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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 :
This is the appeal filed by the Assessee against the order of CIT(A)-1, Pune, dated 04-02-2016 for the Assessment year 2011-12.
Grounds raised by the assessee are as under : “(Without prejudice to each other) 1. On the facts and circumstances of the case and in law the penalty levied under section 271(1)(c) of Rs. 1,67,08,400/- is contrary to the provisions of law and judicial precedents relied upon before CIT(A), Pune. The penalty order be quashed and set-aside. 2. On the facts and circumstances of the case and in law the penalty levied as a result of the penalty proceedings are not according to law. Since the explanation was submitted complying the provisions of Cl. (A) of Explanation 1 to s. 271(1)(c) of the Act was not declared by the A.O. as 'False'. In the circumstances the Ld. CIT(A) was not justified in confirming the penalty levied by the A.O. The penalty levied be quashed.
On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the levy of penalty under section 271(1)(c)of the Act which in fact has been levied on purchases surrendered and declared in the Return. That resultantly having accepted the sales therefrom amounts to levy of penalty on the income included in the form of Gross Sales. The penalty be quashed. 4. On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the levy of penalty under section 271(1)(c) of the Act when income returned and assessed income was the same. The taxes thereon, were immediately paid. No penalty is leviable. The penalty be quashed. 5. The appellant craves to leave, add/amend or alter any of the above grounds of appeal.”
Briefly stated relevant facts of the case are that the assessee is a
company and engaged in the business of operate, manage, control
utility systems. Assessee filed the return of income on 30-09-2011
declaring total income of Rs.10,32,79,380/-. Based on the information
from Sales Tax Department, AO noticed that the Chetas Control
Systems Pvt., a group concern of the assessee was listed as one of the
Hawala dealers. Survey action u/s.133A of the Act was conducted in
the business premises of the assessee. Statement of Mr. Mangesh S.
Deshmukh, Director of the assessee company was recorded. Search
resulted in disclosure of the non-genuine purchases amounting to
Rs.6,74,12,118/-. Assessee during the survey action also accepted that
an amount of Rs.5,03,00,000/- alleged to have been purchased from
M/s.Kakade Infrastructure Pvt. Ltd. Considering the absence of any
supporting documents, assessee offered the same as additional income
by filing the return of income in response to notice u/s.148 of the Act.
Eventually, AO determined the income at Rs.15,35,79,380/-. AO also
initiated penalty proceedings u/s.271(1)(c) of the Act and levied penalty
of Rs.1,67,08,400/-. CIT(A) confirmed the penalty levied by the AO
attributing the same to ‘concealment’ only. Aggrieved with such order
of CIT(A), the assessee is in appeal before us with the grounds extracted
above.
Before us, at the outset, deviating from the grounds, Ld Counsel
for the assessee raised the legal issue relating to recording of
satisfaction by the AO. He submitted that this is a case where penalty
is imposed on the assessee on account of alleged bogus purchases. AO
initiated the penalty proceedings by stating that ‘the assessee has
concealed the particulars of its income and furnished inaccurate
particulars of its income’. Contents of Para No.6 of the assessment
order are relevant. Further, bringing our attention to the penalty order
dated 26-09-2014, Ld. Counsel for the assessee submitted that penalty
is levied stating that ‘the assessee has furnishing inaccurate
particulars of income’. Therefore, Ld. Counsel for the assessee
submitted initiating the proceedings on both the limbs of clause (c) of
section 271(1) and levying the penalty on one limb of clause (c) is bad in
law and unsustainable. To this proposition, he relied on the decision of
Hon’ble jurisdictional High Court in the case of CIT Vs. Shri Samson
Perinchery dated 05-01-2017 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 submitted that the
AO/CIT(A) is justified in confirming the penalty in the year under
consideration. Therefore, Ld. DR prayed for confirming the orders of the
authorities below.
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. In this connection, we proceed to
extract the relevant lines from Para 6 of the assessment order and Para
No.8.4 of the penalty order and the same read as under :
“Para 6 of the assessment order : 6. ……………….. ………………………… Therefore, the purchase expenditure of Rs.5,03,00,000/- for F.Y. 2010-11 relevant to A.Y. 2011-12 is not allowed as expenditure, however, the assessee has filed revised return after notice u/s.148 where purchase expenditure of Rs.5,03,00,000/- has been added back, thus no separate addition is made in computation. Further, the assessee has concealed particulars of its income and furnished inaccurate particulars of its income. Penalty proceedings under section 271(1)(c) of the Act are being initiated separately.” Para 8.4 of the penalty order : 8.4. In view of the above facts it is held that assessee has furnished inaccurate particulars of income within the meaning of section 271(1)(c) of the Act only with a view to avoid tax and has committed default in view of provisions of section 271(1)(c) and explanation thereof, hence rendering it liable for penalty.”
From the above, it is clear that the AO initiated the penalty
proceedings by stating that ‘the assessee has concealed the
particulars of its income and furnished inaccurate particulars of
its income’ and levied the same stating that ‘the assessee has
furnishing inaccurate particulars of 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. Initiation of penalty proceedings is made
for both the limbs and the penalty was levied for one limb of clause
(c) of the said section. 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
and confirmed by the CIT(A) is unsustainable on technical grounds.
Further, 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). Accordingly,
the legal issue raised by the Ld. Counsel for the assessee is allowed.
Considering the same, we find adjudication of other grounds
raised by the assessee becomes an academic exercise. Therefore, the
said grounds are dismissed as such.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on this 16th day of April,
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 : 16th April, 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)-1, Pune 4. CIT-1, 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