BHUSHAN VITTHAL WAGH,NASHIK vs. INCOME-TAX OFFICER,

आदेश / ORDER

PER ANIL CHATURVEDI, AM :

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.”

connected and are with respect to levy of penalty u/s 271(1)(c) of

the Act.

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.

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.

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.

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.

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 :

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.