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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
आदेश / ORDER
PER ANIL CHATURVEDI, AM :
These are the five appeals filed by different assessees but
related to each other, are emanating out of separate orders of
Commissioner of Income-Tax (A) - 13, Pune dt.06.10.2015 for
assessment years i.e., A.Ys. 2005-06, 2006-07 and 2009-10.
Before us, at the outset, Ld.A.R. submitted that out of the five
appeals, three appeals of the assessee in ITA No.1633/PUN/2015,
ITA No.1635/PUN/2015 and ITA No.1636/PUN/2015 are against
the separate orders of Commissioner of Income Tax (A)-13, Pune for
different assessment years but since the issues involved in the above
three appeals are identical except for the assessment years and the
amounts in each of the years, his arguments will also be common
and therefore the three appeals can be heard and disposed of
together. He further submitted that the appeals in ITA
Nos.1634/PUN/2015 and ITA No.1637/PUN/2015 though of
different assessees but are also identical and therefore can be
considered together. Ld. D.R. did not object to the aforesaid
submission of Ld.A.R. We therefore for the sake of convenience first
proceed to dispose of the three appeals (ITA No.1633/PUN/2015,
ITA No.1635/PUN/2015 and ITA No.1636/PUN/2015) of the
assessee by proceeding with narrating the facts in ITA
No.1633/PUN/2015 for assessment year 2006-07.
3.1. The relevant facts as culled out from the material on record are
as under :-
Assessee is an individual stated to be having income from
share trading and other sources. A search action u/s 132 of the Act
was carried out on 28.08.2008 in Bhutada Group of cases at Latur.
The residential and business premises of the assessee were also
covered during the search action. Since the case was covered by
search u/s 132 of the Act, notice u/s 153A was issued to assessee
on 13.07.2009 and served on the assessee. In response to notice
u/s 153A, assessee filed return of income on 17.08.2009 declaring
total income of Rs.22,99,957/-. The case was taken up for scrutiny
and thereafter, assessment was framed u/s 153A r.w.s. 143(3) of
the Act vide order dt.31.12.2010 and the total income was
determined at Rs.63,55,120/-. On the additional income declared
by the assessee, AO vide order dt.20.03.2013 levied penalty of
Rs.7,42,260/- u/s 271(1)(c) of the Act. Aggrieved by the penalty
order of AO, assessee carried the matter before Ld.CIT(A), who vide
order dt.06.10.2015 (in appeal No.PN/CIT(A)-13/ITO Central-1,
Nashik/286/2015-16) granted partial relief to the assessee.
Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before
us and has raised the following ground :
“On the facts and in the circumstances of the case, the learned Hon. Commissioner of Income Tax (Appeal)-13, Pune has erred in confirming penalty on alleged gross profit addition sustained by CIT(A) of Rs.2,68,825/- penalty levied thereon u/s 271(1)(c) by the Assessing Officer.
Subsequently, assessee has also raised additional grounds
which reads as under :
“1. The assessee 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.
The assessee 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.”
Before us, Ld.A.R. submitted that during the course of
search, bank accounts with Solapur Janata Sahakari Bank in
respect of Arjun Trading Company and Anand Trading Company
and with Solapur Janata Sahakari Bank and HDFC Bank in respect
of Kamal Agro Industries were found. Prior to search, assessee
had not declared income from business under the name of Arjun
Trading Company and Anand Trading Company. From perusal of
the bank statements, it was noticed that the total cash deposits in
these bank accounts were to the extent of Rs.13,00,99,481/-. On
being confronted, assessee submitted that he is not maintaining
books of accounts for these two firms and as such the exact
amount of turnover is unascertainable and that the gross profits in
such type of business was 0.50%. Assessee offered a sum of Rs.10
lacs towards the capital in business and Rs.90 lakhs on account of
profit from the business for which no books of accounts were
maintained. AO noted that assessee’s claim of profit percentage was
not supported by any documentary evidence. He noted that during
the course of search proceedings, assessee had admitted the profit
percentage in business to be at 1.5%. He therefore considered the
profit from the activity to be at 1.5% and on the basis of the total
deposits in the bank in respect of business of Rs.39,03,44,294/-,
worked out the profit at 1.5% i.e., Rs.58,55,164/-. Since assessee
had shown profit of Rs.18 lacs in the return of income, he
considered the balance amount of Rs.40,55,164/- to be the profits
from the business carried in the name of Kamal Agro Industries,
Anand Trading and Arjun Trading. Against the quantum addition
made by AO, assessee carried the matter before Ld.CIT(A), who
reduced the gross profit to 0.53%. Thereafter, the matter was
carried before Tribunal wherein the gross profit was further reduced
to 0.45%. On the addition of Rs.25,68,782/- (that was sustained
by CIT(A)), AO vide penalty order passed on 20.03.2013, levied
penalty of Rs.7,42,260/- u/s 271(1)(c) of the Act. Aggrieved by the
order of AO, assessee carried the matter before ld. CIT(A), who vide
order dated 06.10.2015 granted partial relief to assessee. Aggrieved
by the order of ld. CIT(A), assessee is now in appeal before us.
Before us, Ld.A.R. submitted that in the assessment order
framed u/s 153A r.w.s. 143(3) of the Act, though AO had recorded
the satisfaction of assessee for filing of inaccurate particulars of
income but in the penalty order, the penalty was levied for
concealment of income and in the notice issued u/s 271(1)(c) of the
Act, AO had given notice for concealing the particulars of income or
furnishing of inaccurate particulars of income. He therefore, relying
on the decision of Hon’ble Bombay High Court in the case of CIT Vs.
Samson Perinchery (ITA No.1154 of 2014 order dt.05.01.2017),
submitted that in the absence of proper show cause notice to
assessee, penalty u/s 271(1)(c) cannot be levied and therefore urged
that penalty levied by AO be deleted. Ld.D.R. on the other hand
supported the order of lower authorities.
We have heard the rival submissions and perused the material
on record. The issue in the present case is with respect to levy of
penalty u/s 271(1)(c) of the Act. In the present case, penalty has
been levied at Rs.7,42,260/- on additions / disallowances made by
the AO on account of estimated income of Rs.18 lacs offered by the
assessee, gross profit additions sustained by the Ld.CIT(A) at
Rs.2,68,825/- and on change of head of income at Rs.4,99,957/-.
In the present case, the perusal of assessment order passed u/s
143(3) r.w.s. 153A of the Act reveals that in the assessment order,
AO had recorded satisfaction for levy of penalty on account of
furnishing of inaccurate particulars of income, whereas in the
penalty order passed u/s 271(1)(c) of the Act, AO stated that the
penalty is levied for concealment of income. It is a settled law that
while levying penalty for concealment, the AO has to record
satisfaction and thereafter come to a finding in respect of one of the
limbs, which is specified under section 271(1)(c) of the Act. The first
step is to record satisfaction while completing the assessment as to
whether the assessee had concealed its income or furnished
inaccurate particulars of income. Thereafter, notice u/s 274 read
with Section 271(1)(c) of the Act is to be issued to the assessee. The
Assessing Officer thereafter has to levy penalty under Section
271(1)(c) of the Act for non-satisfaction of either of the limbs. While
completing the assessment, the Assessing Officer has to come to a
finding as to whether the assessee has concealed its income or
furnished inaccurate particulars of income. The Hon’ble Bombay
High Court in CIT Vs. Shri Samson Perinchery in ITA No.1154 of
2014 with other ITA Nos.953 of 2014, 1097 of 2014 and 1226 of
2014, vide judgment dated 05.01.2017 held that where initiation of
penalty is one limb and the levy of penalty is on other limb, then in
the absence of proper show cause notice to the assessee, there is no
merit in levy of penalty.
In the present case, as noted hereinabove, it is seen that the
AO in the assessment order has recorded the case to be of
furnishing of inaccurate particulars of income but in the penalty
order passed u/s 271(1)(c) of the Act he had levied penalty on
account of concealment of income. Considering the aforesaid facts
in the light of the decision of Hon’ble Bombay High Court in the case
of Samson Perinchery (supra), we are of the view that in the present
case, the basic condition for levy of penalty has not been fulfilled and
that the penalty order suffers from non-exercising of jurisdiction
power of AO and therefore penalty order cannot be upheld. We
accordingly set aside the penalty order passed by AO. Thus, the
grounds of assessee are allowed.
In the result, the appeal of assessee in ITA
No.1633/PUN/2015 is allowed.
Before us both the parties have admitted that the facts of the
cases of assessee i.e., Satish Kumar Vishnudas Bhutada in ITA
Nos.1635/PUN/2015 for A.Y. 2005-06 and ITA No.1636/PUN/2015
for A.Y. 2006-07 and that of the facts of case of assessee i.e., Anand
Satishkumar Bhutada in ITA No.1633/PUN/2015 for A.Y. 2006-07
are identical. We have hereinabove, while deciding the appeal in
case of Anand Satishkumar Bhutada have decided the appeal in
favour of assessee. We for similar reasons set aside the penalty
orders in ITA Nos.1635/PUN/2015 and ITA No.1636/PUN/2015.
Thus, the grounds of the assessee in ITA Nos.1635/PUN/2015 and
ITA No.1636/PUN/2015 are allowed.
In the result, the appeal of assessee in ITA Nos.
1635/PUN/2015 and ITA Nos.1636/PUN/2015 are allowed.
Now we take up assessee’s appeal in ITA No.1634/PUN/2015
for A.Y. 2009-10 in case of Anand Satishkumar Bhutada.
12.1. Assessee is an individual stated to be having income from
salary and other sources. A search action u/s 132 of the Act was
carried out on 28.08.2008 in Bhutada Group of cases at Latur.
Pursuant to search, assessee filed his return of income on
17.08.2009 declaring total income of Rs.35,36,066/- which
included additional income of Rs.29,12,725/- declared during the
course of search. On the additional income of Rs.29,12,725/-
declared by the assessee, AO vide order dt.06.01.2014 levied
penalty u/s 271AAA of the Act of Rs.2,91,972/-. Aggrieved by the
penalty order of AO, assessee carried the matter before Ld.CIT(A)
who vide order dt.06.10.2015 (in appeal No.PN/CIT(A)-13/ITO
Central-1, Nashik/292/2015-16) confirmed the action of AO.
Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before
us and has raised the following ground :
“On the facts and circumstances of the case, the learned Hon’ble Commissioner of Income Tax, (Appeal)-13, Pune has erred in confirming in penalty of Rs.2,91,272/- levied u/s 271AAA by the Assessing Officer.”
Before us, Ld.A.R. reiterated the submissions made before AO
and Ld.CIT(A). Ld.D.R. on the other hand, supported the order of
AO and Ld.CIT(A) and further submitted that for granting immunity
for penalty u/s 271AAA, three conditions are required to be satisfied
namely, (1) declaration made in the statement recorded u/s 132(4)
of the Act (2) manner of earning of income is disclosed (3) payment
of tax with interest in respect of income disclosed. He submitted
that the assessee in the statement recorded u/s 132(4) of the Act did
not declare the income but declared the additional income before
ADIT, Investigation, Aurangabad in the statement recorded u/s
131(1) of the Act. He therefore submitted that the Ld.CIT(A) has
rightly held that the additional income offered in the statement
recorded u/s 131(1) of the Act cannot qualify for immunity. He thus
supported the order of Ld.CIT(A).
We have heard the rival submissions and perused the
material on record. The issue in the present case is with respect to
levy of penalty u/s 271AAA of the Act. We find that AO while levying
penalty has noted that in the statement recorded u/s 132(4) of the
Act, the income to the extent of Rs.29,12,720/- was admitted by
Shri Ashokkumar Bhutada, father of the assessee but no details in
respect of the same were given. The declaration was made by Ashok
Kumar V. Bhutada wherein a lumpsum declaration of Rs.6 crores
was made without bifurcation of undisclosed income assessee wise
and assessment year wise. Subsequently, in the statement recorded
u/s 131 of the Act on 26.11.2008 assessee made disclosure in the
hands of various business entities and family members. AO
therefore held that assessee had failed to satisfy the conditions
required to be fulfilled to claim immunity u/s 271AAA of the Act.
We further find that ld. CIT(A) has also given a finding that
additional income was offered in the statement recorded u/s 131 of
the Act and not u/s 132 of the Act and that the statement recorded
u/s 131 of the Act cannot qualify for immunity of penalty u/s
271AAA of the Act. Before us, no material has been placed on
record by the assessee to controvert the findings of Ld.CIT(A). In
view of these facts, we do not find any reason to interfere with the
order of Ld.CIT(A) and thus, the ground of the assessee is dismissed.
In the result, the appeal of assessee in ITA
No.1634/PUN/2015 is dismissed.
Now we take up appeal of assessee in ITA No.1637/PUN/2015
in case of Kirtikumar Vishunudas Bhutada.
16.1. Before us both the parties have admitted that the facts of the
cases of assessee i.e., Kritikumar Vishnudas Bhutada in ITA
Nos.1637/PUN/2015 for A.Y. 2009-10 are similar to the facts of
case in case of Anand Satishkumar Bhutada in ITA
No.1634/PUN/2015 for A.Y. 2009-10. We have hereinabove, while
disposing of the appeal in case of Anand Satishkumar Bhutada in
ITA No.1634/PUN/2015 have dismissed the grounds of assessee.
We for similar reasons dismiss the grounds of assessee in ITA
Nos.1637/PUN/2015 also. Thus, the grounds of the assessee in ITA
Nos.1637/PUN/2015 are dismissed.
In the result, the appeal of assessee in ITA
No.1637/PUN/2015 is dismissed.
To sum up, appeals of assessee in ITA
No.1633/PUN/2015, ITA No.1635/PUN/2015 and ITA
No.1636/PUN/2015 are allowed and the appeals of assessee in
ITA Nos.1634/PUN/2015 and ITA No.1637/PUN/2015 are
dismissed.
Order pronounced on 16th March, 2018.
Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER
पुणे Pune; �दनांक Dated : 16th March, 2018. Yamini
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT (A)-13, Pune / CIT(A) concerned. 4. DGIT (Inv), Pune / CIT concerned. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए” / DR, ITAT, “A” Pune; 6. गाड� फाईल / Guard file.
आदेशानुसार/ BY ORDER, // TRUE COPY //
व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune