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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI ANIL CHATURVEDI, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER ANIL CHATURVEDI, AM :
This appeal filed by the assessee is emanating out of the order of Commissioner of Income Tax (A) – 1, Nashik, dt.03.12.2015 for the assessment year 2009-10.
The relevant facts as culled out from the material on record are as under :
Assessee is an individual and stated to be engaged as Civil Contractor. Assessee filed his return of income for A.Y. 2009-10 on 30.09.2011 declaring total income of Rs.3,52,910/-. The case was
selected for scrutiny and thereafter, assessment was framed u/s
143(3) of the Act vide order dt.23.11.2011 and the total income was
determined at Rs.12,83,770/- inter-alia by making addition of
Rs.7,75,860/-. The aforesaid addition was with respect to contract
work of B.P. Sangle Construction Pvt. Ltd., carried out by the
assessee and shown in Form 26AS and not considered by the
assessee in computation of income. On the aforesaid addition of
Rs.7,75,860/-, AO vide order dt.27.09.2013 levied penalty of
Rs.18,735/- 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.03.12.2015 (in appeal No.Nsk/CIT(A)-1/705/2013-14),
who dismissed the appeal of the assessee. Aggrieved by the order of
Ld.CIT(A), assessee is now in appeal before us and has raised the
following grounds :
“In the facts, circumstances and position of law learned Income Tax Officer erred in imposing penalty u/s 271(1)(c) by invoking Explanation-1 to the said section at Rs.18,735/- 2. In the facts, circumstances and position of law the penalty order u/s 271(1)(c) imposing penalty for both concealing the particulars of income and furnishing inaccurate particulars of income at Rs.18,735/- is bad in law and void ab initio and hence may be annulled.”.
Subsequently, assessee has raised the following
additional grounds :
“1. Exact charge on the basis of which the penalty proceedings have been initiated u/s 274 r.w.s. 271(1)(c) vide notice dated 23.11.2011 is not stated in the notice and hence the notice issued u/s 274 r.w.s. 271(1)(c) is bad in law and consequently penalty levied on the basis of such invalid notice is bad in law”. 2. The Assessing Officer has not recorded proper and clear satisfaction in the assessment order for initiating penalty proceedings as penalty proceedings are initiated for concealment and furnishing of inaccurate particulars of income (vide Para No.6.2 of the assessment order) and while issuing notice u/s 274 r.w.s. 271(1)(c),
the AO has mentioned the limbs i.e., concealed the particulars of income or furnished inaccurate particulars of such income.”
Before us, Ld.A.R. submitted that all the grounds are inter-
connected and are with respect to levy of penalty u/s 271(1)(c) of
the Act.
In the present case, AO had made addition of Rs.7,75,860/-
towards contracts receipts and determined the total income at
Rs.12,83,770/- as against the income of Rs.3,62,913/- declared by
the assessee. During the course of penalty proceedings, assessee
preferred appeal before the CIT(A)-I, Nashik (in appeal
No.Nsk/CIT(A)-1/495/2011-12) dt.16.01.2013, who reduced the
addition of Rs.7,75,860/- to Rs.60,630/- by estimating the net profit
@ 8%. On the confirmed net profit of Rs.60,630/- AO levied penalty
of Rs.18,735/- u/s 271(1)(c) of the Act.
Before us, Ld.A.R. reiterated the submissions made before AO
and Ld.CIT(A) and further submitted that inadvertently the receipts
of Rs.7,57,860/- from B.P. Sangle Construction Pvt. Ltd., were
remained to be disclosed and that the same were credited in the
bank account and it was requested that the net profits on receipts
be adopted. He therefore submitted that there was no concealment
of income and furnishing of inaccurate particulars of income.
Ld.A.R thereafter submitted that while passing the assessment
order, AO has not recorded any satisfaction for levy of penalty but
while passing the penalty order u/s 271(1)(c) of the Act, the AO
levied penalty for concealment of income as well as for furnishing
inaccurate particulars of income. Ld.A.R. 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 when initiation of penalty is for furnishing of inaccurate
particulars of income and penalty was levied on concealment of
income, then in the absence of proper show cause notice to
assessee, penalty u/s 271(1)(c) cannot be levied. Ld.A.R. therefore
submitted 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.18,735/- on the addition of Rs.60,630/-
confirmed by CIT(A)-1, Nashik. The perusal of assessment order
passed u/s 143(3) of the Act reveals that AO had initiated penalty
proceeding but no satisfaction was recorded while passing the
assessment order. Thereafter in the penalty order passed u/s
271(1)(c) of the Act, AO held that assessee had furnished inaccurate
particulars of income and had concealed the income u/s 271(1)(c) of
the Act. 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 has not recorded any satisfaction for levy of penalty in the
assessment order but had levied penalty on both the limbs i.e., for
concealment of income and for furnishing of inaccurate particulars
of income while passing the penalty order. 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 ground of assessee is allowed.
In the result, the appeal of assessee is allowed.
Order pronounced on 27th day of February, 2018.
Sd/- Sd/- (VIKAS AWASTHY) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER
पुणे Pune; �दनांक Dated : 27th February, 2018. Yamini
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to :
अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A)-1, Nashik. 4. Prl.CIT-1, Nashik. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए” / DR, ITAT, “A” Pune; 6. गाड� फाईल / Guard file.
आदेशानुसार/ BY ORDER,स T// ///True True copy
// True Copy //
व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.