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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
PER D. KARUNAKARA RAO, AM :
This appeal is filed by the assessee against the order of CIT(A)-1, Nashik, dated 20-03-2015 for the Assessment Year 2004-05.
Grounds raised by the assessee read as under : “1. On the basis of facts and in the circumstances of the case and as per law, the order passed by CIT(A)-1, Nashik, confirming the levy of penalty on the addition of Rs.5,00,000/- be set aside as the principles of natural justice are violated by the CIT(A)-1, Nashik. 2. On the basis of facts and in the circumstances of the case and as per law, the CIT(A)-1, Nashik, is not justified in confirming penalty u/s.271(1)(c) of the Act on the addition of Rs.5,00,000/- on account of unexplained investments u/s.69 of the Act confirmed by him. 3. The Appellant craves for addition to, deletion, alteration, modification, change any of the above grounds of appeal.”
Briefly stated relevant facts are that assessee is an individual and is engaged in the business of Architect, Builders and Developers. Assessee
filed the return of income on 23-03-2005 declaring total income of
Rs.4,65,043/-. During the course of search action u/s.132 of the Act at
the premises of Shri Chandulal Sadhuram Khemani, certain
documents/books of accounts pertaining to the assessee were seized. It
was found that an immovable property was sold for Rs.30,34,000/- and
sale deed was entered into between Zonzden F. Lobo, Shri Arun Chachad &
Shri J.P. Jadhav (i.e.assessee who was one of the confirming party). From
the bank account of the assessee maintained with Janlaxmi Co-op Bank
bearing A/c.No.200550, Samarth Nagar, Branch, it was noticed that there
is credit of Rs.10 lakhs in the cash book of J.P. Builders and Developers.
The AO was not convinced with the explanation given by the assessee. At
the end of the assessment, he made total addition of Rs.11 lakhs u/s.69 of
the Act apart from others. AO determined the total income of the assessee
at Rs.21,12,250/-. Eventually, AO also levied penalty of Rs.3,62,999/-
u/s.271(1)(c) of the Act for concealing the particulars of income.
In the First Appellate proceedings, the CIT(A) dismissed the appeal for
non compliance to various notices. Matters was carried before the
Tribunal, which vide order dated 09-05-2013, were remanded the issue
back to the file of CIT(A) for fresh adjudication. In the first round, the CIT(A)
vide order dated 20-03-2015 deleted addition of Rs.6 lakhs and confirmed
the penalty on the balance amount of Rs.5 lakhs by observing as under :
“In view of the facts given above, it is established that the appellant concealed the true particulars of income and furnished inaccurate particulars of income in respect of Rs.5,00,000/- that he had introduced in cash in the books of account of M/s. J.P. Builders and Developers. The appellant, with a malafide intention to evade tax furnished concocted set of documents in regard to his transactions with Shri Suryavanshi. The appellant has, therefore, concealed his income and evaded tax thereon. In view of the above concealment penalty u/s.271(1)(c) is confirmed on Rs.5,00,000/-. The penalty on the addition of Rs.6,00,000/- is deleted. Appellant’s ground of appeal is partly allowed.
Aggrieved with the order of CIT(A), the assessee is in appeal before us
with the grounds extracted above.
Before us, Ld. Counsel for the assessee submitted that this is a case
where penalty is required to be deleted in view 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. Bringing
our attention to the contents of Para 8 of the assessment order, Ld.
Counsel for the assessee submitted that this is a case where addition of
Rs.11 lakhs was made originally u/s.69 of the Act. AO initiated the penalty
proceedings stating that the “penalty is initiated for ‘concealing the
particulars of income’. Further, bringing our attention to Para No.7 of the
penalty order dt 15-03-2013, Ld. Counsel for the assessee submitted that
penalty is levied both for ‘furnishing inaccurate particulars of income’ as well
as ‘concealing his particulars of income’.
In reply to this legal issue, Ld. DR for the Revenue submitted that the
AO is justified in levying the penalty as the offence attracts both the limbs
of clause (c) of section 271(1) of the Act.
We heard both the parties on this legal issue and perused the orders
of the Revenue. For the sake of completeness of this order, we proceed to
extract the relevant lines from Para 8 of the assessment order and Para
No.7 of the penalty order and the same reads as under :
“Para 8 of the assessment order : 8. …… The penalty proceedings u/s.271(1)(c) of the IT Act, is initiated for concealing the particulars of income on this point.”
Para 7 of the penalty order : 7. In view of the above facts and circumstances of the case, I am of the considered opinion that it is a fit case for levy of penalty in terms of Explanation 1 to section 271(1)(c) of the Income Tax Act, 1961 for furnishing inaccurate particulars of income. I have, therefore, no alternative but to levy the penalty for concealing his particulars of income. I, therefore, direct the assessee to pay by way of penalty u/s.271(1)(c) at Rs.3,62,999/- ….”
From the above, it is clear that the AO initiated the penalty
proceedings for the offence of ‘concealing the particulars of income’ and
levied the same for both “furnishing inaccurate particulars of income”
and concealed the 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. Initiation of penalty
proceedings in this case was done in a casual manner and the penalty was
levied for both the limbs. Such penalty order is unsustainable in law
legally. Such view was already taken in a number of cases. Said manner of
initiating and levying of penalty without making reference to the specific
limb of clause (c) is unsustained. AO is under obligation to specifying the
same and 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. 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 grounds raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced on this 26th day of March, 2018.
Sd/- Sd/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 26th March, 2018. Satish
आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत
अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-1, Nashik 3. आयकर आयु� / The CIT-1, Nashik 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “A” / DR ‘A’, 5. ITAT, Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार
स�यािपत �ित //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune