JAGDISH BHAGWAN MIRCHANDANI,NASHIK vs. ASSISTANT COMMISSIONER OF INCOME-TAX,

आदेश / ORDER

PER ANIL CHATURVEDI, AM :

Assessee is an individual and stated to be engaged in the business of manufacturing of press parts and gaskets etc.

Assessee filed his return of income for A.Y. 2010-11 on 30.09.2010

declaring total income of Rs.63,75,450/-. The case was selected

for scrutiny and thereafter, assessment was framed u/s 143(3) of

the Act vide order dt.27.12.2012 and the total income was

determined at Rs.69,79,664/- inter-alia by making addition of

Rs.5,40,000/- on account of unsecured loans u/s 69A of the Act,

disallowance of Rs.14,234/- for investment made in shares and

mutual funds and disallowance of Rs.50,000/- on account of

expenditure under the head “Wages and other expenses”. On the

disallowance of Rs.5,40,000/- on account of addition u/s 69A of

the Act, AO vide order dt.27.06.2013 levied penalty of

Rs.1,66,860/- 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.01.10.2015 (in appeal No.Nsk/CIT(A)-1/489/2013-14)

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 effective ground :

“The learned Commissioner of Income Tax (Appeals) erred on facts and in law in confirming penalty u/s 271(1)(c) amounting to Rs.1,66,860/-. He failed to appreciate contentions and arguments advanced by the assessee in its behalf.

AO and Ld.CIT(A) and further submitted that the assessee had

inadvertently shown Rs.5,40,000/- as unsecured loans but when it

came to his knowledge during the course of assessment

proceedings, he offered it as income. He therefore submitted that

there was no concealment of income. He thereafter pointing to the

assessment order submitted that AO has initiated penalty for

concealment of income but in the notice dated 21.05.2013 issued

u/s 274 r.w.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 thereafter submitted that while passing

the penalty order u/s 271(1)(c) of the Act, the AO has levied

penalty for furnishing 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.

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.1,66,860/- on addition of

Rs.5,40,000/- u/s 69A of the Act on account of unsecured loans.

In the present case, the perusal of assessment order passed u/s

143(3) reveals that in the assessment order AO had recorded

satisfaction for levy of penalty on account of concealment of

income. Thereafter in the penalty order passed u/s 271(1)(c) of the

Act, AO held that assessee had furnished inaccurate particulars of

income. Even in the notice issued u/s 274 r.w.s. 271(1)(c) of the

Act, AO had stated that the penalty is for concealing the

particulars of income or furnishing of inaccurate particulars 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.

AO in the assessment order has recorded the case to be of

concealment of income but in the penalty order passed u/s

271(1)(c) of the Act he had levied penalty on account of furnishing

of inaccurate particulars 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 ground of assessee is allowed.

Order pronounced on 28th day of February, 2018.

Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 28th 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.