)(c) be declared null and void since there is no proper satisfaction recorded by the AO in the Assessment Order. 2. The appellant further submits that the notice issued u/s.274 r.w.s. 271(1)(c) is also bad in law and accordingly, the penalty levied may kindly be deleted.”

individual. Assessee filed the return of income on 26-03-2013 declaring

total income of Rs.62,250/-. During the scrutiny assessment, AO

noticed that during the year under consideration assessee sold

agricultural land admeasuring 80R at S.No.24, Pimple Saudagar which

was co-owned by him along with his family members for a sum of Rs.3

Crore. Assessee also has income from other sources. Assessee was

asked to furnish the complete details viz, extract of bank accounts,

source of cash deposits etc. of the said land transaction. In response,

assessee submitted that details and stated that he is one of the co-

owner of the property sold by him and he received Rs.1.40 crore as his

share of consideration. Assessee claimed deduction of Rs.1.10 crores

u/s.54B(1) of the Act on account of investment in agricultural land. In

support, assessee also furnished copy of sale deed. At the end of the

assessment proceedings u/s.143(3) of the Act, AO determined the

assessed income at Rs.1,56,34,710 making couple of additions, i.e. on

account of income from long term capital gains at Rs.1,05,72,458/- and

income from other sources at Rs.50,00,000/-. Penalty proceedings also

initiated for concealment/furnishing inaccurate particulars of income

and a penalty of Rs.35,91,782/- has been levied on the assessee.

submissions vide letters dated 19-11-2015 & 04-12-2015 and relied on

various decisions. The said submissions of the assessee are

incorporated in Para No.3.1 of the order of CIT(A). In the absence of

producing any evidence regarding the deposit of Rs.50,00,000/- the

CIT(A) upheld the action of the AO. However, with regard to income

from long term capital gains, the CIT(A) after going through the sale

agreement and the details of payments through cheques directed the

AO to delete the addition made by the AO on this issue. Contents of

Para No.3.3 (Pages 20 and 21) are relevant.

There is no appeal by the Revenue on the deletion of addition by

the CIT(A) on account of income from long term capital gains.

addition of Rs.50 lakhs, the assessee is in appeal before us.

the additional grounds, submitted that there is ambiguity in the mind of

AO in recording the satisfaction while initiating and levying the penalty.

Referring to Para No.7 of the assessment order, he mentioned that the

AO initiated the penalty proceedings stating that “Penalty proceedings

are initiated for concealment/furnishing inaccurate particulars of income”.

Further, referring to the Para No.9 of the penalty order, dated 19-09-

2014, Ld. Counsel submitted that penalty is levied stating that “the

assessee has furnished inaccurate particulars of his income and thereby

concealed the income”. He relied on various decisions of Pune Bench of

the Tribunal delivered in the context of recording of satisfaction by the

AO while initiating and levying the penalty orders u/s.271(1)(c) of the

Act and prayed for quashing the penalty order.

is justified in levying the penalty in the assessment year under

consideration. Therefore, Ld. DR prayed for confirming the order of the

AO.

assessee by way of additional grounds 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. On going

through the orders of the Revenue on this penalty issue, we find it is a

clear case that the AO initiated the penalty proceedings for the offence

stating that “Penalty proceedings are initiated for

concealment/furnishing inaccurate particulars of income”. and

levied the same stating that “the assessee has furnished inaccurate

particulars of his income and thereby concealed the 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. 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).

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.”

In view of the above discussion, we are of the opinion that the AO

is not justified in levying the penalty. Thus, we hold that the penalty

order dated 19-09-2014 passed by the AO is unsustainable in law.

the adjudication of original grounds raised by the assessee on merits

become an academic exercise. Therefore, the original grounds raised by

the assessee are dismissed.

Order pronounced in the open court on this 25th day of April, 2018.

Sd/- Sd/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक �याियक सद�य �याियक �याियक सद�य सद�य /JUDICIAL MEMBER लेखा सद�य लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य

पुणे Pune; �दनांक Dated : 25th April, 2018 सतीश आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत

अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. 3. The CIT(A)-3, Pune 4. CIT-3, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “B 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