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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This appeal is filed by the assessee against the order of CIT(A)-12, Pune, dated 23-02-2016 for the Assessment Year 2010-11.
Assessee raised the following grounds of appeal :
“1. On the basis of facts and the circumstances of the case and as per law, the CIT(A)-12, Pune is not justified in confirming the penalty u/s.271(1)(c) of the Act of Rs.2,500/- of the Act levied by the AO. 2. On the basis of facts and the circumstances of the case and as per law, the CIT(A)-12, Pune is not justified in enhancing the penalty u/s.271(1)(c) of the Act by holding that entire amount of Rs.4,34,768/- declared by the appellant in the return of income filed in response to notice issued u/s.153A of the Act for the year under appeal is concealed income. 3. On the basis of facts and the circumstances of the case and as per law, the CIT(A)-12, Pune is not justified in confirming and enhancing the penalty u/s.271(1)(c) of the Act particularly when the notice issued u/s.274 r.w.s.271(1)(c) of the Act dated 22-03-2013 issued by the A.O. does not specify the specific charge framed against the appellant, i.e. whether the notice was issued for furnishing of inaccurate particulars of income or for concealment of income of for any other reason.
The Appellant craves for addition to deletion, alteration, modification, change any of the grounds.”
Before us, there is none to represent the case of the assessee
before us. On going through the ground No.3 relating to initiation and
levy of penalty without making specific reference to any limb of
Clause (c) of section 271(1) of the Act, Ld. DR submitted that in view
of catena of decisions of the Pune Bench of the Tribunal on this legal
issue, it is appropriate to adjudicate the appeal based on the basis of
information available on record. Of course, the assistance of Ld. DR for
the Revenue is available.
Briefly stated relevant facts of the case are that the assessee is an
individual and derives income from salary professional fees, bank
interest etc. There was search and seizure action u/s.132 of the Act in
the Suyojit Group of cases on 17-09-2010. Assessee filed the return of
income originally on 30-03-2011 declaring total income of
Rs.4,22,610/-. In response to notice u/s.153A assessee filed the
return of income on 10-02-2012 declaring total income of
Rs.4,34,768/-. At the end of the assessment proceedings u/s.143(3)
r.w.s. 153A of the Act, AO assessed the income of the assessee at
Rs.4,34,768/-, the same income as retuned by the assessee in response
to notice u/s.153A of the Act. AO was of the view that assessee has
concealed the particulars of amount to the extent of Rs.12,158/- and
levied penalty of Rs.2,504/- on the said sum with the meaning of
Explanation 5A to section 271(1)(c) of the Act.
Aggrieved with the order of AO assessee challenged the levy of
penalty before the CIT(A). The CIT(A) considered the submissions of the
assessee dt. Nil and the submissions of the assessee dt. 19-02-2016 in
response to notice u/s.251(2) as well as the decisions relied on by the
assessee in the cases of Manjunath Cotton & Ginning Factory 359 ITR
565 and Sanjog Tarachand Lodha in ITA Nos. 688 & 689/PN/2014,
dated 31-08-2015. Contents of Para No.4 and 4.2 of the order of CIT(A)
are relevant. CIT(A) also discussed the provisions of Explanation 5A to
section 271(1)(c) of the Act, satisfaction of the AO while initiating and
levying the penalty, decisions relied on by the assessee. Eventually
relying on the judgment of Gujarat High Court in the case of Sorathia
Engineering 282 ITR 642, the CIT(A) enhanced the penalty levied by the
AO by observing as under :
“4.7 . . . . . . . .Income disclosed is based on entries in the books of accounts or transactions undertaken by the appellant during the previous year hence in view of provisions of section 271(1)(c) read with Explanation 5A, the income of Rs.4,34,768/- would be treated as concealed income for levy of penalty. The AO is accordingly directed to re-compute the penalty leviable u/s.271(1)(c) @100% of tax sought to be evaded on concealed income of Rs.4,34,768/- as against concealed income of Rs.12,158/- considered by the AO while levying the penalty. Penalty levied u/s.271(1)(c) would get enhanced to that extent and the ground raised by the appellant is hereby dismissed.”
Aggrieved with the order of CIT(A), the assessee filed the present
appeal with the aforementioned grounds.
Ld. DR for the Revenue submitted that the CIT(A) is justified in
enhancing the penalty levied by the AO and therefore, prayed for
confirming the order of the CIT(A). However, he fairly conceded to the
absence of mentioning of specific reference to any limb of section 271(1)
of the Act.
After hearing the Ld. DR for the Revenue and perusing the facts of
the case and the orders of the Revenue, we find that there is ambiguity
in the mind of AO in recording the satisfaction while initiating and
levying the penalty. On going through Para No.6 of the assessment
order dated 22-02-2013, we find that the AO initiated the penalty
proceedings stating that “assessee has concealed the particulars of
such income within the meaning of Explanation -5A to section
271(1)(c) of the I.T. Act. Further, on going through the Para No.9 of the
penalty order, dated 10-07-2013, we find that AO levied the penalty
stating that “the assessee has without any reasonable cause,
furnished inaccurate particulars of income and thereby concealed
his income”.
Therefore, on the issue of satisfaction of the AO, we find 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 hold that the orders of AO/
CIT(A) are required to be set-aside on the legal ground of recording of
satisfaction by the AO. Penalty is deleted on legal ground.
Since we allow the appeal of the assessee on the technical/legal
ground, 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 14th day of May, 2018.
Sd/- Sd/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER पुणे Pune; �दनांक Dated : 14th May, 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)-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.