Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI D.KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
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.
Assessee raised the following grounds of appeal : “1. The Ld.CIT(A) has erred in confirming the penalty on the amount of Rs.50 lacs deposited by the appellant in his bank a/cs. without appreciating & considering the practical inability of the Appellant which was beyond his control. 2. The Ld.CIT(A) has erred by not considering the fact that, nothing was unearthed by the Assessing Officer but the amount of Rs.50 lacs was offered as income by the Appellant suo moto and before the Assessing Officer could find out, the Appellant paid all taxes & interest. 3. The Ld.CIT(A) have erred in holding the Ground of levying penalty being furnishing of inaccurate particulars of income to be considered with reference to the Original Return of Income as any entries found had
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”.
Assessee also raised the additional grounds which are legal in
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.”
Briefly stated relevant facts of the case are that the assessee is an
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.
In the First Appellate proceedings, assessee submitted elaborate
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.
Aggrieved with the order of CIT(A) confirming the penalty on the
addition of Rs.50 lakhs, the assessee is in appeal before us.
Before us, at the outset, Ld Counsel for the assessee referring to
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.
On the other hand, Ld. DR for the Revenue submitted that the AO
is justified in levying the penalty in the assessment year under
consideration. Therefore, Ld. DR prayed for confirming the order of the
AO.
We heard both the parties on this legal issue raised by the
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).
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.”
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.
Since we allow the additional grounds in favour of the assessee,
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.
In the result, appeal of the assessee is partly allowed.
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